This week's journey of discovery introduced me to 2 wholesale distributors. My task was to explore the advantages and disadvantages of these 2 when it came to selling sunglasses. One site, Alibaba, is located in China. Their sunglasses were much less expensive, and the had a very large selection. The problem with ordering from them was shipping. It takes at least a month to receive an order, and shipping is very expensive. To order a dozen pair would cost over $550 for shipping. Now they had some pairs that cost a few dollars, so if we ordered enough, the price became very competitive. The other wholesaler, LA Wholesale, had much higher prices, over $20 per pair, but they had free shipping available on orders over $200, which with the minimum order requirement was any order. Shipping was only a few days, depending on where in the country you lived. It was very interesting to compare these two wholesalers, and I will look at several others if I decide to sell a product. I learned that there is a lot of variety in wholesalers when it comes to costs and variety of merchandise.
Comparing drop shipping to an affiliate model for selling acoustic guitars was an eye-opening experience. One source I listened to described his experience as a top rated Amazon affiliate. He said he had a #1 rated site, and another highly ranked site selling high dollar merchandise ($200-$300) and last year he made a grand total of $200 profit. He described a few of the pitfalls of Amazon as an affiliate site. First of all, you receive a small commision (6%), so a $300 sale is worth $18. Now with high volume this sounds pretty good, but there was another problem. He only got credit if the person purchased when he first was linked to Amazon form the affiliate site. If he left the site and came back later, no commision. Most people don't impulse buy for large ticket items. They may look, go check other sites, then come back to buy. Some of the other affiliates I explored had better terms, such as giving you credit for purchases made after the first visit, even up to a month later. Most of the affiliates paid commisions monthly, and only after a minimum threshold was reached. Certainly not a big money proposition, but a safe and reliable way to make a few dollars.
Drop shipping seems to be much more profitable. The one guitar I looked at retailed for almost $100, and my cost was less than $50, so a nice profit. Some of the drop shippers charge a fee to participate, while others added fees to each order. Still, with $40-$50 profit per order, it looks to be a good way to go. Of course, there is a downside. If the customer is not happy with the order, you are now customer service with many drop shippers. If the customer stops payment on his credit card or whatever vehicle he used to pay you, the money is returned. Now in the case of this guitar, I have the $100 taken out of my account, and I have already paid the shipper $50, so my net on this transaction is -$50. Any complaints or problems require your time to resolve, so there is a much larger time commitment involved, as well as the risk of losing money on a sale. Comparing these two marketing methods just proves the old adage, "the greater the reward, the greater the risk."
One very good thing came out of this exploration. I found that one of the companies in the genre I am considering uses affiliates, and I plan on researching more in the field. I may set up a website with multiple affiliate links, as well as offering a service or informational content. I am looking forward to learning more so I am able to decide what to market, and how.
See ya next week
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