Internet home business is a topic so hot that it’s on fire; just about everybody wants to know how to leverage the Internet to make money. Igniting the fire is the desire for trustworthy information on how to find products to sell. The exchange of physical products for money is a tried and true business model. If you have something that people want and your price is right, then you will make money. However, knowing how to find the right products to sell is not always easy requires some know-how.
There are many ways of solving product sourcing problems. Retail business, whether online or off has often relied on wholesale distributors to provide affordable goods. Drop ship suppliers have also filled a niche for retail marketers and have become especially popular with the increase of online e-business. Before you throw yourself into this subject, however, it is best to pick up a few basics.
Drop shipping and wholesale are often confused, and even the term wholesale is frequently misunderstood. Drop shipping has become very popular with the advent of the Internet commerce, but to understand it, you have to first understand the term “wholesale.” A true wholesale business is licensed to buy goods from manufacturers for resale to retailers. The wholesale business license allows the purchase of products without paying sales tax as that is charged by retailers to the buying public. Wholesalers and their client retail customers bargain for the best prices, the lowest prices given for the largest bulk orders. In other words, the larger the order the lower the per unit price.
By law, a legitimate, licensed wholesale company is required to sell only to merchants having a sales tax permit, which is authorized by the state of residence. Sales tax permits sometimes have different names depending on the state, but they essential mean the same thing. This is the permit allowing retailers to buy goods from wholesalers without paying sales tax. The sales tax permit is simple to acquire from your state of residence. The sales tax requirement makes it very easy to distinguish true wholesalers from other kinds of product sourcing. If a business does not require proof of your tax permit, then it is not a true wholesaler. This is important in identifying so-called “middlemen” dealers who sometimes claim or imply that they are wholesalers when in fact they are not.
Drop shipping is not the same thing as wholesale supply. A drop shipper may be a wholesaler, and a wholesaler may offer a drop shipping service, but as mentioned above, the two are not the same. Drop shippers are product suppliers who stock and warehouse an inventory of products that are sold through you, the retailer, to your customers. When a buyer pays you for the item, you pay the drop shipper, who then ships the product out to your customer under your business name. This is the true meaning of drop shipping. Your customer is never directly aware of the drop shipper operating behind the scene of the sale.
Where this gets tricky is that some drop shippers are merely discount retailers selling to other retail store owners. However, some drop shippers are also legitimate wholesalers authorized by manufacturers to distribute their goods. In other cases, some wholesalers offer drop shipping to their retail clients as an added service. As someone who may be starting out, you need to be aware that just because a business may advertise low prices or even claim they sell at wholesale prices does not mean they are a true wholesale product supplier. Unless they require proof of your sales tax permit, they are doing retail business, not wholesale business. Examples of legitimate drop ship companies who are not true wholesaler would be dropshipdesign.com, shopster.com, and megagoods.com, to name a few. Examples of legitimate wholesale companies who offer a drop shipping service upon request would be WYNIT and DBL–two of the major names wholesale, consumer electronics.
Drop shipping and wholesale distributors are standard means of solving the product sourcing problem for your home business. The information in these few paragraphs should save you misunderstanding down the road and hopefully prevent you from making purchasing mistakes that would otherwise cost you money. Buying low cost products and selling them at a slightly higher price is standard business practice, but in order to succeed, you must be sure of your product sourcing.