Dropshipping - Understanding the risks An article by Charlotte Alice for www.ukdropshippingguide.co.uk   It’s very easy to get excited by dropshipping. Read the web site copy and it’s just so easy to make money, all you need to do is sign up with a drop ship company, build a web site or advertise on eBay, sell the item and start counting your profits on your way to work from home heaven.     Understand the risks. I’m amazed how high people’s expectations can be if the term dropshipping is in the title. I would like to make it absolutely clear, becoming successful with dropshipping is the same with any other business. It requires hard work, research and understanding of your customer and your marketplace. You just can’t open a box and have all of these things to hand.   Below I have detailed the main risks that will impact your dropshipping profits.   1.        You have a “So What” offering. Think about how you’re selling and how it is positioned in the market, then put yourself in your customers shoes. Remember, this is not about the product you’re selling, any product will sell and sell well if it packaged correctly. It’s about how your products look to your potential customers. Drop ship companies have lots of customers, so there may be many other sellers trying to sell the same products. If you’re all the same and you all fail the “So What” test, you’re all selling on price, it’s that simple. One thing is sure, if you’re selling on price alone your margins will continue to be squeezed. So look at how you can differentiate yourself. It will take a little effort to do this, so it’s easier not too, however ultimately more rewarding and profitable if you do.   2.        Don’t be a Jack of all trades. Yes, you’ll make some money and sell some products if you spread yourself wide enough. If you want to make more sales and have better relationships with your customers (meaning repeat orders) we suggest focusing on niche areas.  What’s better, someone that sales clothes, toys, DVD’s, Books, bikes, kitchen utensils, or someone that has a children’s store (either eBay or website) dedicated to providing children’s clothes, toys, DVD’s etc. If your customers know what you specialize in, they’re more likely to come back and buy again.   3.        Understand what the cost of sale and the cost of a customer is. Many large companies understand that it costs far more to find a customer than it does to keep a customer. This means that you need to consider how to make your customer’s experience as good as possible. Some of this is out of your control as you’re using a drop ship company, so make sure you know exactly what service they will get. Consider how you can keep in contact with this customer, ask if you can add them to your mailing list, tell them about other special offers you have etc.     4.        Think about how and where you sale. Many sellers will begin by selling on eBay, this is understandable considering the huge amounts of traffic that can be leveraged. Consider also, your own web site, if you’ve been a success on eBay then enticing your customers to a web site should be easy. It will also save you lots in fees. A web site will give you a lot more flexibility with regards to newsletters, extra residual income and new markets.   5.        Be close to your drop ship company, have a good relationship with them and get to know someone there personally. It is very useful to have some form of insight and knowledge about your suppliers. If you had known they were just about to stop an entire range of products, would you have paid out good money for an eBay shop to sell them? A good relationship usually means that you will get good information, this is critical for keeping your profits high.   Any questions relating to this article should be addressed to Charlotte via info@ukdropshippingguide.co.uk   This article can be reprinted and distributed freely as long as the article includes the link to www.ukdropshippingguide.co.uk