Category Archives: eCommerce

HoR Story Part 5: Pros and Cons of Dropshipping

Having an internet store that uses a drop shipper is an attractive sales model because:

  • You never have to physically send out anything yourself.
  • Zero inventory.
  • Once you get an order, you send it off and you’re done.
  • Extremely low overhead compared to a traditional business.
  • You can run it from anywhere with an internet connection.

Sounds pretty good huh? Well for the most part it is, but there are also some inherent problems with running this type of dropshipping business:

  • Your margins are relatively small. Usually between 20% and 40%.
  • You must compete with larger suppliers who are well established. Nowadays a lot of larger wholesalers are selling to individuals instead of just distributors, this is big competition.
  • You may not always have a phone line connected. If it’s just you, it’s hard to always pickup the phone like a big business does.
  • As search engines and comparision sites flourish, it’s easier than ever to find your same product from multiple vendors.
  • People ordering larger quantities of items will want deep discounts you cannot always provide.

If this was five years ago I’d tell you a dropshipping model is GREAT, and it still sometimes is….however the largest threat to this model is the wholesalers.

Previously these people would import products by the shipment container full, keep them in a huge warehouse on pallets and only sell to volume buyers. The distributors who buy the pallet amounts would then keep stuff in their warehouses and send out to individual consumers. Then after that comes the dropshippers, think of them more like middle men. As the level of technology and sophistication of these large distributors increases, they now have systems in place where individual consumers can buy small quantities of products at near wholesale prices.

As technology improves it allows these larger vendors to sell to individuals, it also allows the individual consumers to find these distributors through internet search results. So as time goes on, the middle men will slowly have more competition pressures.

SO HOW TO OVERCOME THIS?

Many of the larger distributors focus on a specific niche of products (Party suppliers, cell phones, toys etc), so they only have so much to offer. Distributors keep smaller quantities on hand of products, but can carry many items from various wholesalers. So distributors (and consequently drop shippers) offer their unique selection of products, customer service and unique store shopping experiences.

Next —> Part 6

HoR Story Part 4: Getting A Site Setup

Back when I started HouseOfRave, simple eCommerce solutions were relatively scarce or really expensive. I remember for my initial draft of HouseOfRave I downloaded a pirated piece of software which rendered the webpage on the computer, then would FTP files to the server.

My home computer at the time was very slow at the time, so I would mainly build my page after school everyday at my high school using the brand new, state of the art 40o Mhz computers (Ha! 400 Mhz and “Fast” in the same sentence sounds funny now :-)

BUT….I had several hundred items to sell, so a dedicated eCommerce site was neccessary. However if you’re only selling between 1 and 10 items, you might consider just inserting PayPal or Google Checkout payment buttons on each of your products rather than using a full fledged eCommerce solution.

If you have several hundred items to sell, creating a site yourself is daunting unless you’re great at programming…and even then you’d just be re-inventing the wheel since there are literally thousands of solutions for e-commerce already out there (many of them free)!

HouseOfRave currently runs on the Shopsite Ecommerce platform which has worked well for me, but it requires you have your own server, and will cost around $2,000 to install.

For my latest eCommerce project called BodyMonkey.com I chose a fully hosted solution (Yahoo Stores) instead of hosting it on my own server. I did this to:
1.) Hedge my losses in case my server crashes, at least ONE business will still be running.
2.) They take care of everything including SSL security certificates, payment gateways, hosting and they constantly update the system which means new features for free.

There are lots of hosted solutions but the two I recommend are:

Yahoo Stores – I’m using this for BodyMonkey.com. This is a great system, but a little difficult to design. A HUGE plus for this is you get linked into the Yahoo Shopping system which brings in a decent amount of sales, even if you’re not fully ranking on Google yet.

Volusion.com – I’d suggest this solution if you don’t know much about setting up a freeware solution on your own. I’ve tried them before, and they’re pretty good about getting you setup with a decent looking store made with proper search engine optimization techniques and lots of other cool features. You must pay a monthly fee every month, but it includes pretty much everything you need to start selling.

If you know very little about e-commerce, I’d suggest something like Volusion.com to get started. All you really need to do is add product photos and descriptions and you’re up and selling. However you do have to pay them monthly and they take a small cut of revenue.

