3 Ways To Sell Products Online Without Inventory, Shipping Or Fulfillment

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Most people who want to start an online business are hesitant to sell physical products online because they have a false impression that you have to store and ship all of your own products.

But did you know that you can run a successful ecommerce business without carrying any inventory at all? In fact, it’s pretty straightforward to run a full blown online store without worrying about storing or shipping anything physical at all.

Here are 3 ways to do exactly that.

How To Start An Online Store Without Carrying Inventory Or Dealing With Shipping

You Can Dropship

A dropshipped online store is a type of ecommerce business where you you take orders on your own website, but your vendor or distributor is responsible for shipping the product to the end customer.

As a result, you don’t have to carry any inventory at all. You simply act as a middle man between the distributor and the buyer.

Here’s how it works.

  • A customer finds your website online and places an order
  • You receive the money from the customer and immediately place an order with your distributor at an agreed upon wholesale price.
  • The distributor sends the product to the end customer with YOUR company branding and logo. As a result, it appears as if the product is coming from YOU and not the vendor

Sounds simple right? But as with everything in life, there are pros and cons to this business model.

The Pros

  • You don’t have to carry inventory or ship out any orders yourself
  • The startup costs are really low. There are no upfront costs for inventory. You simply need a website and can start taking orders right away
  • The overall risk is negligible.

The Cons

  • The margins are usually super low (on the order of 10-30%)
  • Managing customer service can be a pain since you have no control over fulfillment
  • Your advertising options are limited because the margins are low.
  • There will be many other stores selling the exact same products which will cause pricing pressure.
  • The ramp up to significant money will be much longer than a traditional store because margins are low.
  • You will likely have to rely on SEO and other free methods of promotion.
  • Customers may need to be shipped separate packages if different dropship vendors are used on your store
  • You need to connect to your vendor’s database to determine inventory levels
  • You are responsible for driving traffic to your own website

Overall, dropshipping can be very attractive if you don’t have a lot of money and if you plan on having a long time horizon for your business. In other words, it could take several years for your store to ramp up to significant profitability.

To find vendors who are willing to dropship in the United States, you can use a service like Worldwide Brands but be prepared to put out a lot of content to rank your store in the search engines.

You Can Use A 3PL

3pl

For those of you who are unfamiliar with the terminology, a 3PL is a 3rd party logistics company. Most 3PLs can handle the storage of your products in addition to order fulfillment. And in some cases, they can even help with customer support and product returns.

Here’s what a typical order flow looks like if you use a 3PL

  • You ship all of your products to the 3PL provider
  • A customer places an order on your website
  • Your website sends the order to the 3PL
  • The 3PL ships the order to the end customer.
  • You pay the 3PL a monthly fee in addition to a per order cost for fulfillment.

The online store/3PL combo looks and behaves very much like a traditional online store with inventory except that you don’t have to store or fulfill the orders yourself.

The Pros

  • You don’t have to store any inventory or ship out orders yourself.
  • You have full control over your customer flow.
  • Your margins are usually 50% or higher which gives you more flexibility on advertising

The Cons

  • You have to purchase your goods up front
  • You are responsible for driving traffic to your own website

Overall, if you want to start a more traditional online store but don’t want to worry about inventory or fulfillment, then using a 3PL might be a good option for you.

Here’s a list of 3PLs to consider if you decide to go this route.

  • ShipWire.com – Probably the easiest way to get started. However, they will not take any special packaging requirements. Basically a no frills fulfillment service.
  • EFulfillmentService.com – A no frills fulfillment house that caters to small businesses. They don’t need for you to have a corp or LLC in the United States. Generally easy to work with.
  • ShipMyOrders.com – A fulfillment service very similar to EFulfillmentService.com. They cater to small businesses. There is no minimum on monthly transactions
  • WarehousingAndFulfillment.com – A fulfillment service very similar to EFulfillmentService.com catering to small-med businesses.
  • InFifthGear.com > 300 packages/month – These guys can take on high touch products. For example, they can do personalization, engraving etc… But they generally are only interested in shops that can generate at least 300 orders/month.
  • 3plsolutions.co.uk – An option for those shipping in the UK
  • Direct-Outbound.com – A fulfillment service catering to small-large businesses.
  • At Last – These guys tend to cater to larger shops but you might still want to talk with them.
  • AliveFulfillment.com – Integrates nicely with Shopify

