If you use Drop Shipping for your home-based, web business, what kind of profit margins to you expect to get? One issue with Drop Shipping is that the suppliers who perform this service generally do not do so free of charge. Generally, there is a per-order fee associated with it.
Many people see this as a drawback to making profit using a drop shipping business model. However, consider that when someone else does the stocking of inventory, carries the risk of inventory, and does the shipping for you, this fee is usually justified. And because you don’t have to do these things yourself, you can usually make do with lower profit margins. This helps you play with the big kids in most markets. Obviously, you will have to decide how low of a margin you can accept depending on your business.
Also, drop ship fees are usually applied on a per-order basis. If you can sell multiple items to your customers on one order, the dent created by the drop ship fee will be spread out over those items.
Ordinary businesses with storefronts have overhead expenses that you as a home-based business do not (such as lease expenses, equipment, and employees) and therefore, must make sure they can achieve a certain profit margin. Oftentimes with a drop shipping arrangement, you can play competitively in markets at margins they cannot and still be profitable