Drop shipping companies are an ideal solution for many small business owners. They conveniently drop ship products directly to your customers.

Making the most of drop shipping is easy to do. You simply need to find the right drop shipping companies or company for you.

Some of the advantages of using a drop shipper are:

1. You can easily run your business from home. By using drop ship distributors, you can allow customers to buy your products online and have their goods shipped directly to them. They don't need to know that you don't have a physical storefront.

2. You do not need to store the goods. Storage can be a big problem for small business owners, but with drop shipping wholesalers, the goods stay at the warehouse.

3. You do not need to invest a lot of money upfront. In most cases, a drop shipping company offers you their goods at a wholesale price. You sell the product to a customer at retail price and give the drop shipper the wholesale cost. You keep the difference. You don't have to gamble and purchase a lot of products to succeed.

Action Steps
The best contacts and resources to help you get it done

Choose a drop ship company that does not show their company name

When customers receive your product, you want them to think that you shipped it to them. That's why you should look for drop shipping services that do not use their own name in packaging and sending the product. This allows for better customer service.

I recommend: Check out S&S Vegas Distributors, which offers a number of products. They list "Shipping Department" as the contact on their forms, rather than their own company name. Pathway Electronics ships popular electronics goods and uses your company name and address on the packaging.

Seek out drop shipping vendors that offer a variety of products

The more products your drop shipping company offers, the more you can offer to your customer. If one product does not seem to be a hot seller, you can easily switch to promoting a different product. Look for a company that has several products in order to increase your chances for success.

I recommend: Ming Zhou Oriental Imports offers a wide range of Asian goods, from furniture to artwork. Download their catalog to see their products. Doba offers over a million different products.

Get great results by working with more than one drop shipping company

Unfortunately, drop shipping companies have a reputation for going out of business without notice. You won't have to worry about this if you choose to work with several different companies.

I recommend: Choose to work with popular companies such as MegaGoods.com. Your Wholesale Dropship Source offers advice about getting more business in addition to drop shipping their products.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Test a company's drop ship services by ordering a product. Note how long it takes to receive the product and whether it arrives in good condition.

Drop shipping is a way to send goods straight from your supplier to your customers online — without some of the risks normally associated with having a store. For example, with drop shipping you don't have to pay for goods until they are sold, thereby reducing a common financial risk for retailers.

More than simply reducing risk, however, drop shipping can enhance existing brick-and-mortar operations with valuable partnerships and improved customer service. Get started with three easy steps:

1. If you don't already have them, get a business license and tax ID number, as a drop-shipping business must be treated as a real and legitimate business — complete with all the tax and legal precautions that you would take in opening a traditional business.
2. Choose reliable wholesale drop shippers and surefire products that will sell in volume and which have wide appeal.
3. Market your drop-shipped products on your own Web site and on Internet auction sites such as eBay, leaving you with immediate profits before you even buy anything.

Action Steps
The best contacts and resources to help you get it done

Forge relationships with wholesale drop shippers

Your expenses may include sign-up and drop-ship fees to the drop-shippers' sites, and possibly a membership fee.

I recommend: Compare drop shippers' services and costs at Dropship Review. Some popular sites are Doba, Worldwide Brands and Dropship Direct.

Select products worth marketing

Because the drop shipping process eliminates big-order discounts, look for maximum margins by selecting products that are heavily discounted to sell in quantity. Selling a consumable product can create ongoing demand. You may find more unique goods from companies with fewer than 'hundreds of thousands' of products. Keep your customers with good customer service and follow-through.

I recommend: E-commerce wizard Wes Shepherd offers how-to guidelines at Channel Velocity. Find drop-shippers by product category at Drop Ship Locator.

Develop your Web site or auction site

An integrated e-commerce Web site will allow you to do everything from ordering inventory to processing PayPal payments online.

I recommend: eBay's Seller Onramp offers tutorials on getting your eBay business started. A widely respected e-commerce expert, Chris Malta of Worldwide Brands, offers a free e-book on the topic, too. And finally, Ecommerce-guide offers tips for choosing the right products to sell online.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Choose wisely. Select your drop-shipping partners carefully by reading reviews. Make sure they're not just one in a line of middlemen, which will add cost to your product.
• •  Self-promote. Use articles you or others write on your Web site to attract readers and position yourself as an expert.
• •  Do your homework. Advanced searches will help you find and sort products based on price, brand name, suppliers and other features.
• •  Stay in touch. Some drop shippers will provide email alerts to let you know when orders have been received and when merchandise leaves the warehouse.