If you know a little more about the web, have some web hosting of your own and can do things like change a DNS or FTP files, you can probably get a FREE store setup on your own pretty simply.

BUT WAIT!!
Once you get your store running, it means NOTHING. Now the actual hard part comes: Getting people to your website.

My gimmick with House Of Rave was the rave videos and rave pictures. I gave them away for free (not such a big deal anymore after YouTube and Flickr), and it got lots of people to the site. Less than 1% of the people who would come for the free videos ordered stuff, but at least it got people to start visiting, linking and discussing my website.

You don’t necessarily need a gimmick like that, because I know of many websites that don’t have any attractions yet still make lots of sales, but it really helps get the ball rolling.

The moral here is don’t think that setting up an online drop-shipping business is all that easy. It’s just like any other real store, it requires a lot of attention at times and lots of effort to get people through the doors.

Next >>> Part 5: Pros and Cons of Drop Shipping

————————————
The House Of Rave .com Story
————————————
Part 1: The Beginning
Part 2: Finding Something to Sell
Part 3: Finding A Drop Shipper
Part 4: Getting A Site Setup
Part 5: Pros and Cons of Drop Shipping
Part 6: How It All Works
————————————

HoR Story Part 3: Finding a Dropshipper

This is by far the most frequently asked question I get:
“How do I find a drop shipper? I’ve been looking but everything I find is junk.”

A quick tip is DON’T GOOGLE IT. If you start looking for dropshippers like that, you most likely will end up with one of those services that has a warehouse and advertises their drop shipping services. This means that have hundreds or even thousands of people signed up under them, and they all sell the same stuff. Most of the stuff they sell is usually generic stuff you can buy at Wal-Mart, hardware stores or other common retail outlets. This means you’ll be competing with thousands of similar sites plus large retailers.

So how do you find a dropshipper for my niche product?

You simply look for people that already sell what you want to sell. My target dropshipper already sold rave & club type of stuff, so I gave them a call. You can generally tell if someone is a supplier if they have proper contact information, someone always picks up the phone and other small cues by looking at their website.

Often times the supplier with a warehouse will not have any sort of drop shipping program. You must create it. Simply explain to the head decision maker that you want to sell his products, and he ships them out whenever you send him orders. Usually a business owner will be happy to expand his business base if it’s not too much of an inconvenience.

Most likely several places will reject your offer before you find one that accepts. To get accepted faster, don’t call someone and say, “I wanna build a website and sell your stuff.” I suggest you first build a sample store, perhaps add some of the suppliers products on there for good measure and THEN call and say, “I can expand your customer base by selling your products, I’ve already got a store ready to go, check it out at …..” A business owner will take your request more seriously if you already have something in place and it looks like you’re experienced.

I started HouseOfRave before I had a supplier. I had already built the site and added some sample products, I just needed to fill it with a suppliers inventory. For this reason I quickly got someone to jump on board.


Think about it from the suppliers point of view:
1.) If your website appeals to a different niche than theirs but sells the same stuff, they can effectively expand into a different niche without doing a thing. For this reason, try to appeal to a different niche than your supplier, don’t just try to steal their customers.

2.) With you selling THEIR stuff on a different site, it creates artificial competition in the niche. It’s kind of like when you buy gum; whether you buy Juicy Fruit, Winterfresh or Double Mint, some profit always goes back to the Wrigleys company.

3.) From a search engine optimization perspective, if you type in a product, the supplier can be number in a top search results and so can you. This means if someone buys something based off a search result, the supplier is more likely to make money.

So to find the supplier I first compiled a list of websites and suppliers of rave/club products. I started calling. It took at least 10 calls before I found someone who was willing to work with me and didn’t require up-front payment (and didn’t ask how old I was). This was a very narrow genre of products, so if you’re looking for a more common product, expect to make A LOT MORE calls. Word of advice: Calling is more powerful than sending an email. The supplier in California I was working with imported all these products themselves, and even had their own website selling the stuff. I got an agreement to use their images and descriptions on my website, and get wholesale pricing on individual orders. I would pay them my balance at the end of each month.