Quick Tip: Amazon is also a 3PL. If you are already selling on Amazon using FBA, you can also have Amazon fulfill the orders from your own website. The only downside is that your goods will be shipped in an Amazon branded box unless you pay an extra fee.

You Can Use Amazon FBA

Amazon FBA
Right now, Amazon FBA is the most popular choice among online sellers. Amazon FBA stands for “Fulfillment By Amazon” and here’s how it works.

  • You ship your goods to Amazon’s warehouse
  • You list your products on the Amazon marketplace
  • A customer places an order on Amazon
  • Amazon handles storage, fulfillment and all of your customer support

Going the Amazon FBA route is extremely attractive because not only does Amazon take care of EVERYTHING, but you also have access to Amazon’s vast audience of buyers.

However the main downside is that you have to obey Amazon’s rules and they also take a pretty sizable chunk of your profits. In addition, it’s much harder to establish your brand on Amazon because people think that they are buying from Amazon and not you.

Overall, here are the pros and cons

The Pros

  • Once you ship your products to Amazon, you don’t have to do anything else. Amazon takes care of sales, shipping, returns and customer service
  • Amazon’s marketplace is so large that you will likely generate sales right away

The Cons

  • Amazon takes a sizeable chunk of your sales. (15% of your revenues + 10-15% for fulfillment depending on your product)
  • You have to purchase your products upfront
  • Your margins must be high to make money because Amazon takes such a large chunk of your sales. (Margins should be > 66% which means you will likely need to import from overseas).
  • You have to obey Amazon’s rules
  • You only get paid every month. Amazon can hold your money for any reason.
  • You have to constantly monitor your listings from the competition
  • Amazon can ban you at any time
  • It’s hard to establish your brand because you are building your house on someone else’s property

The Amazon marketplace is so large that you definitely should be selling on Amazon at some point. In fact, I’ve had students make over 100K per month selling on Amazon alone.

But selling on Amazon can also be extremely stressful as well. Because the Amazon platform is super competitive, you have to constantly monitor your products in case they get piggybacked or hijacked

In addition, there’s also the danger of getting inexplicably banned or shut down in case you get too many customer complaints.

My Recommendations

Most people’s first instinct is to gravitate towards dropshipping since it’s cheap and risk free. But in this day and age, dropshipping is getting harder and harder to execute successfully. Because you are selling someone else’s products at a lower margin, you usually can’t win based on price.

Instead, you have to do an incredible job of educating your customer and presenting them with an amazing shopping experience to get them to buy from you. For a great example of a successful dropshipped store, check out my buddy Andrew’s shop at Right Channel Radios

In terms of deciding whether to sell on Amazon versus using a separate 3PL, I heavily lean towards selling on Amazon through FBA and also using them as your 3PL. If you are worried about Amazon’s branding on the box, then pay the extra fee to have it removed.

Chances are, you are going to be selling on Amazon anyway, so there’s no reason to use 2 separate fulfillment services that do the same thing.

In my mind, the only reason to use a separate 3PL is if you require special handling on your products. For example, smaller mom and pop 3PLs may be willing to bundle separate products together or prepare your products in a specific way that Amazon would not.

If you sell internationally, certain 3PLs may be better equipped to handle international fulfillment. And finally, certain 3PLs may also offer more attractive pricing than Amazon depending on your goods.

But no matter what option you go with, your end goal should be to create your own branded business. So even if you are seeing great results on Amazon, you should always start your own website.

In this day and age, you don’t ever need to carry inventory or worry about fulfillment but you still need a brand.

