Drop shipping is simply an arrangement between you, customer, and the seller of a product you wish to sell in which the original seller --not you-- ships the product(s) to your customer(s) on your behalf. This means you can sell quality, brand-name products on your Web site for a hefty profit, while someone else looks after product sourcing and order fulfillment.

How Drop Shipping Works:
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Let's say Mary sets up a website where she sells a product called "The Total Skin Care Package," priced at $97. A customer visits her site, places an order, and is billed $97 plus $11 for shipping and handling, if any.

Mary then sends her seller an e-mail with her customer's order and shipping information. The seller packs up the customer's order, puts Mary's shipping label on the package, and mails it out via UPS or FedEx or EMS or DHL, usually with in few days and send the tracking details to Mary.

The seller then simultaneously bills Mary for the wholesale price of the "Total Skin Care Package"--in this case, for example, $64 plus $11 for shipping and handling, if any. Since Mary has passed the shipping and handling fee on to her customer, she just netted a profit of $33. And all she had to do was send her seller an e-mail to fulfill order(s)! However, without Mary paying, the seller would not ship to her customer.

Drop Shipping Advantages:
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In addition to not having to worry about shipping products yourself, there are a few other advantages to this business model. First, it saves you the cost of building your own inventory. If you're like most people starting a small business, you don't have a ton of extra money lying around--the last thing you want to do is tie up your cash in inventory that you may or may not be able to sell.

Second, no inventory also means no leftovers. If the product you sell suddenly becomes outdated, obsolete or just plain untrendy, you aren't the one with a room or warehouse full of stock nobody will buy. Many online retailers find themselves having to offer deep discounts--and taking huge losses--on old products just to get them out of their homes or warehouses to make room for more inventory.

Third, you'll be able to add new products to your site almost instantly. Since you don't have to worry about stocking inventory, if you find that your customers are clamoring for a particular product, it's not unrealistic to expect you could add the item to your site in just a few days.

Final Thoughts:
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Drop shipping can be an easy way to get started selling online. Since the seller takes care of warehousing and shipping, you'll be able to concentrate your efforts on building your site and marketing your products. And this is what most entrepreneurs are good at.

When searching for a product to drop ship, don't spend money on "drop shipping directories." Think about it: Not only is their information frequently out of date, but everyone who buys these lists will be contacting the same companies, which means more competition for the products you'll be selling.

And choose your products carefully:

1. Make sure there aren't already hundreds of sites selling the same thing at prices you can't afford to compete with.

2. Choose products that target a "niche" market rather than "everyone." You'll always be more successful with this strategy.

3. Ask yourself: Is this a product I would buy myself?

Most important, remember that drop shipping isn't a magic formula that will make you rich. Building a business always takes a certain amount of elbow grease. The real "magic" is that drop shipping allows you to invest your money in marketing rather than inventory, and a well-planned marketing strategy is what will ultimately help you build a lucrative online income.