Here at PoweredbyIncome.com, we’ve been receiving a lot of questions about what is dropshipping really? While this may seem like a pretty easy question to answer, over the years, its core essence has been muddied and soiled due to many unscrupulous business practices by companies and individuals alike.
So, what is dropshipping?
At its very core drop shipping is a business model that bypasses the middleman. The business model of drop shipping essentially has a retailer (an individual or business entity) purchasing goods directly from the manufacturer, wholesaler, or another retailer and ships the products straight to the customer.
One of the major benefits of dropshipping is that the retailer that is doing the drop shipping doesn’t have to have the product in stock, they need to ensure it’s in stock at the manufacturer or wholesaler where they are getting the product from.
Dropshipping arbitrage is almost identical to drop shipping.
The most effective explanation I’ve ever heard regarding the definition of arbitrage is from one of my mentors.
Arbitrage is selling high and buying low, not buying low, and selling high. As with drop shipping, arbitrage is conducted online, whether you choose eBay, Amazon, Shopify, or whoever its all the same. Sell high and buy low, ship directly to your customer and keep the profits.
Here’s an example of how this works.
You, as a retailer and independent business person, decide that you want to start selling on eBay, or Amazon. You have absolutely no products to sell and little to no money. You’ve heard about dropshipping before and decide to give it a try.
The first product you list online is an umbrella, just a regular old standard blue umbrella. You see several wholesalers online selling this umbrella for $4.99, so you decide to list this item on your site for $9.99. Keep in mind that you never purchase this item beforehand. Once someone purchases this umbrella from your website, you will go to the manufacturer or wholesaler, purchase the item from the money your customer sent you for the item, and have the wholesaler ship directly to your customer.
After paying the necessary expenses and fees, you can take home a profit of $3 or more. When you multiply that by 10 or 20 sales a day, you can quickly see how dropshipping can be a profitable business model.
There are a limitless number of products you can sell, countless numbers of e-commerce platform to use and trillions of dollars circling the globe electronically every single day just looking for a home.
You can sell anything from furniture to kitchen appliances, but the best products to sell via. dropshipping is products that are purchased every month on a recurring basis.
The U.S. Census Bureau recently released its quarterly retail e-commerce sales report dated May 17th, 2019. The report states that the estimate of U.S. retail e-commerce sales for the 1st quarter of 2019 was $137.7 Billion. (1) Amazon Prime Day in 2019 is estimated to generate an estimated $5 Billion in sales for the retail giant.
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