By: L. J. Piznarski

When looking to start a new internet business, one of the main concerns is what to sell and what is the best way to sell those products. One decision that must be made is whether to create a website that sells one type of product, a niche store, or multiple types of products. Either way, once you make that decision, you now have to figure out where to get the products and how to get them to your customers. One way would be to manufacture the products yourself but that's more complicated than we will attack in this article.

There are three other ways of providing products to your customers and they are;
1) Finding a Drop Shipper or
2) Becoming a member of an Affiliate Program or
3) Stocking the products yourself.

All three of the above have their Pro's and Con's and we will explain some of them below. The information below is our opinion based on personal experience with all three ways of conducting business over the Internet.

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Drop Ship Programs
A drop ship program is one where you place an order with a supplier and they then ship the product directly to your customer. This is somewhat more difficult than an affiliate program since you will have to receive the order and payment from your customer and provide customer support. Since the customer bought from you, they will contact you if there are quality issues, shipping damage, return requests, etc.. You will be more directly involved in each sale but you should on average make more profit per sale than with an affiliate program. This stands to reason since you are doing more of the work.

Some of the concerns that you should have about any drop ship program are:
1) Do you have to pay any upfront fees to join there program and if so, what do you get for this fee? Some drop ship programs charge an initial fee to join and they offer special features and tools that help you to be successful but beware of some that take upfront fees and then don't do anything to help you.
2) Are they the actual manufacturer or importer of the products they sell? Why is this important? As an example, there is a true drop ship supplier located in Texas that actually imports 1000's of products from China, stores the items in their warehouses and will then drop ship products to your customers. Unfortunately, there are 100's of other websites that actually say that they are drop shippers but are actually just forwarding orders to the Texas company and having them drop ship the products. If you have your products drop shipped directly from the Texas company, you will pay them the true below wholesale price. If you join one of the 100's of other websites, you will pay them the true below wholesale price plus their markup thus reducing your profit. If they markup the price by 10% or more, you make that much less on each order.
3) Do they provide quality pictures and descriptions of their products? You need high quality product pictures to sell over the Internet.
4) Do they provide "Out of Stock" information? You work very hard on setting up your internet business, spend money on advertising and "HURRAY", you receive your first 10 orders only to have the drop shipper say "Sorry, Out of Stock" to 4 of the 10 orders. Believe me, it is much better to show that an item is out of stock on your website. Customers will then look at your other products and may buy something else from you. How would you feel if you go to a website and place an order to be told later that the order is cancelled because the item is out of stock? Would you go back to that website to make another purchase?
5) Do they notify you of new products or discontinued products? You don't want customers to order a "Discontinued Item" for the same reason as stated in 4 above. New products - You can't sell it if you don't know about it.
6) How much time between receiving your order and actual shipment of the product? Some drop shippers ship out all orders within 24 hours but others may take 3 to 5 days to ship an order. This is important because many internet customers are buying gifts for special occasions and need quick delivery.
7) Once shipped, do they provide tracking information? The more professional drop shippers will give you UPS or Fed-Ex tracking numbers that you can provide to your customers. This is greatly appreciated by customers and will save you a lot of time answering the phone.
8) What is there "Return Policy"? Can a product be returned within 30 days, 60 days, etc.? Are there restocking fees?
9) Do they charge any handling fee on an order and if so, how much? Almost all companies charge a handling fee. Some are up front and state the charge, some just add it to the shipping cost and others add it to the product cost.
10) What is their rate of product returns? This is a question that is hard to get an answer to but is very important that you try to get it. Do you want to do business with a company that has 1 out of 100 items returned? I would but I'm not sure about a company that has 1 out of 10 returned.
11) How do they handle defective merchandise? Does the defective product go back directly to the drop shipper or do you have to get it from the customer and then send to the drop shipper? Who pays for the return shipping? Will they give a refund or only send a replacement?

CLICK HERE to see a list of recommended Drop Ship Suppliers and Resources.

