If you have made the decision to sell products on the internet as an Ecommerce store, your next step will be to determine your product strategy.  Even if you know what niche market you’re going to cater too, it’s important to thoroughly think through your strategy for getting your product.

There are two schools of thought regarding this process.  It’s important to know that the two different types of product dispersal are drop shipping and inventory based.  We will explore the pros and cons of each system so that you can develop a good strategy to get started with.

There are two things to consider when you work through this article; time and money.  You will see why as we go through the examples.

In case you do not know what drop shipping is, we will explain it for you.  Drop shipping is where you do not touch nor own the product that you are selling.  In essence you are the middle man who promotes the product.  When your customer comes along and purchases the product you then order it from your source and they ship it to your customer.  Most times they represent you and make it appear that the product is coming from you.  Finding good drop shippers is usually the challenge and you might have to look around to find one.  By and far the easiest way is to sign up with worldwide brands and go through their list of verified sources.  You do not want to attempt to reinvent the wheel here, go with sources that are verified, this will lessen the chance you will get taken from someone of questionable intent.

This is a somewhat easy way of getting into business. You don’t have to plunk down large sums of money to get some product and if you work diligently you can line up several vendors for your niche market.  This allows you time to focus on building a quality site that is SEO friendly and has lots of links.  This will be the key if you are trying to stand out from all the other sites out there.

Because it’s easy does not always make it profitable.  Most people are willing to go down the wide road, because it’s easy and well lit.  The mere fact that you become a middleman means that you are going to take a smaller profit, otherwise known as profit margin.  The margin for products on drop ship sites are always lower, so you have to count on volume to make up for it.  Doing volume is subject to how well ranked your site is for keywords.  Most people that are just starting out tend to NOT understand how to get a site ranked well and get frustrated.  You have to remember you are building a business that is going to last so there is considerable amount of work to be done in the beginning.

Inventory based business are just like they sound, they buy their inventory and sell it first hand to their customers.  Inventory based business have more control in some areas than in drop shipping.  Inventory based businesses can also design their own product line as well as buy or import existing products.  Generally there are more challenges with the inventory based business since you have to store the products and distribute them. 

Margins are much higher than in drop shipping.  If you make your own products you have direct control over changes and upgrades in your product line.  You are also not limited by what is available since you can create your own items.  You can also import products in larger quantities.  The challenge is in turning your product over so that you don’t have to sit on a larger quantity of product which in essence is sitting on money.

If you import your inventory, you are going to need more cash.  This involves an investment and generally it will take you some time to recoup that investment as your business grows.  Time is generally increased since you have to develop shipping solutions that work for your product line.  All this is in addition to the site development and getting your site to rank better in the search engines.  If you manufacture your own products, there is considerable more time involved as you work out the kinks of production and build your brand.

An idea that most people do not capitalize on much is blending the two product concepts together.  While getting started with drop shipping is somewhat easy, there is no rule that says you can’t offer a product that you source yourself.  It does take a while to add these products but you could capitalize on this feature by adding one product at a time.  The key is choosing a store front that allows you to do both.  For example if you drop ship or do affiliate marketing, some shopping portals do not allow that.  Yahoo shopping is a great portal but does not allow you to use affiliate marketing and take the customer off the site.  The reason is that Yahoo gets a small piece of your sale, so they have a vested interest in where your customers go.