An ideal way to run an e-commerce business is to not paying for and storing large quantities of inventory. The problem is, most budding Web entrepreneurs don't know how to take advantage of what is called "drop shipping."

Drop shipping allows you to process orders on your site while the manufacturer handles the inventory and shipping duties for you.

The topic has come up several times in our forums.

Forum member "Anton," who lives in the Ukraine, asked recently: "I want to start an online store. I am a beginner at Ebusiness but I have been searching and processing lots of information somehow connected to the subject. Do I stand any chance to set up account with a Drop Ship company if I am not a citizen of the US? Because even having a Non-US Merchant Account I guess my offer will not instill confidence. I am afraid that people will not have a desire to make a deal with somebody living outside the US. In addition, in my case, communication through e-mail seems to be the only means to get in touch with both Distributors and Customers."

Anton is looking for opportunities in the United States, as he believes his prospects for making any money in Eastern Europe are slim.

Kevin Isaac, from the UK, is also looking for drop ship opportunities in the US. Specifically, he'd like to sell toys.

Forum regular, "jellesy," who runs the fashion e-commerce site www.jelessycollection.com, chimed in with a few suggestions, as she takes advantage of drop shipping in her business.

In response to Anton, he said, "You have a big time problem. Credit card fraud is huge outside the USA. Unless you take the risk of credit card fraud no one will deal with you."

"I have a drop ship supplier but I take all the credit card fraud risk. My site is a success," she added.

As for his advice for Mr. Isaac, "Most games are made in Asia and what you want to become is an e-tailer. Contact the major game companies and see if you can get a license to sell on line. The difficulty becomes that mass production and distribution centers out of Asia cannot ship directly to consumers because they are not equipped to do that. The result is you will need to buy from UK based distributors and the margins will be thin and the competition fierce."

Forum user h53pilot was also looking for drop shipping advice.

"I'm in the same boat. I'm trying to find out what the drop-ship opportunities are before I invest a bunch of time developing my site," he asked recently.

Searching the Web for Sources
A search for drop shipping companies on the Web immediately leads to a flood of hucksters selling lists of drop ship companies for fees ranging anywhere from $10 for a directory to $39.99 per month for a turnkey site. There is no guarantee the information is up to date or accurate.

Also, given the sheer volume of sites selling this information, anyone looking for drop shipping opportunities should exercise great caution. The Web sites selling this information come across as little more than "Get Rich Quick!" schemes. Many of the sites claim to be able to make you thousands of dollars per month on eBay. But, if it sounds too good to be true, it likely is. If there are 50 other people selling the same items from these so-called drop shippers, the chances of you making any real money is slim to none. Only persistence and patience will reveal any real leads.

Another thing to be aware of is that many so-called drop-shipping companies are not true distributors — they are middlemen. If a company says it receives products to stock in its warehouse, they are not the true distributor and are taking their piece of the profit before you see any money.

Instead of search for "drop shipping," try searching for distributors instead.

The key is to find out which wholesale companies or manufacturers sell items you want to sell and contact them directly. Note that you will need a valid business license when setting up shop, or wholesalers will not do business with you.

One example we were able to find was The Fruit Company in Oregon. A signup form is available on its Web site for drop shipping opportunities and no outlandish claims about profit potential are made.

We'd like to hear about your experiences with drop shipping companies or services. Join us in the ECommerce-Guide forums and share your stories.

Devin Comiskey is the Managing Editor for ECommerce-Guide.com.