There are many competitive advantages that internet retailer enjoy other than just lower operating prices. For instance, clients in other states are not subject to sales tax - this in many times more than offsets shipping costs.

Probably the most obvious advantage that an internet retailer has is audience. If you open a internet retailer store in a town of 2,000,000 people you need to have a product line with mass appeal - remember, only a small % of those 2,000,000 people are in the market for what you sale.

Online the story is different - you can create a niche that appeals to just one thousand people across the planet - with great marketing you can grab the majority of this industry and enjoy a very loyal user base. Typically at this point you will not be competing on price.

Another advantage that internet retailers have is the ability to capture and distribute information from other clients. When you go to a local shop and ask the cashier question the answer is limited to the experience she or he has personally had with a particular item - online you can aggregate information and create a social environment where clients and helping soon to be clients.

While there may be some people who start internet retailer companies with little or no money this is increasingly less common and the success percentage is much lower. If your model depends on drop-shipping, remember, you are losing control of the supply chain and fulfillment - keeping clients happy under such conditions is much more difficult.

Depending on the market there is also usually a lot of margin pressure on drop-shippers. Stocking items almost always increases your margins. So while starting an internet retailer company may be cheap, if you want to succeed it probably won't be.

This is probably the most commonly heard myth associated with internet retailer - people focus on the process of launching their website, adding items and getting ready to make sales. You need your merchant account, your gateway, some working capital and finally, you have a functional store.

Now you have to get people to your site. I recommend all prospective internet retailers with any capital constraints skimp on their site design - focus on the functionality, not the aesthetics. Invest your cash in getting traffic to your site - then let your profits pay for your shop redesign. The goal in any business is to get the business paying for itself - this hedges your risk and guarantees the long-time prosperity of your business.