Many small business owners turn to drop shipping companies in order to help their business grow. Drop ship services allow business owners to sell products without the hassle of stocking and shipping the products.

If this is something that you are considering for your business, knowing the drop shipping basics will help you to sort through the good and bad of the industry. It's important for you to have all of the drop shipping information you need to make an educated decision.

Drop ship distributors are great for people who:

1. Have caught the eBay bug. There are a number of people who start earning a bit of money by selling their own goods through eBay. As they begin to understand how profitable this is, they seek out wholesale drop shipping companies in order to make more money from home.

2. Don't have the storage space to stock inventory. If you have limited space in your office, or you run a home based business, it's easy to have a drop shipper handle orders.

3. Need to fulfill an unusual order. Occasionally, customers may place a large order. In these cases, it's easiest to have the wholesaler fulfill the order.

Action Steps
The best contacts and resources to help you get it done

Research the drop shipping basics to choose the best vendor

One of the keys to success in using a drop shipping company is to find a company that is legitimate and easy to work with. Make sure they have an acceptable turnaround time and all of the products that you desire.

I recommend: Wholesale and Drop Ship Direct offers some advice about how to choose a drop shipping company. Business owners should be wary of scams in the drop shipping industry, however. The Home-Based Business Blog uncovers 3 red flags to determine if a company is a scam.

Work with some of the most popular drop shipping companies

When you're just starting out with drop shipping, it's a good idea to work with the most popular drop shipping vendors. You can feel more secure when you choose to work with these types of companies because of their range of experience.

I recommend: Doba can connect you to a large number of wholesale companies for whatever product you are looking to sell. DropshipDesign.com is another excellent resource.

Examine the return policy before you sign up with a drop shipping company

Your reputation is on the line, so you want to make sure that the company you choose will be able to take returns if the customer is not satisfied with the product. Make sure you read over the return policy before you choose a company.

I recommend: Net2Malls Drop Ship allows customers to return products up to ten days after they receive the item. They charge a small restocking fee. DropShip Electronics offers a full 30-day money back guarantee.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Don't pay for information regarding which drop shipping companies are best. These 'reports' often lead you to scams.

Since a lot of business has migrated online, drop shipping has become a popular setup for retail. With drop shipping, a seller places orders from a manufacturer as they come in from customers, rather than stocking up initially. Though this seems like a good way for sellers to avoid the costs and liabilities of inventory, it is not without its hazards. Reading up on some key concepts behind drop shipping can help you figure out if you should try this somewhat new system of commerce.

Action Steps
The best contacts and resources to help you get it done

Order fulfillment

This term is used frequently in all kinds of business situations. Order fulfillment is simply the process of filling an order and delivering it to a customer who has ordered. In drop shipping, the order fulfillment process is a cooperative endeavor between the seller and the shipper.

I recommend: 3LINX is a third party provider that specializes in order fulfillment.

Profit margin

This is another fundamental business term. A profit margin is the difference between expenses and revenues. It is what a seller has 'left over' after completing the sale. This is a significant factor to consider in all drop shipping operations.

I recommend: See Investopedia for an in-depth discussion of profit margins.

Third party providers, or 3PL

A third party is any other business or individual that enters into a transaction between two parties. For instance, drop shipping allows a company to go outside its own inventory to sell from a third party. This is important for the customer because it changes the equation, so companies that use drop shipping have to be sensitive about it and treat it as a real aspect of their business.

I recommend: Inbound Logistics lists the top 100 third party providers.

E-commerce

Many firms that use drop shipping are engaged in e-commerce, which is simply the phenomenon of selling online; but within that realm, the labels of business to business (B2B), customer to customer (C2C) and business to customer (B2C) differentiate different kinds of transactions and marketing campaigns.

I recommend: Learn more about B2B, C2C, B2C and the alphabet soup of e-commerce from ECommerce Digest.

Restocking fees

Any time a customer wants a guaranteed product with a return policy, restocking fees enter the equation. Not all returns trigger restocking fees, but each company decides if a fee is appropriate. With drop shipping, it's a little more complicated, because the seller's restocking fees have to cover any costs on the part of the drop shipper.

I recommend: Find out more about restocking fees from PC Guide.

Charge back

A charge back happens when a customer files a complaint against a company. Charge backs are something to watch out for in drop shipping operations as the process can get complicated.

I recommend: Find out more about the hazards of charge backs at Taming the Beast.