People have been distributing products since before the first

mastodon skinner traded a fur coat for a flint axe.

Here’s how it works.

Let’s say ABC Manufacturers makes a product called Mom’s

Ankle Wax. We'll say that Mom’s Ankle Wax has been around for

years. It’s a very well known brand name product. It will without a

doubt give you the shiniest ankles on your block, and everybody

wants some.

ABC Manufacturers makes Mom’s Ankle Wax, but they don't

sell it directly to the public. They're a manufacturing operation.

They're far too busy melting paraffin and waxing test ankles to go

around building stores all over the place. They need distributors;

companies who will take their product and distribute it to the

places that will sell it.

For years, ABC Manufacturers has sold Mom’s Ankle Wax to a

company called DEF Distributors. The founder of DEF

Distributors knew Mom herself, back in the old days when she

made her Ankle Wax by hand, out in the turkey barn.

Today, DEF Distributors buys Mom’s Ankle Wax by the truckload.

They pay $5.00 a case for it, which is a very good price. It’s such

a good price, it has it’s own name: the Manufacturer’s Wholesale

Price.

However, DEF Distributors does not sell it to the general public

either. They are a distributor. They distribute Mom’s Ankle Wax.

DEF Distributors works with a chain of retail stores called Wax R

Us. This place was founded by a retail business visionary who

saw the incredible potential of Mom’s Ankle Wax a long time ago.

Today there are Wax R Us retail stores on every street corner in

every major city in the country. Wax R Us buys truckloads of

Mom’s Ankle Wax from DEF Distributors for $10.00 a case.

So, DEF Distributors makes $5.00 on every case of Mom’s Ankle

Wax they sell to Wax R Us retail stores. This makes DEF

Distributors very happy.

Cases and cases of Mom’s Ankle Wax arrive in the stockrooms

of Wax R Us stores everywhere. The Wax R Us employees open

those cases, and pull 12 cans of Mom’s Ankle Wax out of each

case. With their pricing guns, they stick a price of $4.50 on each

and every can.

Wax R Us stores make a total of $44.00 on each case of Mom’s

Ankle Wax. (12 cans x 4.50 per can = 54.00, minus the 10.00

they paid for the case = 44.00).

Wax R Us is even happier than DEF Distributors.

However, the happiest people of all are the people who can stroll

into Wax R Us and purchase a can of Mom’s Ankle Wax for only

$4.50. They think this is a great price, and they're walking around

with the shiniest ankles in town.

Well, that’s it…basic product distribution. The manufacturer sells

to the distributor, the distributor sells to the retailer, and the retailer

sells to the end user (the customer). The manufacturer, the

distributor and the retailer all make money because the customer

is willing to spend money for the product.

Drop Shipping has been around for a long time, too. Probably as

long as mail order catalogs; maybe longer. If you want to use a

buzzword to impress a corporate type, call it “second party

addressing”.

Above, we talked about the manufacturer-distributor-retailer

relationship. When you use drop shipping to sell products on the

Internet, (or anywhere else), YOU become the RETAILER in that

relationship.

For our purposes, there are two kinds of retailer. There is the

retailer who stocks products, and there is the stockless retailer.

Drop Shipping means that you become a stockless retailer.

Retailers who stock products

Let’s imagine that you want to open a retail store on the Internet.

You have to have products to sell, right? Let’s also imagine that

you like to suffer. Mental anguish is your favorite pastime. You

aspire to financial ruin. In that case, you will want to stock products

for your Internet retail store.

To stock products for your store, you will have to rent warehouse

space, or at least clean out your garage. You will have to have to

pay for a shipping account with UPS or FedEx, unless you want to

saddle up and trot down to the post office every day. Worst of all,

you will have to pay for those products up front.

Yes, that’s right. Money. Probably lots of it. For example, if you

want to sell Mattel Toys, you can contact Mattel and they will be

happy to set you up as a retailer. I know…I've talked to them. We

had a nice conversation about setting up an account, placing

orders, and all the other wonderful things businesspersons

discuss with each other when beginning a relationship. Toward the

end of our conversation, this nice woman said to me, in an offhand

manner, “By the way, your minimum first order must be at least

$100,000.” That’s One Hundred Thousand Dollars, folks.

I nearly choked on my bagel. Needless to say, I do not stock

Mattel products. Or anyone else’s, for that matter.

Stocking products costs money, that’s the bottom line. No matter

what you sell, if you carry stock, you pay first, and then hope you

sell later. If you don't sell the products you buy, there are going to

be some very happy people at your next garage sale, and your

bank will be sending you an amazing amount of undesirable mail.

There’s a much better way.

Stockless Retailers (Drop Shipping)

It should be noted here, if only to keep the Punctuation Police

happy, that if you use the method of drop shipping in your

business, YOU are not the “drop shipper”. The company(s) who

supply the products to your customers for you is the drop shipper.

YOU become a “Stockless Retailer”.

Here’s how drop shipping works.

1.) You open an Internet Store, with a shopping cart and the ability

to accept credit cards.

2.) You find a distributor who is willing to drop ship the products

you want to sell. The best place on the Internet for this is

www.DropShipSource.com. This is our website, and our Drop

Ship Source Directory is recognized as the best source for

legitimate wholesale drop shippers on the Internet.

3.) You establish an account as a retailer with the distributor you

choose.

4.) You receive images and descriptions of the products you want

to sell from the distributor, and post them on your Internet Store.

5.) A customer surfs into your Internet Store, and falls in love with

a product that you have priced at, say, $80. They purchase the

item with their credit card. Your Store charges their credit card

$80 plus your shipping fee.

6.) You turn around and email the order to your distributor, along

with the customer’s name and address.

7.) The distributor sends the product directly to your customer, with

YOUR Store’s name on the package.

8.) The distributor charges you the wholesale price of, say, $45.00

plus shipping.

9.) Your customer gets a cool product from your store shipped to

their door, and they tell all their friends about you, and you make

even more money.

There you have it. You just made a $35.00 profit on one item. You

didn't have to buy a whole bunch of the product and keep it in your

warehouse, hoping you would sell it. You didn't have to pay to have

it shipped to you, and then pay to ship it to your customer. All you

did was send an email to your distributor.

That’s the drop shipping process in a nutshell, and we've placed

information in the Drop Ship Source Directory about everything

from setting up your store to accepting credit cards.

Chris Malta

Worldwide Brands, Inc.

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