In This Chapter

Although the Internet is an electronic marketplace, the overwhelming majority of online stores sells and ships physical goods. In fact, the first really successful e-business was an upstart online bookstore called Amazon. com. (Heard of them?)

Selling physical products online is a much more complicated process than software, subscriptions, and other products that can be digitally delivered. You have to source or create the product, then promote and sell it, then get it shipped to the customer. On the plus side, websites that sell physical goods tend to have less competition than those that sell, say, e-books. So if you learn the ropes, and have a popular product that can be sold profitably online, you can do very well.

I sell two types of products on my website:

So the first thing you need to realize about selling physical products online is that it requires more work and all-around hassle than the other ways a website can make money: digital products, services, and advertising and affiliate programs.

Yet, if you work everything out and get your order fulfillment processes running smoothly, selling physical products can be very profitable.

And as you’ll learn later in this chapter, there are other ways to profit from physical products that don’t require you to handle inventory, packaging, and delivery.

There are four questions you need to answer before you can sell physical products on your website:

The third question, concerning shipping the goods, is covered in more detail in Chapter 13. The answers to the other questions I covered right here, in this chapter. So stayed tuned!

Let’s assume that you’re not going to manufacture a product from scratch. How do you find products that you can sell on your website?

Say, for example, you plan to build a web-based business selling custom silk flower arrangements for special events such as weddings, funerals, home décor, store displays, and so forth. You’re going to need an inventory of various types of silk flowers, stems, mounts, and adornments.

The worse mistake you can make is to simply purchase these materials from a retail store. If you do, you’ll be paying retail prices and it would be very difficult, if not impossible, to make a profit reselling those materials online—even if you’re adding value by making the custom flower arrangements.

What you want to do is buy your silk flowers and other materials at the same price as that retail store pays.

How do you do that? You’ve probably heard the term wholesale price before. That’s the price you need to be able to pay. And you get that price, of course, by going through a wholesaler.

The typical arrangement with a wholesaler is this:

When buying wholesale, you won’t be ordering one silk flower at a time. The typical requirement is to buy in bulk. In fact, depending on the wholesaler, the pricing may fluctuate depending on the size the order—100 units, 500 units, 1,000 units, and so forth. And it is not uncommon for wholesalers to have minimum order requirements.

Why can’t you just buy direct from the manufacturer? Sometimes you can. Not all manufacturers work through wholesalers, but most do. Typically, the larger the manufacturer the more likely it is they will have a wholesaler network.

An easy way to find a wholesaler is to contact the manufacturer of the product you want to sell on your website. Ask to speak to the sales manager. He or she will be able to provide you with the names and contact information of wholesalers in your area.

Another way is to search through the many online directories and databases available on the Internet. Wholesalers want to be found! So they do a good job of getting themselves listed in every directory that potential resellers (that’s you) may be searching.

Here are some places to start:

Another good resource is ThomasNet.com. It’s a directory that cross-references products with manufacturers, distributors, and wholesalers. Very handy!

And don’t forget to look in local business directories in your area, including the world’s most popular: the Yellow Pages. Most of these directories have a category called Wholesalers, which makes it easy.

When most people think of manufacturing, they think of making something from scratch. But that isn’t always the case. Any type of assembly, or customization of an existing product, is considered manufacturing.

In my earlier example, the website owner was selling custom silk flower arrangements from supplies purchased through a wholesaler. That is, in fact, a type of manufacturing. You are treating a product, in this case silk flowers, as raw material for something else you are creating—custom silk flower arrangements. You could potentially do the same for snowboards (custom etching), coffee cups (logo embossing), and coffee beans (repackaging for consumer use from larger wholesale bags).

Making your own products requires a lot of preparation. You need, at the very least:

Manufacturing your own stuff requires a significant up-front investment, even if your product is relatively simple to make—such as knitting instructions. Even that product may require an illustrator and writer to create the instructional sheets and printing. That investment doesn’t begin to be recovered until you’ve opened the doors to your web-based business and started getting orders.

Before you take the leap, you should at least explore sourcing products through wholesalers, finding drop ship wholesalers and manufacturers, or outsourcing manufacturing to another company. All these topics are explained in this chapter.

Still, if manufacturing your own product makes sense for your web-based business, go for it. Just keep in mind that your per-unit costs are probably going to be higher at the beginning of your business. It takes time to learn and refine a manufacturing process to minimize costs.

