In short, drop shipping is a mid point between affiliate selling and being a merchant yourself. Affiliate selling protects you from handling orders and stock. You do not need to handle queries and bounced payments nor do you have to find stock and set competitive prices. With affiliate promotion you merely find the customers and pass them to the merchant’s website.
The alternatives are not simple
But affiliate selling is by no means perfect. Repeat orders are possible to go to the merchant’s website, so the affiliate loses commission. The jump between sites can lose visitors and there are stacks of missed cross advertising opportunities.
But being a merchant is by no means easy. Carrying sufficient stock, somewhere to store it and a lot more problems come into the equation. So there is a mid point.
What is drop shipping?
With drop shipping you act like a merchant up to the point of payment for the goods. But once you collect the payment you pass the order more than to the warehouse who sends the order out on your behalf. It is up to them to carry enough stock, not you. Returns are passed back to the warehouse and most good drop shippers will also either not label the goods at all, or use your logo. As far as the customer is concerned, the goods have come from you.
The problems with drop shipping
So where’s the downside? Well, you are still handling the payments. Any chargebacks hit you and you need to be ready and prepared for them. This could be quite costly, not merely in the fees involved in handling chargebacks but also if the goods have been dispatched and cannot be recovered.
The advantages to drop shipping
Let’s look now at the advantages then of drop shipping. First, you take the merchant’s catalogue and load to your web site whatever products from that catalogue that you want to promote. Because the customers come to your web site and stay on your web site to place the orders, there is the chance of cross advertising.
For example, if you are selling widgets from one merchant then you might also promote to the customer a suitable cover for the widget even it it is only available from a different merchant. There is no reason why you might only use one supplier - you could combine the product catalogues of plenty of suppliers!
Also, if you want to make use of the bounced traffic you can display third party adverts as for instance Google Adsense or even third party affiliate schemes. This may involve you promotion travel products and showing adverts for travel insurance, a product that you cannot sell yourself.
Lastly, if you are running it as a full ecommerce web site you can collect email addresses, both through orders and a newsletter, and keep mailing latest offers to this collection. Suggest that visitors and those placing orders follow you on Facebook and drop them notes of weekly offers to tempt them to your site. Customers will also look at receipts and come back to your site only by remembering they have bought from you in the past.
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