Developing a Drop Shipping Strategy

Welcome to the second part of this 5-part e-course on drop shipping and how to use it to your advantage. In Step 2, we discuss how you need to analyse your market and select products that you can successfully sell.

If you are already in the retail business, you may be thinking, “My product selection is done. I can skip this section.” Well, you are right that you have already made your decisions but, every business owner should, on a regular basis, step back and look at how well they are doing, how they can improve or expand and how well their overall business strategy is working. This section is all about matching products to market and pursuing a successful business strategy.

Let’s focus first on those who are just starting out and trying to figure out how to get into business or how to expand their Internet business.

Product Selection

The task of figuring out which products to sell on a drop ship basis is difficult to separate from the task of selecting a drop ship supplier; the two tasks operate together. For the moment, however, we’ll focus on the product side of the equation.

Narrow the choices

If you truly do not know what you want to sell, you have a big universe of products to select from. It is, of course, possible, to search for any available product at the right price that you can resell. There are certainly plenty of people on the Internet using that strategy right now, but it’s not a very good strategy for success. Here’s why.

Some wholesalers, distributors and scammers advise you to select items from their enormous catalogues, advertise the items at a marked up price on your website, take orders and payment then transmit to them for fulfilment. (You’ll find some of these operators lurking in the “Make $20,000 a month working from home…” ads found throughout the internet.)

And … there are many, many get-rich-quick wanna be entrepreneurs doing just that. If you follow that strategy, you will be competing with hundreds or thousands of others being supplied with the same products at the same wholesale price. That’s an uphill battle. Plus, if you are choosing products based only on the possible mark-up available, you may not know enough about your marketplace to sell that product effectively.

If you are just entering ecommerce, take the smarter approach and narrow your choices a bit more. For example, you may prefer to focus on medical products because you have a medical background or you have an excellent on-line market niche through your participation in disease-specific chat rooms. Or you may want to sell sporting equipment because you’re a former athlete and now a coach and you can write terrific articles on sports that will draw people to your site to buy products.

Think about your market

Think about a market niche that you believe you can sell to (because you understand the market, you have access to the market, etc.), e.g., soccer moms, the elderly, people who travel internationally, high income pet owners, people with arthritis. Then think about that market’s needs and how you might be able to meet those needs with a product or products. For example, high income pet owners tend to treat their pets like substitute children by purchasing clothing, accessories, toys, gourmet foods, etc. You understand what these consumers want to buy because you used to work for an exclusive pet boutique.

Speaking of markets, it is usually wisest to begin your business by appealing to a defined market niche. It can be difficult to put up the resources to appeal to the general public in the beginning.

Now you know something about the products you want to sell. Next, you need to find those products, available through drop shipping, at a wholesale price that can be marked up and sold successfully at a profit.

Determine wholesale price opportunities

Get a feel for how much you will pay for the product you wish to sell. You will have to contact suppliers and negotiate price. We’ll talk more about developing that relationship in Section II.

Do the competitive analysis!!!

This is where the rubber hits the road. In order to perform a competitive analysis, you need to figure out:

• How much it will cost you to sell the product
• How you will need to price the product to cover costs and enjoy a profit
• How your price compares with others selling the same or similar products
• Who else is selling and how they are doing
• How you are going to sell this product more effectively than your competitors

If, at the end of your analysis, you believe you can sell this product to your targeted market at the right price and the right quantity to meet your business goals, you’re ready to establish a relationship with a supplier!

What have you learned?

By the end of this section, you should know:

• How to decide which products to sell with the recommendation that you select products for a market you know how to access
• How to analyse the business case for your product.

In part 3 we will look at the supplier side of drop shipping.

To our success working together,