——————————
ACTIONS TO TAKE:
—————————–
1.) Identify a genre of products you would like to sell.

2.) Do your homework and compile a list of everyone that sells these products.

3.) Find out who actually sends stuff out (you don’t want to contact another drop shipper).

4.) Ask if they can drop ship for you.

5.) Start inputting the suppliers inventory in your store and start selling!

Word of Caution: If you want to sell a common item like MP3 players, computer parts etc, you have a very large uphill battle. There are thousands of other places already selling these things, some very established, and they will often kill you based on price and reputation. Imagine if you’re selling a digital camera that Wal-Mart also carries. Most people will order from a larger retailer just based on trust, and most likely they will never find your site in the first place. The larger places will also kill you on price.

I sell these 3-packs of Oggz for $49.99. The product was extremely successful in the smaller markets and eventually started selling at WalMart. The price at WalMart was $28.00!! My wholesale price wasn’t even that low! So to even TRY competing based on price I’d have to take a loss which is not an option. While people still order the Oggz at my $49.99 price, the price internet-wide has dropped once the product went mainstream and is being sold by hundreds of retailers.

So if you want to sell extremely common items like digital cameras etc, you probably have a better chance selling them on Ebay….however then you’ll REALLY be in a constant price war.

Having a unique offering of products always helps attract buyers to your site, because it’s often difficult to get such specific items elsewhere. This is why I chose such a niche genre of products such as rave/club items for my first business.

The best thing to sell is something no one else has. I didn’t have anything like that, so the next best thing was to sell items that very few people had.

Next >>> Part 4: Getting A Site Setup

————————————
The House Of Rave .com Story
————————————
Part 1: The Beginning
Part 2: Finding Something to Sell
Part 3: Finding A Drop Shipper
Part 4: Getting A Site Setup
Part 5: Pros and Cons of Drop Shipping
Part 6: How It All Works
————————————

HoR Story Part 2 : Finding Something To Sell

I was a senior in high school, age 17, living with my parents, about to leave for college in a few short months and had very little cash. I wasn’t prepared to buy any inventory and ship out orders each day, so I had to get a little more creative if I wanted to sell physical products. I decided to find someone who sold what I wanted, then ask them to send the products out for me (aka Drop Shipping). First I had to find something to sell.

This was a bit hard. I took a sheet of paper, and in my tiny handwriting I listed about 300 products. EVERYTHING I COULD THINK OF. Lamps, mugs, pens, speakers, couches, guitars, software, beds, mini-blinds. Whatever popped into my head, I wrote it down. I then started narrowing the list down. The first items scratched off the list were the items with either way too much competition or things out of range for my $200 budget. Couches, computers, ceiling fans etc. were scratched out. I then started to search the competition for other products by doing search engine tests for the products.

Keep in mind, this was my first eCommerce project, so I wanted to enter a very small niche where I had a chance of survival.

I ran my final list of 10 things over with some friends and family….but still nothing was looking fantastic to me. My 12 year old brother helped me brainstorm a bit, and it was actually one of HIS ideas that stuck. Rave, club and party stuff. I did a quick search for that genre of product, and there were about 10 websites that sold them. Two of the websites were good, and the eight others were total crap. I KNEW I could make more professional and easier to use sites than 80% of the competition, so I set my sights on the rave/club/party genre of products.

Competition was low and the products wouldn’t be very expensive, so this seemed like an ideal testing ground for my first eCommerce site.

——————-
ACTION TO TAKE:
——————-

If you don’t already know what you want to sell, get out some paper.

1.) Start writing down different products. Anything. EVERYTHING. List at least 100 products. Since “products” is such a general term, I’d say list at least 300-400 items.

2.) Start narrowing down the options. Start by crossing out obvious things that either have way too much competition or are out of your range. I started crossing off things like couches, airplanes, computer monitors etc…

3.) Identify possible targets and niche markets. Maybe you’ll get clobbered trying to sell books, but perhaps you could experience some success with your knowledge of antique books from the Victorian era…or some niche market like that.

4.) Start researching your potentials and even further narrowing the list. Is a certain niche already filled by lots of big players? Can you do a much better job than the competition? Is the niche large enough to make profit?

