Saturday, October 29, 2011
Is Drop Shipping Products a Legitimate potential to Make Money Online?
Is Drop Shipping Products a Legitimate potential to Make Money Online?
Internet retail sales are forecasted to increase to over $245 Billion annually by 2014.
If you choose to select this venue to earn income, internet retail sales could be your answer. Let’s suppose you choose this venue for income and decide this is the way to go and you want to sell Widgets. So you go out and buy 1,000 widgets and stock them in your garage. You expect to sell 1,000 Widgets your first month. Let’s say each widget costs you .50 cents, shipping to you is .25 cents. So far you owe .75 cents X 1,000 or $750.00 you had to prepay.
So you already have your website which is hosted by Google or Yahoo, and the domain is paid for, and you list your widget on your website. Let’s say the annual cost of the prepaid website and template is $120 annually or $12 per month.
So your first month of selling widgets, you decide to list them on your website for $2.00 each shipping included and you have the first month expense of $762.00 (overhead).
Then you get your first order for 10 Widgets. So you earned $20.00 gross income and shipping the 10 Widgets costs $2.00 (.20 cents each bulk lot instead of .25 cents each). So your second order, 3 days later comes in for 990 Widgets at $2.00 each. So your gross income is $1,980.00 and the shipping is $198.00 for the lot (.20 cents each bulk lot instead of .25 cents each).
So, we started out at a monthly gross income on the Widgets at $2,000.00 less your shipping costs to your buyers of $200.00 less your cost of the 1,000 Widgets of $750.00 less your overhead of $12 per month.
So your net profit is $1,038.00 for the month. Not too bad right? Well, let’s say you had to spend 160 hours during the month finding your supplier, ordering Widgets, stocking them in your garage, posting them to your website, answering orders, processing and then packaging them for mailing, and going to and from the post office. (We will assume you already had the other costs prepaid – computer, internet, packing supplies, auto, gas, insurance, etc.). So a net profit of $1.038.00 divided by 160 hours equals you got paid $6.49 per hour of your time.
DROP SHIPPING. Using the above example, let’s suppose you are browsing the internet and you find a drop shipper that will sell you each Widget for .25 cents each and will ship for you for .25 cents each(cost passed on to consumer), so your total costs are .25 cents per Widget before overhead.
Now let’s say the drop shipper offers you a prepaid domain, website template, and up to 1 million products listed on your website. They handle all the inventory, shipping, updating the website, etc. Let’s say the costs are a one-time fee of $149.00 and a monthly hosting fee of $29.99 or for the first 12 months $42.41 per month (overhead) in the first year, then $29.99 per month.
So on the drop ship plan you sold 1,000 Widgets at $2.00 each or $2,000 Gross Income less your cost to the drop shipper of $250 for the 1,000 Widgets and less your monthly overhead of $42.41 equals a net income of $1707.59.
Now, let’s suppose you it took you 60 of your time for the month to monitor the website, change the template, track orders, etc. So $1707.59 divided by 60 equals $28.46 per hour income to you for your time.
So had you rather work for $6.49 per hour or $28.46 per hour?
In the next article, I will address the tips to pick the exact drop shipper, and what to watch out for that can go wrong.
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