NevBlog

Having an internet store that uses a drop shipper is an attractive sales model because:

• You never have to physically send out anything yourself.
• Zero inventory.
• Once you get an order, you send it off and you’re done.
• Extremely low overhead compared to a traditional business.
• You can run it from anywhere with an internet connection.

Sounds pretty good huh? Well for the most part it is, but there are also some inherent problems with running this type of dropshipping business:

• Your margins are relatively small. Usually between 20% and 40%.
• You must compete with larger suppliers who are well established. Nowadays a lot of larger wholesalers are selling to individuals instead of just distributors, this is big competition.
• You may not always have a phone line connected. If it’s just you, it’s hard to always pickup the phone like a big business does.
• As search engines and comparision sites flourish, it’s easier than ever to find your same product from multiple vendors.
• People ordering larger quantities of items will want deep discounts you cannot always provide.

If this was five years ago I’d tell you a dropshipping model is GREAT, and it still sometimes is….however the largest threat to this model is the wholesalers.

Previously these people would import products by the shipment container full, keep them in a huge warehouse on pallets and only sell to volume buyers. The distributors who buy the pallet amounts would then keep stuff in their warehouses and send out to individual consumers. Then after that comes the dropshippers, think of them more like middle men. As the level of technology and sophistication of these large distributors increases, they now have systems in place where individual consumers can buy small quantities of products at near wholesale prices.

As technology improves it allows these larger vendors to sell to individuals, it also allows the individual consumers to find these distributors through internet search results. So as time goes on, the middle men will slowly have more competition pressures.

SO HOW TO OVERCOME THIS?

Many of the larger distributors focus on a specific niche of products (Party suppliers, cell phones, toys etc), so they only have so much to offer. Distributors keep smaller quantities on hand of products, but can carry many items from various wholesalers. So distributors (and consequently drop shippers) offer their unique selection of products, customer service and unique store shopping experiences.

Next —> Part 6

Back when I started HouseOfRave, simple eCommerce solutions were relatively scarce or really expensive. I remember for my initial draft of HouseOfRave I downloaded a pirated piece of software which rendered the webpage on the computer, then would FTP files to the server.

My home computer at the time was very slow at the time, so I would mainly build my page after school everyday at my high school using the brand new, state of the art 40o Mhz computers (Ha! 400 Mhz and “Fast” in the same sentence sounds funny now :-)

BUT….I had several hundred items to sell, so a dedicated eCommerce site was neccessary. However if you’re only selling between 1 and 10 items, you might consider just inserting PayPal or Google Checkout payment buttons on each of your products rather than using a full fledged eCommerce solution.

If you have several hundred items to sell, creating a site yourself is daunting unless you’re great at programming…and even then you’d just be re-inventing the wheel since there are literally thousands of solutions for e-commerce already out there (many of them free)!

HouseOfRave currently runs on the Shopsite Ecommerce platform which has worked well for me, but it requires you have your own server, and will cost around $2,000 to install.

For my latest eCommerce project called BodyMonkey.com I chose a fully hosted solution (Yahoo Stores) instead of hosting it on my own server. I did this to:
1.) Hedge my losses in case my server crashes, at least ONE business will still be running.
2.) They take care of everything including SSL security certificates, payment gateways, hosting and they constantly update the system which means new features for free.

There are lots of hosted solutions but the two I recommend are:

Yahoo Stores – I’m using this for BodyMonkey.com. This is a great system, but a little difficult to design. A HUGE plus for this is you get linked into the Yahoo Shopping system which brings in a decent amount of sales, even if you’re not fully ranking on Google yet.

Volusion.com – I’d suggest this solution if you don’t know much about setting up a freeware solution on your own. I’ve tried them before, and they’re pretty good about getting you setup with a decent looking store made with proper search engine optimization techniques and lots of other cool features. You must pay a monthly fee every month, but it includes pretty much everything you need to start selling.

If you know very little about e-commerce, I’d suggest something like Volusion.com to get started. All you really need to do is add product photos and descriptions and you’re up and selling. However you do have to pay them monthly and they take a small cut of revenue.