Next >>> Part 3: Finding A Drop Shipper

————————————
The House Of Rave .com Story
————————————
Part 1: The Beginning
Part 2: Finding Something to Sell
Part 3: Finding A Drop Shipper
Part 4: Getting A Site Setup
Part 5: Pros and Cons of Drop Shipping
Part 6: How It All Works
————————————

House Of Rave .com Story Part 1

When I was in high school I decided to start an online business. I started making several hundred dollars a month doing very little, and I never saw a single product I sold until 5 years later.

The store was a rave/club party store called HouseOfRave.com. It still exists today and is going stronger than ever.

The store made between $500 and $1,000 per month all through my college years, and when I started taking it seriously, the profit started to reach over $4,000/per month.

This is the story of how I started this business from the very beginning:
————————

Curious about eCommerce back when I was in high school, I decided the best way to learn was to create an eCommerce website of my own. I had no clue where to start, so my first step was NOT coming up with a product to sell, but HOW to start an eCommerce business. I voraciously read every article, how-to and software review I could find about eCommerce, mainly hitting upon the topic of eCommerce software, merchant accounts and marketing techniques.

I was already pretty computer savvy and knew the ins and outs of building regular .html web pages, but the ‘Add to Cart’, Shopping Cart and credit card transaction functions were well beyond my knowledge. I decided if I was to launch an eCommerce store soon, I would have to use pre-made shopping cart software.

I started downloading evaluation versions (and illegal downloaded copies if I could find) of different shopping cart software. I started creating sample stores, changing templates, adding sample products, placing test orders and playing with every possible facet of each shopping cart software. I now knew the in’s and out’s of creating and managing an eCommerce store.

——————————-
ACTIONS TO TAKE:
——————————-
If you’re a slightly more web-savvy person, you can experiment by installing OScommerce or other open-source shopping carts on your own. While these are free, you DO have to know what you’re doing. If you don’t know what FTP or DNS is, this might be a little advanced for you.

If you’re not extremely web savvy enough to install programs on your own server, take the free demo-trials of some fully-hosted eCommerce solutions like Volusion. Hosted eCommerce solutions like this make it very simple to start a full fledged eCommerce store….but it’ll cost ya. The bad part is they charge a monthly fee for your store. The good part is they make creating products, pages etc. very easy, and they do most of the work for you.

The key here is to just take the first step and start playing around with the systems. Place test orders, add products, try re-designing the templates. You’ll start learning a lot quickly.

NEXT >>> Part 2: Finding Something to Sell

————————————
The House Of Rave .com Story
————————————
Part 1: The Beginning
Part 2: Finding Something to Sell
Part 3: Finding A Drop Shipper
Part 4: Getting A Site Setup
Part 5: Pros and Cons of Drop Shipping
Part 6: How It All Works
————————————

Improving By Being a Beginner

While browsing through the bookstore I stumbled upon a section of books about online business, eCommerce and the like, and just for fun I decided to pickup this book called “Start an Online Business in 10 Days.”

With my smug attitude I was secretly thinking how I could (and have) put up fully functioning businesses within HOURS rather than days, and that I was “beyond” this book. However to humor myself I picked it up and thumbed through.

It had all the pretty basic information about what kind of software to use for an online store yadda yadda, but what caught my attention were all the details it had about a lot of small stuff I’ve never really paid much attention to. For example it had a section on how to format a professional looking email footer, and a section on what information should be on your contact page, and it gave examples of each used in other successful web businesses.

This got me thinking that I could use this beginner’s book as an outline to start improving upon my own online ventures. HouseOfRave.com started from scratch from my high school days, and has slowly been pieced together since then. Never have I once taken the time to properly format all these small elements into a professional looking end product, and to this day I still think some of the order flow or HouseOfRave could use drastic minor but very effective changes.

So instead of making a giant to-do list of general improvements I can make, I can read this book front to back while implementing the suggestions as I read! This will take much longer than reading the book first then making a list of improvements, but this way I won’t be overwhelmed by a massive and vague to-do list.

So this begineers book went from me scoffing at it, to me paying $19.99 for it and using it to re-vamp my sites.

