“Wholesale drop ship” – Is probably the biggest misconstrued and misunderstood in the psyche of a businessperson, be it man or woman, be it orthodox or online business. Most of them think that they can get specified products from a wholesaler at the cheapest prices on the globe and they are the only people that are buying from the said wholesaler. Well, the dream of earning and spending millions arising thereof and the objectives to retiring to Bahamas based on these dreams, goes out of the window, when they realize that they are actually getting lesser margins than some of their competition.

This is when they begin to become revengeful and accuse the wholesaler of cheating and making false claims of being wholesalers. They have somehow forgotten the component of competition that has entered most lives today. The situation, as a fact, has arisen out of lack of education regarding business, than anything else.

When the dreamer sees the same products being sold at prices lower than he does, it is time education and enlightenment took a step forward and culminates in beginning the learning process. This would keep the dreamer in good stead, when he/she does business online or elsewhere.

The following realizations may come to help the process of education, think!

1. A large retail store can buy goods at a much cheaper price and qualify for many wholesalers rebates, further reducing the price. Competing with them, riding on a small or home business on drop ship basis is mission impossible. The more you sell on a monthly or fortnightly basis, the more you could bring down the price form your wholesaler. Economies of Scale…!

2. The concept of Wholesale drop ship goes beyond a fixed price. A small or home business could only break the fist level of wholesale pricing because the orders in singles and two’s. Wholesale pricing is volume dependent, say $X each for quantity up to 50 pieces, a further 10% off on quantities between 50-100 pieces and so on. So, the actual price depends upon the quantity you can sell being a small or home business.

3. Competition further erodes the suggested manufacturer’s retail price. In the dog-eat-dog market like electronic products on the internet, it is almost impossible to make a profit despite buying at the best wholesale price possible. In these cases, the sellers are responsible for undercutting the profitability by advertising reduced prices to compete. The profitability becomes so low that it is no longer viable to deal in these products. Too many suppliers divide the market, making volumes ridiculously small.

4. The selling skills also play an important part in profitability. If “cheap” was the only criterion, Wal-Mart would have wiped out the entire retail industry. Thinking from the customer’s perspective, he/she would be willing to spend a little more if they get value-added services along with the product, great after sales service and most importantly the trust arising from branding. Company or dealers focus on products also matter. In an online scenario, a clean focused and informative website with all offers displayed would go a long way in achieving a sale than the price itself. One could look at the possibility of adding the service portfolio in addition to the one provided by the manufacturer and the wholesaler.

5. While entering the online retail industry, businessperson has to choose the options to compare in minute detail. Just looking for the cheapest available and being bogged down will not help. Comparing pricing and products in the niche market of the businesspersons own website is most important. Since the website is focused at a particular class of customers, comparing to sites that this class of customers may visit will help to evolve a better picture. Make sure that the class of customers you focus on are slightly better off financially and are open minded, most middle class and stingy customers do not take well to the drop-ship concept because of an inborn idea that the prices would be higher because of the margins.

6. Trying to sell products that are otherwise not available to the niche market through online stores would help to get a toe-hold in the online market.

In addition to the above pointers, a few more qualities that are personal have to be developed to succeed in the ever growing online retail business. There is no shortcut to success, so keeping at it despite the initial drawbacks is important. Make sure that the small wholesale drop ship business falls into the legal framework, so that you get the best without any added hassles. This is the only way to work around the online millionaire hype. Eventually getting there would be hard but worth the effort.