The dropshipping business model is an excellent way for entrepreneurs to get started with a small investment, generate passive income and work from anywhere. All you need to get started is a computer, an online store and some basic marketing skills.
In this article, we will explore the ins and outs of dropshipping, including its benefits, potential drawbacks, and tips for success. Whether you’re an aspiring entrepreneur or an established e-commerce business looking to expand your offerings, this guide will provide you with the information you need to get started with dropshipping.
- 1 What is Dropshipping?
- 2 Benefits of Dropshipping Business Model
- 3 Challenges
- 4 How Dropshipping Works?
- 5 Tips and Tricks for Setting up your First Dropshipping Store
- 6 Have your own Designer Products with Print on Demand
- 7 Conclusion
What is Dropshipping?
First things first, let’s define what dropshipping actually is.
Dropshipping is a fulfilment model that allows you to buy directly from suppliers and manufacturers who will then ship the products directly to your customers.
In this model, the retailer creates an online store or marketplace where customers can browse and purchase products. When a customer places an order, the retailer forwards the order details to the supplier, who then ships the product directly to the customer. The retailer earns a profit by charging a markup on the supplier’s price.
This let’s drop shippers focus on marketing and customer service instead of warehousing and the logistical challenges traditionally associated with running a drop shipping business. Dropshipping has become such a notable model in digital entrepreneur communities because it has so many benefits for those just starting out.
Benefits of Dropshipping Business Model
Less Capital Required
Dropshipping is a great way to get into e-commerce without spending a lot of money upfront. You don’t need to spend thousands of dollars on inventory, which makes it a really accessible and less risky option.
Easier to Manage
Dropshipping is a great e-commerce option because it’s relatively low-maintenance. You don’t have to deal with inventory, shipping, or warehousing, which takes up a lot of time and money. This leaves you more time to focus on other aspects of your business and overall makes for a less stressful experience.
Easier to Scale
It’s also easier to scale. Traditionally with retail businesses, if you were to receive three times the number of orders, you would have to do three times the amount of work. And that’s not the case with dropshipping since you don’t have to buy in bulk right away.
Easier to Test Market
When you’re starting a business, the biggest risk is building and selling something that no one wants. It’s easier to test the market when you’re dropshipping. You can list and sell an item to see if there’s demand for it before buying it in large quantities. This can save you a lot of heartbreak and wasted effort later on.
Work From Anywhere
Dropshipping gives you the freedom to work from any part of the world, which is really attractive in today’s economy. With drop shipping, you can run your business from anywhere, and you don’t have to worry about inventory or shipping logistics.
Better Cash Flow
Besides the benefits mentioned above, another advantage of Dropshipping is that it helps to avoid the risks associated with holding large quantities of inventory. This is good news for any business owner and relief for beginners who may not have the capital to invest in inventory.
Drop shipping does have a few challenges, which are important to take note of.
When it comes to dropshipping, the first challenge you’ll face is competition. Not having your own branded and copyrighted products does leave you vulnerable to others selling the same thing.
Supplier Error May Happen
Supplier errors are inevitable in dropshipping, and you’ll often find yourself taking responsibility for mistakes you didn’t make.
Number three is lower profit margins. Since dropshipping products aren’t exclusive, it can be hard to command sizable profit margins.
Number four is little to no customizability.With dropshipping, what you see on the supplier’s site is often what you get.
Longer Shipping Times
Lastly is longer shipping times. With drop shipping, don’t expect two-day shipping. While it can vary widely, shipping can take anywhere from 19 to 35 days.
How Dropshipping Works?
Now that we’ve discussed the pros and cons of drop shipping let’s get into how the model really works.
Let’s start by defining the roles throughout the supply chain. First, we have manufacturers, and they’re the ones that
actually create the product.
Then they sell it in bulk to wholesalers and sometimes to retailers. Then we have the wholesalers, who buy the products in bulk from the manufacturers, mark them up slightly and sell them to the retailers. Lastly, we have retailers who sell products directly to the public at a markup.
Notice how a dropshipper isn’t listed in the supply chain. That’s because dropshipping is an invisible service. It’s not a roll.
Dropshipping works like this. You, as the retailer, choose the product, set the price, put it in your online store and run advertisements to attract customers. Soon enough, a customer sees your product and pays you the retail price.
Once that happens, you notify your supplier, pay them a wholesale price, and they ship the product directly to your customer.
Here’s an example.
Let’s say you’re selling resistance bands. You find a supplier that sells them for $15 with shipping included. Then you put them on your online store for $40 with free shipping. Now, when a customer places an order, you pay the supplier $15 and they’ll ship the product directly to your customer, using the information that you’ve collected, then you get to keep the $25 in profit.
In Conclusion, For a dropshipper, you need an online store in order to receive orders from customers. One way to find products to sell is by looking at popular supplier platforms, such as AliExpress.
There are also plugins (like for Shopify and WordPress) that help store owners obtain product information with a few clicks–eliminating the need for manual copying and pasting. This way, store owners can focus more on other aspects of their business, like interface design or marketing.
Tips and Tricks for Setting up your First Dropshipping Store
Now that you understand the basics of the drop-shipping model. Let’s discuss about some tips for setting up your first dropshipping store.
Making your Business Legal
If you’re looking to do a serious business out of dropshipping, it’s important that you set it up the right way, as most suppliers won’t actually work with you unless you’re legally registered business, at which point you’ll gain access to wholesale prices. Here are some of the most important steps for making your business legit.
- Decide on a business structure.
- Legally register your business.
- Set up a business checking account and credit card.
- Lastly, abiding by the tax regulations in your region.