If you know a little more about the web, have some web hosting of your own and can do things like change a DNS or FTP files, you can probably get a FREE store setup on your own pretty simply.

BUT WAIT!!
Once you get your store running, it means NOTHING. Now the actual hard part comes: Getting people to your website.

My gimmick with House Of Rave was the rave videos and rave pictures. I gave them away for free (not such a big deal anymore after YouTube and Flickr), and it got lots of people to the site. Less than 1% of the people who would come for the free videos ordered stuff, but at least it got people to start visiting, linking and discussing my website.

You don’t necessarily need a gimmick like that, because I know of many websites that don’t have any attractions yet still make lots of sales, but it really helps get the ball rolling.

The moral here is don’t think that setting up an online drop-shipping business is all that easy. It’s just like any other real store, it requires a lot of attention at times and lots of effort to get people through the doors.

Next >>> Part 5: Pros and Cons of Drop Shipping

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The House Of Rave .com Story
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Part 1: The Beginning
Part 2: Finding Something to Sell
Part 3: Finding A Drop Shipper
Part 4: Getting A Site Setup
Part 5: Pros and Cons of Drop Shipping
Part 6: How It All Works
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This is by far the most frequently asked question I get:
“How do I find a drop shipper? I’ve been looking but everything I find is junk.”

A quick tip is DON’T GOOGLE IT. If you start looking for dropshippers like that, you most likely will end up with one of those services that has a warehouse and advertises their drop shipping services. This means that have hundreds or even thousands of people signed up under them, and they all sell the same stuff. Most of the stuff they sell is usually generic stuff you can buy at Wal-Mart, hardware stores or other common retail outlets. This means you’ll be competing with thousands of similar sites plus large retailers.

So how do you find a dropshipper for my niche product?

You simply look for people that already sell what you want to sell. My target dropshipper already sold rave & club type of stuff, so I gave them a call. You can generally tell if someone is a supplier if they have proper contact information, someone always picks up the phone and other small cues by looking at their website.

Often times the supplier with a warehouse will not have any sort of drop shipping program. You must create it. Simply explain to the head decision maker that you want to sell his products, and he ships them out whenever you send him orders. Usually a business owner will be happy to expand his business base if it’s not too much of an inconvenience.

Most likely several places will reject your offer before you find one that accepts. To get accepted faster, don’t call someone and say, “I wanna build a website and sell your stuff.” I suggest you first build a sample store, perhaps add some of the suppliers products on there for good measure and THEN call and say, “I can expand your customer base by selling your products, I’ve already got a store ready to go, check it out at …..” A business owner will take your request more seriously if you already have something in place and it looks like you’re experienced.

I started HouseOfRave before I had a supplier. I had already built the site and added some sample products, I just needed to fill it with a suppliers inventory. For this reason I quickly got someone to jump on board.

Think about it from the suppliers point of view:
1.) If your website appeals to a different niche than theirs but sells the same stuff, they can effectively expand into a different niche without doing a thing. For this reason, try to appeal to a different niche than your supplier, don’t just try to steal their customers.

2.) With you selling THEIR stuff on a different site, it creates artificial competition in the niche. It’s kind of like when you buy gum; whether you buy Juicy Fruit, Winterfresh or Double Mint, some profit always goes back to the Wrigleys company.

3.) From a search engine optimization perspective, if you type in a product, the supplier can be number in a top search results and so can you. This means if someone buys something based off a search result, the supplier is more likely to make money.

So to find the supplier I first compiled a list of websites and suppliers of rave/club products. I started calling. It took at least 10 calls before I found someone who was willing to work with me and didn’t require up-front payment (and didn’t ask how old I was). This was a very narrow genre of products, so if you’re looking for a more common product, expect to make A LOT MORE calls. Word of advice: Calling is more powerful than sending an email. The supplier in California I was working with imported all these products themselves, and even had their own website selling the stuff. I got an agreement to use their images and descriptions on my website, and get wholesale pricing on individual orders. I would pay them my balance at the end of each month.

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ACTIONS TO TAKE:
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1.) Identify a genre of products you would like to sell.