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Affiliate Programs
An affiliate program is one that you join and then they provide you with text links and banners that you display on your website. If someone visits your website and then clicks on their link or banner and makes a purchase at their website, you will receive a percentage of the sale. This is the easiest way to sell over the Internet because the affiliate program and not you, has to deal with the customers, ship the products, take care of problems like shipping damage, returns, customer complaints, etc.. There are thousands of affiliate programs on the Internet. Some are very good, some are okay and many are bad. Some of the concerns that you should have about any affiliate program are:
1) Are their products priced to sell or are their prices higher than other internet stores selling the same or similar products? It doesn't do you any good to join an affiliate program, spend time and money in developing, maintaining and advertising your website if customers can buy the same or similar products for less money at other websites. Today's internet customer is savvy and shops the Internet looking for the better price. The prices you offer must be competitive because even if you get a high commission rate from an affiliate program, you make ZERO if you don't make a sale.
2) Are their commission rates similar to or better than other affiliate programs that offer the same products? Commission rates vary and some affiliate programs may pay 3% while another selling similar products may pay 12%. Joining the right affiliate program can made a huge difference in the amount of commission you make.
3) Have they been in business for less than a year and will they be in business next year? We have in the past joined affiliate programs only to make sales and then the affiliate website disappears and we lost our earned commission.
4) Do they pay their commissions in a timely manner? If your commission is greater than $100.00 at the end of any month, the good programs will pay your commission by the end of the following month. Be wary of any affiliate program that has a threshold higher then $100.00 and makes you wait longer for commission to be paid.
5) Do they have 50 affiliates or 5000 affiliates? This might be obvious but are your chances of making a sale better when you have 5000 competitors selling the exact same item at the exact same price as you or if you only have 50 competitors?
6) Do they belong to one of the online advertising channels of affiliate programs like Commission Junction, Linkshare or Shareasale? If you join one or all of these types of affiliate channels, many of the problems associated with affiliate programs are greatly reduced. To join any of these channels, an affiliate program must adhere to certain standards and requirements that help protect you from questionable programs.
7) Do they provide individual product links or just a generic link to their homepage? The better affiliate programs will provide you with individual product links or datafeeds that can be downloaded and used to create product pages on your website.
8) Do they provide useful statistics that help you pinpoint which links are most profitable? You may have 10 links on your website and you may be receiving sales but which link or links are generating the sales and which ones are not? What size banner links or which text links work best on your website? These types of statistics are very useful in increasing sales since it will tell you what works and what does not work.

If interested in Affiliate Programs, we suggest that you CLICK HERE and view an Affiliate Program offering over 20,000 products you can sell on your website!

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Stocking Products
This is easy to explain but other than manufacturing your own products, it is the hardest to do. This should be the most profitable per sale but requires the most effort. Basically, you purchase the products from a manufacturer or importer, store the products, and when you receive an order for the product, you must box up the product and ship to your customer. Some of the concerns that you should have about stocking products are:
1) How many different items will you sell and how many of each item will you stock? Will you create a 'Niche" business with only one primary product (Example: Grandfather Clocks)? Will you create a "General Category" business with a line of products (Example: Clocks that sells wall, mantel, grandfather, cuckoo, etc.)? Will you create a "Department Store" business with multiple lines of products (Example: clocks, furniture, toys, luggage, etc.)? Once you make the above decision, you will then need to figure out the number of variations of each product line (Example: How many different styles of grandfather clocks, how many colors of each and how many different clock movements, chime melodies, etc.).
2) How big of a warehouse space will you require and how much will it cost? Once you have answered question 1 above, have you created a business plan that will help you determine how many of each item to store and how much room will be required to not only store those items but also to store shipping supplies and a work area to prepare shipments?
3) What are the associated costs of stocking products? Some items to consider are occupational licenses, product damage insurance, product liability insurance, additional warehouse costs like utility bills and other costs you will be responsible for based on your warehouse lease such as outside lawn maintenance, trash removal costs, etc..
4) Are you getting the best price from your supplier? The best thing to do is find more than one supplier and get competitive prices. Just remember that the lowest price is not always the best price. Getting samples from each supplier would be smart so that you can not only compare price but also quality.
5) What other items do you need to ship products? Are you going to ship all your products via the U.S. Postal Service or will you need to open up a UPS or Fed-Ex customer account? Some items required will be boxes, shipping tape and tape dispensers, packing material, a scale to weigh shipments.and a way to produce packing lists and shipping labels.
6) Will the supplier provide quality pictures or will you have to take pictures yourself? If the supplier does not provide pictures, you will need a quality camera and a well lighted room to take pictures that you can use. The higher the quality of the picture, the better the chances of sales.
7) Will your products become obsolete before you can sell them? This is fairly obvious. If you stock "Fad Items", the question is "How long will the fad last"
8) What type of warranty does the supplier provide? If your customer receives a defective product, what does your supplier do for you and who pays shipping costs to return the defective item? If your customer later needs warranty service, do they send the product to the supplier for work or do thay have to send it to you and then you send to the supplier?
9) What type of "Return Policy" will you offer your customers? A published "Return Policy" is more important than ever in getting sales. Many Internet Customers will actually buy a product from one website based on a better or easier "Return Policy" even though the price may be higher than another website offering the same product.

