Earning Money From Internet - Part 5 Wholesaling And Drop Shipping

Earning Money From Internet - Part 5 Wholesaling And Drop Shipping

This is a business model that is closest to running a real business in offline world. The concept is not new but the Internet really made it blooming. Apart from the customer who is always necessary there are two important participants Wholesaler and Drop Shipper. If you decide to go down this road Drop Shipper will be you and Wholesaler will be your supplier.

The model is following. You create an online store on your website where you offer various tangible products people may be looking for on the Internet. When you have a willing buyer you make a sale and accept the money from the client. You do not have the product you sold yet. Only after you make the sale you go to a Wholesaler and you purchase the product that your customer has already bought from you. You are able to get a much better price from the Wholesaler than your customer. The difference in prices is your profit, minus the costs obviously.

The reasons this works and is a legitimate business practice:

It is not illegal to sell something that is not yours (in almost all jurisdictions in the world sale is an obligation, it does not transfer ownership. You have an obligation to transfer the ownership of the product to the buyer and you fulfill this obligation by buying the product from the Wholesaler and sending it to a customer).

You have to sign a contract with the Wholesaler. The contract which will in short say that you are willing to buy from the Wholesaler on regular basis and in return the Wholesaler will offer you prices unavailable for consumers. What this does is it effectively makes the Wholesaler what it is (seller of large volumes) and it makes you a Retailer selling the goods to the end consumer.

This makes economic sense because the Wholesaler does not have to bear costs of dealing with consumers. You don't have to bear the costs of dealing with producers.

Internet made it very easy for Wholesaler to get organized in Directories or Organizations or any other form they find useful. This further reduced the costs because the risk of not selling a product is lower.

The great thing about how the business works today is that the Wholesaler will take care of the logistic part for you. So your job is to find a buyer (usually you have time to check if you'll make profit), take money from the buyer, buy product from Wholesaler and then give him information where to send the product. You keep the price difference.

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