2.) Do your homework and compile a list of everyone that sells these products.

3.) Find out who actually sends stuff out (you don’t want to contact another drop shipper).

4.) Ask if they can drop ship for you.

5.) Start inputting the suppliers inventory in your store and start selling!

Word of Caution: If you want to sell a common item like MP3 players, computer parts etc, you have a very large uphill battle. There are thousands of other places already selling these things, some very established, and they will often kill you based on price and reputation. Imagine if you’re selling a digital camera that Wal-Mart also carries. Most people will order from a larger retailer just based on trust, and most likely they will never find your site in the first place. The larger places will also kill you on price.

I sell these 3-packs of Oggz for $49.99. The product was extremely successful in the smaller markets and eventually started selling at WalMart. The price at WalMart was $28.00!! My wholesale price wasn’t even that low! So to even TRY competing based on price I’d have to take a loss which is not an option. While people still order the Oggz at my $49.99 price, the price internet-wide has dropped once the product went mainstream and is being sold by hundreds of retailers.

So if you want to sell extremely common items like digital cameras etc, you probably have a better chance selling them on Ebay….however then you’ll REALLY be in a constant price war.

Having a unique offering of products always helps attract buyers to your site, because it’s often difficult to get such specific items elsewhere. This is why I chose such a niche genre of products such as rave/club items for my first business.

The best thing to sell is something no one else has. I didn’t have anything like that, so the next best thing was to sell items that very few people had.

Next >>> Part 4: Getting A Site Setup

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The House Of Rave .com Story
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Part 1: The Beginning
Part 2: Finding Something to Sell
Part 3: Finding A Drop Shipper
Part 4: Getting A Site Setup
Part 5: Pros and Cons of Drop Shipping
Part 6: How It All Works
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When I was in high school I decided to start an online business. I started making several hundred dollars a month doing very little, and I never saw a single product I sold until 5 years later.

The store was a rave/club party store called HouseOfRave.com. It still exists today and is going stronger than ever.

The store made between $500 and $1,000 per month all through my college years, and when I started taking it seriously, the profit started to reach over $4,000/per month.

This is the story of how I started this business from the very beginning:
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Curious about eCommerce back when I was in high school, I decided the best way to learn was to create an eCommerce website of my own. I had no clue where to start, so my first step was NOT coming up with a product to sell, but HOW to start an eCommerce business. I voraciously read every article, how-to and software review I could find about eCommerce, mainly hitting upon the topic of eCommerce software, merchant accounts and marketing techniques.

I was already pretty computer savvy and knew the ins and outs of building regular .html web pages, but the ‘Add to Cart’, Shopping Cart and credit card transaction functions were well beyond my knowledge. I decided if I was to launch an eCommerce store soon, I would have to use pre-made shopping cart software.

I started downloading evaluation versions (and illegal downloaded copies if I could find) of different shopping cart software. I started creating sample stores, changing templates, adding sample products, placing test orders and playing with every possible facet of each shopping cart software. I now knew the in’s and out’s of creating and managing an eCommerce store.

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ACTIONS TO TAKE:
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If you’re a slightly more web-savvy person, you can experiment by installing OScommerce or other open-source shopping carts on your own. While these are free, you DO have to know what you’re doing. If you don’t know what FTP or DNS is, this might be a little advanced for you.

If you’re not extremely web savvy enough to install programs on your own server, take the free demo-trials of some fully-hosted eCommerce solutions like Volusion. Hosted eCommerce solutions like this make it very simple to start a full fledged eCommerce store….but it’ll cost ya. The bad part is they charge a monthly fee for your store. The good part is they make creating products, pages etc. very easy, and they do most of the work for you.

The key here is to just take the first step and start playing around with the systems. Place test orders, add products, try re-designing the templates. You’ll start learning a lot quickly.

NEXT >>> Part 2: Finding Something to Sell

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The House Of Rave .com Story
————————————
Part 1: The Beginning
Part 2: Finding Something to Sell
Part 3: Finding A Drop Shipper
Part 4: Getting A Site Setup
Part 5: Pros and Cons of Drop Shipping
Part 6: How It All Works
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