I remember reading a quote (probably from TheKirkReport where I steal all my good quotes from):

“You can learn new things at any time in your life if you’re willing to be a beginner. If you actually learn to like being a beginner, the whole world opens up to you.”
–Barbara Sher


P.S. Wow, I can make these posts so much faster when I don’t make accompanying pictures.

Business Idea / Help

I’ve been looking everywhere for a PAID service that lets me use the YouTube-like features, but without all the YouTubishness. I like:

  • Uploading my videos on a 3rd party service.
  • Free bandwidth.
  • Being able to embed videos into web pages with code snippets.

…these are all things so many YouTube clones are giving away for free. I’m surprised no one has an upgraded paid version where I can host my videos but customize them for my own businesses.

Does anyone know of one??

If not, this would be a great business idea to implement. Although it would probably be best for one of those bigger sites to just implement this. I would LOVE to pay YouTube $20/month to use their existing service, but allow me to customize the logo on the embedded video:

Not only that, but also I’d like to promote my own videos at the end, or at least post a link to another product, or perhaps show a special promotional announcement.

Of all the YouTube clones and wannabes out there, it seems everyone has been trying to directly copy the YouTube strategy, and no one remembered to CHARGE people, even if they want to pay!

FacebookProfile Site Sold, $5,500

A little while I go I was selling FacebookProfile, a site which I started in May 2006 as a small little side project. Traffic quickly rose on it as the popular social networking site Facebook got ever more popular.

Despite my lack of attention to it, I had managed to get the site to make about $100/month with just Google Adsense, but I was just letting the site sit there. It had tons of traffic, and therefore lots of potential for someone to take the reigns.

So I posted it for sale on the SitePoint forums and started getting lots of serious bids through private message. However I started the bidding way too low. Even before I posted the site for sale I had serious buyers trying to pay $3,000 for the site. Therefore all the normal bids on the auction I ignored, and only spoke with buyers who sent in much higher private bids.

The highest bid I got was $6,500 but I was wary because the buyer was dragging their feet and didn’t know much about the transfer of the website or how to operate it. I wanted a quick sale and quick transfer, so I sold the site to someone who knew what they were doing and could transfer everything without a hitch.

Within three days of posting the auction I had my $5,500 via Google Checkout, and less than a week later the full website and database were transferred over to the new owner without me doing much work (this is why I chose to sell to someone who knew what they were doing).

This profit tally doesn’t include the Adsense revenue the site brought in…probably somewhere in the hundreds of dollars range.

For me the transaction is over, but it’s nice to see the new owner is actually drastically improving upon the website. He added a whole slew of new features, posts, articles, re-structured the advertising and even added a Facebook Forum for developers and users.

———

So from a random idea last year, I got some good experience, several hundred dollars in adverting revenue and a nice $5,500 payout this year!

Online Business Ideas

People always ask me different ways to make money online. I like seeing new ways also, so one of the sites I visit everyday is the SitePoint Established Websites for Sale section. People post small and large interenet businesses for sale here everyday.

I don’t visit the page with the intent of buying any websites, but it’s a GREAT place to see different ways people have setup businesses and see how much they make. You’ll often see small side-projects people are trying to sell off, but you will also see the occasional big-time businesses being sold that makes tens of thousands of dollars per month.

Just something to keep in mind!

Selling FacebookProfile.com

In May 2006 I started up FacebookProfile.com and it almost immediately started getting good traffic.

Today the traffic is over 2,800+ unique visits a day. In July the total was 73,735 unique visits.

As I’ve become more involved in other ventures, I decided to not let this site stagnate and sell it while it’s still on an upward traffic trend. I’ve placed it on auction at the SitePoint forums here.

I’ve already been offered over $3,000 by people prior to this sale, so I’ve set my minimum bid to which I can get out of the sale to $3,000. Even from the hour or so ago I’ve posted the ad I’ve got several high bids.

With Facebook Apps out and Facebook users coming on board by the tens of thousands per day, I’m sure someone could really take this site to the next level.

With the amount of traffic and high amount of advertising clicks (even though there are only two ads on the site) the site should fetch my asking price. Hopefully the person who buys it knows how to properly place ads and use different systems other than Google, they could really boost profits right away.