Good luck!

photo credit: Bycatch delivery

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16 thoughts on “3 Ways To Sell Products Online Without Inventory, Shipping Or Fulfillment”

  1. My company uses 3PL and we increase our revenue 5 times since we don’t care about shipment, warehouse, warehouse workers etc. Our job is only to advertise products and put effort in advertisement.
    Company is founded 30yrs ago and we were classic retailer. But now we have several sales teems in five States.
    Yes it is hard for those who don’t have sufficient capital to pay for all good’s at once, but we don’t have that kind of issues.

    1. I am try to get my small family business off an running on line. How can I pay you to help me an my family out

  2. I’m glad you mentioned the 3PL. The one thing I am very hesistant about is the shipping and packaging aspects. I’m a designer and just want to design! The less administrative/backend I have to do the better, thanks Steve!

  3. 3PL is best way handle your delivery.
    One hour spent on creating income is always better then one hour to cutting cost by your personal packaging and sending.

  4. Nate says:

    Hi Steve, love the content. In 6 months, I am going to be moving to South America for a year to marry the women of my dreams. I want to build an income stream that I can run full time, but do you think it would be possible to run an online store with 3PL from overseas or should I stick to Dropshipping and take the lower margins? Appreciate you!

  5. Amy says:

    Hi,
    I want to start an online business, and I read that I have to have sales tax ID to buy from a wholesalers. Is that really necessary if I want to use drop shipping method? thank you.

    1. Steve says:

      Yes, you will need a sellers permit in order sell legally online and get dropship vendors in the US

  6. jack dona says:

    Shipwire is some of the worst you can choose. You can find more bad reviews than good about them, they are a nightmare.

  7. rotimi rogesin says:

    hello i need an extra income but i want to venture into ecommerce business,pls i will be very gratefull if u can put me through.thanks.

  8. Bhagyashree says:

    Is there anything for this scenario – I don’t have inventory here with me.. I work with lot of vendors in USA and India. Whenever I get the order, I will notify the vendor and vendor will then ship to customer. Is there any service/ fulfillment service I can use to make this whole process seamless? Is there any 3pl company where my vendors can ship the products and then 3pl will ship it to customer.
    Also, if I decide to use Endicia for the shipping labels, can I forward those labels to vendors, for them to use it to ship?

    Thanks!

    1. Hi there, noticed you’re looking for information on a 3pl. I work for a shipping/fulfillment company in Michigan. We ship worldwide and can help answer any questions you have.
      thank you,
      Lindsey Brown
      877-984-7224.

  9. It’s really an excellent and beneficial data. I was actually captured with the piece of resources you have got here. Big thumbs up for making such wonderful blog page!

  10. Terence Yap says:

    Hello Steve,

    I am an international seller.

    How do I get sales tax ID in the US if I need to buy from wholesale or I need to get it from my country?

    Thanks.

  11. This was really something very special and interesting. Hopefully I can really learn so much from this valuable information. Thanks

  12. You reference purchasing product for your customers orders. What if you’re working with clothing, ie: team jerseys; you purchase from overseas to get a lower price per unit. In order to do that you have to purchase a bulk order ie: 100 units. How do you guess on purchasing what the customer might want, the size, the style etc… without having a basement full of inventory that is wrong? Do you know if I order, and pay for the entire order, from overseas a company that warehouses that order for me of 100 units and each time I order for a customer they keep track of lowering the inventory. and I still get the wholesale price per unit?

    HELP!

  13. Mike says:

    Hi Steve,

    My online business is going through a growing pain and I hope you can help me solve the problem.

    My online business sells customs items just like your hanhandkerchief business. My sales have been picking up and I’m having a hard time keeping track of my orders. I have a manufacturing partner so I need to send them the correct orders and specs.

    I’ve been searching high and low for order management software that can handle custom orders and with the ability to share that data with a third party.

    How do you manage this with your custom handkerchief business? It seems that no one really writes about this :)

    Your help would be greatly appreciated.

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