Dropshipping as a Home Based Business

Filed in archive Home Based Businesses on January 24, 2008

You may have seen the infomercials touting SMC as an ideal home based business. The idea is they provide you with a catalog filled with a wide variety of products and allows you to sell them either online or through direct sales. They claim you can make a lot of money because you charge your customers the retail price, get the item at a rock bottom wholesale price, and pocket the difference. There's also a membership fee of several hundred dollars. Is this a scam? That depends. The infomercials claim you can buy the products ahead of time and keep an inventory in your home. If you want to try this opportunity, this is the way to go. Never use drop shipping! What is drop shipping? It is a sales practice where you sell an item and get paid for it, then order it from the warehouse and have them ship it directly to your customer. Companies like SMC claim this is a great idea, that it saves time, etc. Don't believe it. There are several problems with dropshipping.

First of all, if you don't have the product in hand you have no idea of the quality, and you won't be able to answer customer questions very well. If you're selling electronics, handbags, or any kind of popular item this could be a very serious problem as without having seen the item before you sell it, you won't know if the company you're doing business with is dealing in counterfeits. Not only does this lead to angry customers, it could get you in very hot water with law enforcement. Finally, there is the problem of inventory control. Imagine this. You sold several items, collected payment, and placed the order with the warehouse when surprise! They tell you the item is out of stock. Now you've got to process refunds and explain this to your customers. Think they'll be happy?
Or say you've placed the order and several weeks later you start getting angry calls or emails from your customers asking where their items are. What do you say?

For these reasons, if your home business is based on selling product make sure you always have a supply on hand. Never ever sell an item you don't actually have, and use caution with any suppliers located in China or India as they are often in the business of distributing counterfeit goods (Ipods and designer handbags are two examples). Use your common sense and listen to your gut. Sales can be a very profitable home business if you do your homework first!