Drop shipping is a supply chain management in which the retailer does not keep goods in stock, but instead transfers customer orders and shipment details to a supplier who then ship the goods directly to the customer . The seller makes their profit on the difference between the wholesale and retail price.Can money be made drop shipping closeouts? Lets think about this for a minute. Lets say you set up a drop ship website selling single products at a retail level…one at a time. For example you sell watches and maybe you get an order today for one watch. You take that order and purchase the watch from your supplier (drop shipper) and they ship it out to your customer. Maybe this watch retailed on your website for $24.99 and your cost is$18.00. You just made a $6.99 profit before credit card transaction fees.
How about wholesaling instead of retailing on your website? You set up a wholesale website selling merchandise by the case. Now your website customer might be purchasing 6 dozen necklaces for his store. Your website wholesale price is $3.99 per necklace and your actual cost from your supplier is $1.39 per necklace! Simple math will show that this single order comes out to: 72 Watches x $3.99 = $287.28 – 100.08 (Your Cost) = a profit of $187.20 to you!
Becoming a wholesale distributor of closeouts is not very hard as long as you have a few trusted, reliable sources for merchandise that will drop ship for you without charging you a fee.
The two main benefits of drop shipping are - no upfront inventory to purchase and a positive cash flow cycle. A positive cash flow cycle occurs because the seller is paid when the purchase is made. The seller usually pays the wholesaler using a credit card or credit terms. Therefore, there is a period of time in which the seller has the customer’s money, but has not yet paid the wholesaler.
Many sellers on online aution sites, such as Ebay, also drop ship. Often, a seller will list an item as new and ship the item directly from the wholesaler to the highest bidder. The seller profits from the difference between the winning bid and the wholesale price, minus any selling and merchant fees from the auction site. A seller is permitted to list items that are currently not in his/her own possession, provided that he/she follows eBay’s policy on pre-sale items.
There are several fantastic closeout companies here in th US that will be happy to drop ship to your customers. Here is a list aof a few that we have used and recommend:
