My history

You can read about me on the other page but here's a brief synopsis so you can see where this is coming from:

I got a university degree in Electronic Engineering back in the early seventies. I worked for three multinational companies doing design and development through quality assurance and management. When I was made redundant I was out of work for 7 months before getting a poorly paid job repairing satellite TV receivers. When I was made redundant from that, I set up a repair shop in my garage and made "survival wages". Pretty soon I realised I could make additional income by selling repair kits by mail-order. Then I started to buy in stock of remote control handsets and other stuff to sell by mail-order. I wrote and published a repair manual and included adverts for my mail-order stuff in it. The manual was bought by a couple of warehouses who sold it for me, so I got the printing costs back, plus some profit, plus free advertising. Then I set up a crude web site and began to put repair information on it. I added a shopping cart (a free one). That old site still exists but most of the information is now out of date so I just use it with Google adverts to generate pocket money:

http://www.netcentral.co.uk/satcure

When digital satellite transmissions began, it killed my repair business because BSkyB was giving away free satellite receivers. I had planned for this, however, and concentrated on selling accessories. I also wrote a few eBooks about installing this stuff and, of course, included adverts for my accessories and links to my new web site:

http://www.satcure.co.uk

So what has this to do with drop-shipping?

Well, my mail-order business flourished and reached the point where I couldn't handle any more orders. That meant my income couldn't increase and I had no leisure time. Also my house was so full of stuff that my wife was threatening to move out. Now, by this time, I had established good links with a number of warehouses. I asked them if they could ship orders direct to my customers. That would mean that I held less stock and did less packing. Some of them agreed so my business expanded. Then I contacted a family mail-order company who specialised in supplying spare parts to the TV repair trade - a dying (dieing?) industry. They agreed to handle all orders on my behalf and they would share the profits with me. This meant a big drop in wages but a big increase in free time. I used that time to create more business and was soon earning as much as before but for almost no work.

So drop shipping is easy?

It sounds easy, doesn't it. But building up to it can be a slow process. Here's my advice:

1. Decide what you want to sell. 90% of my success comes from the fact that I know my products and I can tell the customer everything he needs to know about what to buy, installing it and getting it to work.

2. Locate suppliers. Buy stuff from them and sell it. You can begin by selling on eBay but you MUST set up your own web site as soon as possible. It's cheaper and less work in the long term.

3. Once you've established a relationship with your suppliers, visit them in person and tell them you can increase the volume of sales if they will drop-ship the orders on your behalf.

Negotiating this won't necessarily be easy! They will probably want to charge you a higher handling/shipping charge of around ten GBP. This is obviously no good if you are selling penny whistles! It may be that it's viable to drop-ship only the higher value items this way.

Once the warehouses have agreed, run a few test orders and get them shipped to your friends or relatives. It's important that the warehouse doesn't send YOUR invoice to your customer. (The first two companies I tested DID send my invoice to my Mother!) If they fail the test and can't correct the problems, you can't use them for drop-shipping. Look for a different supplier.

Note: there are almost NO true drop-shipping specialists in the UK. Those that advertise as drop-shippers are probably just buying stock from a regular warehouse and adding their mark-up to the price. Your competitors will undercut you easily. In addition, if they advertise on the Internet, you can bet that many other people are using their services. Avoid them!

The European Market

Although you can make a living selling in the UK, you will never get rich. However, the European market is about the same size as that of the USA and there are no import restrictions preventing you from shipping to a European Union (EU) country. In addition, most Internet-savvy customers will have at least a basic command of English language. So restricting yourself to UK customers only is stupid.

However, shipping costs outside mainland UK can be high so make sure you tie up the best deal with your drop-shipper. Also bear in mind that it makes more sense to ship with the country where your customer lives. So it's a good idea to locate drop-shipper in, say, Germany. Better still, if you can find them in places such as Romania, the prices are likely to be much lower! But I do urge you to visit each potential drop-shipper personally.

UK requirements

In the UK you don't need a business licence or any form of registration to set up a business. Your only obligation is to inform your tax office if you begin trading. This means that a warehouse won't ask for any documents from you, other than references from other businesses from whom you buy. This can be tricky for your first contact but normally a good credit reference from your bank will suffice. In addition, if you pay your supplier immediately in cash (or by credit card if they accept this), then they won't need a credit reference at all! Inn fact many simply ask you to provide a "business letterhead", which is easy to generate on your computer.

VAT Registration

You don't need to register for VAT until your turnover approaches the monthly equivalent of around 52,000 GBP per annum (check this as it keeps changing). However, trade warehouses are more likely to welcome you if you can show them a VAT registration number. If you do earn more than 60k/12 in any one month then you should check with your accountant immediately. Failure to register when you have to is a serious offence. If you are VAT registered then you have to add 17.5% tax to your invoice total including postage. Every three months you must hand this tax over to the government. Obviously this increases your selling price but bear in mind that you claim back the 17.5% that you paid when you bought the goods (so get a VAT receipt every time).

Finding suppliers. If you live in or near a major city or industrial area, look in your local phone book; drive around and see what you can find. I was amazed by some of the places I found locally. You can also buy countrywide wholesale guides in the form of eBooks.

Richard Grady supplies an eBook UK wholesalers guide. Maybe you can tie up an affiliate deal? http://www.thetraderonline.com

Automation

Your eventual goal is to do no work. To achieve this you need to automate. Your orders and payments should be handled via your shopping cart and passed to whoever is going to organise the shipping for you.

Just to prove the point, I've sprained my back and I'm lying in bed typing this on my laptop. My business continues to run. I'm not losing any money.