Finding the Best Dropshipping Products to Sell
The second step to success in drop shipping is finding the right products. One way to do this is by finding a niche market. Not all customers are the same, and finding products that cater to their specific needs will help your business thrive.
A niche market is a segment of the larger market that has its own preferences, identity, and needs. Niche markets are powerful for drop shipping because they help you differentiate your products and reduce competition. By catering to a specific market, you can set your business apart from the rest.
let’s talk about some guidelines that will help you narrow your focus.
- Pricing : Number one is pricing. When picking a product, we want to look for something that will be able to sell between the $40 and $200 price range. And that’s because this price range will allow us to maximize
profit without providing extensive presale support. Also, impulse buyers generally buy things that are between this price range.
- Minimum Advertised Pricing : Number two is the minimum advertised pricing. And this is when suppliers require that resellers price their products at or above a certain level. If you can find a niche where this is enforced, it’s going to save you a lot of headaches and prices wars with competitors later down the road, you never want to be caught in a situation where you’re in a race to the bottom.
- Marketing Potential : Number three is marketing potential. How many ways can you brainstorm being able to market this particular product? If you can’t think of any, it’s going to be a big barrier to customer acquisition down the line.
- Accessories : Number four is accessories. When people commit to making a larger purchase, they are less price sensitive to high-margin upsells. Accessories can be a great way to upsell your customers and increase that average order value and revenue long-term.
- Local Products : Number five, selling a product that’s hard to find locally will increase your chances of success. The reason for this is simple. When people can’t find a product at a store in town, they turn to the internet.
- Smaller Item : Lastly, smaller is often better. The smaller the item is, the easier and cheaper it is to ship to your customers.
Using Online Tools to find the Perfect Product
Now that we have some principles laid down for finding the perfect product, it’s time to turn to online tools.
- Google Autosuggest : Google is a great place to start for brainstorming product ideas, as it will give you insight into what people are actually searching for. Google’s autosuggest feature will give you even better insight into long-tail keywords.
- Answer the public : Another fantastic tool for market research is answer the public, which will give you insight into actual keyword phrases that people are searching for on search engines.
- Checking Online Stores to get the idea : Another great resource for brainstorming product ideas is simply going to online stores and checking out their curated product lists. Amazon’s new and exciting finds, eBay’s trending on eBay, and Alibaba’s first look at next season’s products can be gold mines for product ideas.
- Checking Social Media Sites : You can also check out social shopping sites like Pinterest, SSENSE, Wanelo and Etsy. Social shopping sites incorporate social aspects, like product sharing and user engagement features that give you insight into how a product is popular at a glance.
Using Keyword Research tools
Now let’s discuss about keyword tools. It’s much easier to fill in existing demand again than to create a new one. So once you have a short list of product ideas, it’s important that you validate them with hard data.
To do this, you’ll want to use a keyword tool like Semrush, Ubersuggest, or Google’s keyword planner to gain insight into how many people are searching for that particular product? If you’ll be selling primarily in the US, it’s important that you focus on the local search volume and ignore the global results, as that’s where most of your customers will be.
If a search term has many variations that are actively searched for, that’s a really good sign that this market is fairly deep, with a lot of variety and interest. If you’re using Semrush, this process will be so much easier as their tool Market Explorer gives you insight into competitors, keywords, audience, interests, and demographics, all at a glance.
Once you’ve chosen your product, you’ll want to take some time to conduct a competitive analysis. Too much competition, and you’ll have a tough time acquiring traffic and competing against established players, too little competition can indicate a tiny market size, which will really limit your growth potential.
To conduct a competitive analysis, run a Google search and take note of the top-ranking sites. Make sure to take a look at how they present themselves with their messaging, imagery and design.
Since backlinks are a large ranking factor for search engines, running your competitor’s websites through Link Explorer is going to give you a really good idea of how hard it’s going to be to outrank them.
Since you’re sending people to your site, you’re going to want to make sure that your product pages are optimized because you want people to actually buy.
A product page can really make or break a buying decision. Here are some quick best practices.
- Price : First is price, setting a price slightly higher than your competitors can be a great strategy as it can increase the perceived value of your product. We wouldn’t recommend being the cheapest thing on the market as it will ultimately be a losing game and just slowly eat away at your margins.
- Trust : Building trust will be a vital component of increasing your conversions. Reviews and testimonials, customer generated photos and money-back guarantees, are all powerful ways of building trust and reversing risk for your customers.
- Urgency : Urgency can be a powerful technique for increasing conversions, using flash sales and letting customers know there’s a limited quantity of an item can help them adopt a scarcity mentality and put them on a time crunch. And this can really help them make a purchase decision a lot faster.
- Relevant Products : Using relevant product recommendations to cross-sell and upselling your customers can help increase the average amount spent at your store per purchase.
- Order minimums : Another great tactic is order minimums. Offering free shipping on orders over a hundred dollars is a great way to incentivize your customers to add on extra items.
- Offering Discounts : Lastly, we have loyalty programs offering your customers a discount or coupon for their next purchase is a great way to get them to keep coming back.
Have your own Designer Products with Print on Demand
Selling products online doesn’t have to be limited to dropshipping from big wholesale platforms. You can sell products from a family-run factory or have them customized/created on-demand. This is an excellent option for designers interested in having products with their own designs.
Having your designed characters or arts on tote bags or other items has never been easier with services like QPMN. They handle both print-on-demand and dropshipping, so you don’t have to worry about printing or shipping the products yourself.
In conclusion, It takes a significant level of commitment and investment over time to truly build something that is successful. For some reason, this myth persists that people can build a six-figure passive income with just a few months of part-time work. And that’s not the way it works.