If you're not sure what drop-shipping is, you might want to read my article "Part-time, low-risk business ideas you can implement from home" on our articles page.

Drop-shipping is an extremely effective business model for getting into online retail, via your own site or some other outlet, such as ebay. It's so easy to do that prospective drop-shipping retailers have become quite a target for online scammers. Many people who don't quite understand drop-shipping see it as a get-rich-quick scheme, and of course, there are plenty of people ready and waiting to exploit that mentality.

So, the first rule to researching drop-ship sources - avoid using search engines. After you find a reputable source of information, use it as your starting point, and work from there. The search engines will give you page upon page of links to useless information.

The second rule is - avoid any company that expects you you pay them an up front fee, or who offers you a fully featured "drop-shipping solution - with a website and everything."

Third, if they don't require a valid wholesale certificate from you (which requires that you have a business license), then stay away. Only illegitimate companies will do business with non-legal "businesses." If you do find a company willing to do business with a non-legal business, the chances are, they are middle-men who simply forward your order to the real wholesale company, and take a cut of your profits.

There are two ways to find legitimate drop-shipping companies.

• The first is very obvious - if you see a product you'd like to sell, call the company! If they don't drop-ship, they may very well be a light-bulk seller. That is - they'll sell wholesale with minimum orders under $200 or so. We (my wife and I) found one of our best selling products this way. We saw a product we liked in a hobby store, wrote down the website on the package, contacted the company, and they supported drop-shipping. We had a great run on ebay with their product.
• The second is - WorldWideBrands. There are others, but this is the only we've directly dealt with, and can vouch for their authenticity. This company's sole purpose is to research and compile legitimate drop-shipping companies. The result is an extensive, searchable listing of products, and the companies that supply them. If you're seriously planning on retailing on the internet, using their directory is a no-brainer time saver, if you can manage the one-time $70 subscription. The really great thing is - you can see what products they have in their database before you buy, so you know what you're getting.

So you've found a company that will drop-ship. What next? First of all, you must have a valid reseller/wholesale certificate. The exact requirements for this vary from state to state, but as a minimum, you need a business license (see resource page on obtaining a business license).

The next step is to contact the company about setting up an account. If your business is new, and you don't have references, you can expect them to require a pre-paid account (i.e. they charge your purchases to credit card instead of extending you credit directly). So you'll have to fill out a credit card form, an account application, and send them your wholesale certificate. They, in turn, will send you a wholesale catalog, and all the resources you need to get up and running with their products.

One last note - don't be fooled by drop-ship directories that are sold for $5 or $15 on suspect-looking sites. They are all basically copies of each other, and outdated. You're better off paying a little extra for a regularly updated, reputable directory.

Once you've found something you'd like to sell, it's time to put up a website, or set up an account on ebay!