Tight Margins
It's inexpensive to get started with drop-shipping. Some companies charge its retailers a monthly subscription fee, ranging from $30 to about $70, depending on the services required. But working with a drop-shipper is not a path to easy riches. For a retailer, drop-shipping typically provides smaller profit margins than if they carried actual inventory.
Given the nature of drop-shipping, these tight margins are to be expected. The supplier is taking all the risk and covering the expense of holding inventory, plus handling fulfillment and shipping. All the retailer does is post a photo and description of the item on their site.
Some companies can offer a better wholesale price for retailers because it aggregates the purchasing power of its many retailers to negotiate a competitive rate. Margins differ greatly among the many product categories, from consumer electronics to home and garden to camping equipment, and may even vary from product to product within a category. One notoriously slim-margined category is electronics. Overall, the margins vary from "10 percent to 90 percent," he says. But it's reasonable to assume the majority of products offer margins near the smaller end of that scale.
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