In order to ship a product promptly to customers, you need to have that product available. Unless you’ve made a prior arrangement with customers who place an order—such as you might with customization—then you can’t wait for a product to be shipped from your wholesaler. Your customer is going to want it right away.

In fact, you might be surprised at how quickly online customers expect their orders to be shipped. At my online business, ForCopywritersOnly.com, we recently received a call from a customer demanding to know the delivery status of his order … an order he placed just three days earlier!

You need a place to store your products that is safe and secure, and where the chances of your stock being inadvertently damaged are minimal. If product is stored in your garage, for example, with lots of other family items, damage could occur in a variety of ways. (I once bumped my car into a box of books while parking.) You want to make sure merchandise can’t easily be stolen. And you want to make sure it’s protected from the weather and other environmental damage. A basement, for example, could flood and destroy thousands of dollars in inventory.

Here are some suggested places for storing inventory:

Make sure you ask a lot of questions before signing up with any storage or warehousing service. You want to make sure they have insurance to protect your goods from theft or damage, and that you have access to your products as needed.

A friend of mine once stored his products in a local self-storage facility, only to discover that they were closed for the holidays during the last two weeks in December. During that time he had no access to his goods. Happy holidays!

If you suspect that making your own products from scratch is going to be expensive and time-consuming—and it probably will be—then consider outsourcing to a manufacturer. There are plenty of companies that offer custom manufacturing even in small quantities.

If your product is new, many custom manufacturers will work with you to create it. Some even have design departments specifically for this purpose. You show them plans or drawings of what you’re looking for and they create a prototype of the product for you to review. If you like what you see, you can negotiate manufacturing it in quantity. If you don’t, then it’s back to the drawing board.

A friend of mind once had a novelty item—a stuffed animal—custom manufactured by a company in China. He went through two or three prototypes before finally coming up with a product he liked. Then he placed his order and received his first shipment of the new toys in about seven weeks.

Where do you find a custom manufacturer? In addition to searching online and in directories of manufacturers, try MFG.com. On that website you can submit your product plans or drawings and get quotes from dozens of custom manufacturers around the world.

The Achilles’ heel of selling physical products on the Internet is that you have to package and ship the orders. That can be an expensive, time-consuming headache. Think of the last time you had to wrap up and mail holiday gifts to distant relatives!

Now wouldn’t it be nice if the wholesaler you’re purchasing the products from would also be nice and package and ship those orders directly to your customers?

Well, some wholesalers do. The arrangement is called drop ship. And it can make selling goods on your website a lot easier.

Drop shipping bypasses the traditional process where a wholesaler ships products to your location and you ship orders to your customers. Instead, with a drop ship arrangement, the process goes something like this:

A drop ship arrangement seems so simple and convenient that you might wonder why any web-based business would even consider any other method. In fact, drop shipping is extremely popular among web-based business owners. But there are a few drawbacks.

First of all, just because the wholesaler is delivering the products to your customers doesn’t mean they’re paying for that expense. You will be charged for packaging, shipping, and other order fulfillment costs—either separately, or as a fee built into the wholesale product price. In most cases, it’s cheaper to bring in the product and handle order fulfillment yourself. The primary benefit of a drop ship arrangement is time savings and simplicity.

Also, not all wholesalers offer drop ship programs. So the products you want to sell may not be available within this arrangement.

Still, drop shipping is an ideal solution for those web-based businesses that don’t have the resources to inventory products and fulfill customer orders themselves. The profit margins are a bit less, but the lower required upfront costs of getting started, along with the simplicity of this arrangement, often makes it all worthwhile.

Where do you find a drop ship wholesaler? Many of the companies and wholesalers listed earlier in this chapter offer drop ship programs. In addition to those, check out these online directories and resources.

Many of these sites do more than just help you find drop ship wholesalers. Some, in fact, are set up like a one-stop shop. They will make the drop ship arrangements with the wholesalers on your behalf, integrate with your online business to get order information (so you don’t have to send it manually), place the orders with the wholesalers, and provide your customers with shipment tracking numbers.

And here’s a tip. Not every wholesaler makes it obvious, even on their website, that they offer drop ship services. So if you find a wholesaler with a product you want to sell on your website, call and ask if they have a drop ship program. They might!

The Least You Need to Know