If you stock and sell your own products, you may want to start your own Affiliate Program and have other websites help sell your products. Information about starting your own Affiliate Program can be seen at Shareasale.com!

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The provided information is meant to give you a glimpse into the pro's and con's of affiliate programs, drop ship programs and stocking products. It does not attempt to tell you what is best because that totally depends on each individual. Some people like to talk to and work with customers. Some people like to work on websites and do marketing. You have to make the decision for yourself.

In summary:

Affiliate Programs require the least amount of effort and success is dependent on your ability to:
1) Have a user friendly website with clear product pictures
2) Have products that are in demand and priced right (To high = low sales / To low = low profits)
3) Market your website (NO visitors = NO sales)
4) Be associated with an affiliate program that pays on time and provides excellent links and statistics
5) Find a backup affiliate program (if the affiliate program closes, does your business also close?)

Drop Ship Programs require more effort and success is dependent on your ability to:
1) Have a user friendly website with clear product pictures
2) Have products that are in demand and priced right (To high = low sales / To low = low profits)
3) Market your website (NO visitors = NO sales)
4) Provide direct customer service both pre-sales and post-sales
5) Find drop shippers that provide you with excellent customer service
6) Find the actual manufacturer or importer, not a middleman that will take part of your profit
7) Find a reasonably priced and reliable merchant account to process credit cards
8) Find a reasonably priced and reliable shopping cart
9) Create "Return Policy" and "Exchange Policy" based on drop shippers policy
10) Your ability to find a backup drop shipper (if your supplier closes, does your business also close?)

Stocking products requires the most effort and time but should provide the most profit and is dependent on:
1) Have a user friendly website with clear product pictures
2) Have products that are in demand and priced right (To high = low sales / To low = low profits)
3) Market your website (NO visitors = NO sales)
4) Provide direct customer service both pre-sales and post-sales
5) Finding the correct size storage space at the lowest possible cost
6) Find the actual manufacturer or importer, not a middleman that will take part of your profit
7) Protecting yourself and your inventory with the proper insurance (Product Liability, Fire Insurance, etc.)
8) Find a reasonably priced and reliable merchant account to process credit cards
9) Find a reasonably priced and reliable shopping cart
10) Your ability to keep track of inventory and reduce "Out of Stocks"
11) Create customer friendly "Return Policy" and "Exchange Policy"
12) Your ability to find a backup manufacturer (if your supplier closes, does your business also close?)

I am sure that I have not listed all things that need to be considered but hopefully this will be a good beginning and may save you from making some of the mistakes that I made when I first started a business on the Internet.

Copyright 2007 - L. J. Piznarski - All Rights Reserved

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