Sales: Call 877.832.5289 (N America)Is eComm drop shipping a valid source of income?
Hi everyone,
I’m brand new to eComm. I only heard about it after reading an article in Entrepreneur Magazine this past July. In the article, I read how it was one of the few ways to start up your own business without a lot of overhead. I thought it was a great idea and decided to give it a shot. I started out with Volusion, who I thought had a nice presentation and the whole 9 yards (not that I knew or even know now what the whole nine yards are).
After a couple weeks with Volusion, I stumbled upon OS Commerce and liked the sound of open-source better. Then, when I ran across Magento - I was hooked. I Enjoyed setting up the catalog. It was ugly at times and there was a lot of head-scratching, but I’ve now got the bear essentials stocked and the doors are open. My store is OceanwideSupply.com. Please swing by and let me know what you think.
I have a couple of specific questions that have me troubled. If anyone could comment on them, I would love to learn from your experience.
1. It seems as though no matter how low I cut my margin on a particular product, there’s always someone offering it somewhere for less than I bought it for. I’ll take the name of my product as displayed and paste it into a Google search and out comes 5 stores listing the same product for less than I bought it for. I know that these other stores are using the same supplier as I am (CWR Electronics) because the description is identical to what you download off their site). How can that work? Are established stores buying it in bulk and storing it? I have to say that some of the other stores in my niche don’t seem like they’re high budget operations. Maybe I’m wrong, but to look at their sites is like looking at a lemonade stand. If someone here is selling lemonade, no offense intended. I have nothing against lemonade - I love it. HA!
2. How long does it take to get someone rolling into your shop? I know this differs greatly with each store/niche, but does anyone have a basic idea of when you should be at the point of “this may work out fine” or “I give up - It’s just not going to happen”.
3. I ran some numbers through a spreadsheet that made and it seems as though I will have to generate about $600K in sales to break be able to do this full time. Here are my figures (if this is not the right place for this forum, then I apologize):
Annual Gross Sales: $600,000.00
Annual Cost of goods Sold: $397,800.00 (calculated at 33% margin
Annual Marketing: $32,600.00 (estimate based on industry and marketing plan)
Annual Drop ship and misc fees: $6,000.00 (1% - this could be higher, I have no idea)
Annual General Expenses: $750.00 (PO box, hosting, etc...)
Adjusted Net Income: $162,870.00
Self Employment Tax: $24,919.00 (15.3% of adjusted net income)
Federal Income Tax: $89,090.00 (calculated at 30%)
No Income Tax in my State
Which leaves over $89,090.00 in your pocket. Without going into too much personal info, after health insurance, mortgage, etc..., that would be “do-able” biut just barely.
I have no dilusions of being able to quit my job for a while, if not ever, but it would be nice to think that you could get there eventually.
Again, I know everystore is different, but doeas any have any advoce for
(a) How long its going to take to get to those levels of production and,
(b) How to get there ASAP.
??
Sorry if this is the wrong forum, but I know that there are a lot of others out there like me - getting started up and not having any way to measure my production (which, right now, is zero). And I also know there are some pros in here, so If you have any words of wisdom for me, I would appreciate it.
Matt
1bntabor posted Sat, September 20, 2008
Yes, can be very profitable.
2magentomatt posted Mon, September 22, 2008
thanks for the comment
Does anyone else have any insight here?
3razor posted Mon, October 20, 2008
Generally speaking, if you are doing $600k in revenue, you would normally take things up a level by doing some of the following:
-Negotiating lower prices through contracts
-Buying in bulk
-Provide Customer Service/Additional Services to battle price competition
Think about it, you took one item and checked 5 places out. That means 4 of them do not have the lowest price. Somehow they are staying in business (or are losing money).
And last but not least, they could be buying direct from manufacturer or high end distributor. The company you could be getting things from could just be a low-level wholesaler. They may take descriptions from manufacturer’s site.
Supply Chain: Manufacturer > Distributor > Wholesaler > Retailer > Consumer. Some steps vary by industry but that is a general idea of the supply chain.
4DDMAN posted Mon, October 20, 2008
I agree with razor.
If you start doing that much volume you should be looking for better discounts. The biggest challenge coming into e-commerce is getting the traffic and getting quality traffic to your website. If there are 5 others out there that are selling at lower prices then there are probably 100’s out there selling at the same price. So how to get quality traffic. It takes time and hard work. If it was easy then everyone would do it.
1. Search engine optimization - Be careful here. Lots of companies promising the world. Either learn it yourself or find someone you can trust
2. Paid CPC (Cost per Click) Advertising. Google, Yahoo, MSN are the three main tiers
3. Affiliate marketing - Depends if you want to manage this or not. I find it to be a good channel.
4. Vertical shopping networks - Shop.com. shopzilla.com, nextag.com, pricegrabber.com, yahoo shopping, Google Base, shopping.com -
This is a very low level intro into ways to get traffic.
5Oldgamer posted Fri, October 24, 2008
I agree with razor and DDMAN,
it sounds easy to get 89K when you got 600K in sales.
In reality, when you start, you barely will make 1 or 2 sales per month and it will not grow fast even with competitive prices. I remember attending on eComm conference, where they tell me how easy it is, drawing picture you tanning on a beach and making sales online in same time. Yeah, right!
What I come to is there is a two ways to do it: you can try to create and support store with minimum expenses and wait and see how it will grow, or you can put in some money and wait and see if it will give you some profit after some time. I have my job and started my store more of curiosity, so I choose first one. I didn’t put any cent into advertising and mostly hope for a Google Product search. So, I practically have no sales almost. From other side, I have very low expenses, only for my host and for my SSL. Despite of that, it still not a walk in the park, I spent a lot of time keeping store live. I tried some other stores but no I glad I have Magento. I am not a web programmer (I program on other languages) and I do not know Magento architecture, but from what I saw Magento is the most promising and flexible store. But again, you can have the best store and still do not have clients.
Good luck.
6Oldgamer posted Fri, October 24, 2008
P.S. I checked your store and when I tried to add product to the card it took forever, I stopped torture explorer pressing stop and closed page after second try. I tried to open other categories, but it was no go. Otherwise store is fine. Just in case I opened my store and it was fine after I clicked on diff categories. I had problem like that with my old host provider. After I changed provider I forgot about problems like this.
7magentomatt posted Fri, November 7, 2008
This is all good info. Thanks for your time and effort on these responses. I guess I’ll hang in there and see what happens. My best to all of you…
matt