Dropshipping 101: How to Start a Dropshipping Business in 2021
Last Updated on January 7, 2021 by Smarty Whiz
Dropshipping is a common term amongst people who are in the game of online businesses. However, only a few can interpret what this term means and have a true understanding of how it works.
Nowadays, most people are looking for side hustles to make some extra money for themselves. One of such hustles is to get into dropshipping.
For anyone new to the arena of online business, who wishes to earn a decent living in the e-commerce field, dropshipping might be the answer.
However, there is a crucial difference between dropshipping and traditional eCommerce.
Dropshipping’s framework involves avoiding the complexities of maintaining an inventory, shipping, and order fulfillment processes.
Still, this model may appear mystic to some as finding a reliable source can seem to be a daunting task.
In this Dropshipping 101 article, we will comprehensively cover all the nitty gritty’s about dropshipping.
Including and not limited to what dropshipping is, how to start a dropshipping business, how this business model works, and the pros and cons of these business models to running a successful dropshipping business.
Let’s get started!
What is Dropshipping?
You have a company where you don’t need to stockpile the inventory, look after a warehouse, or even bother about shipping products to your customers.
All you need is an online store and a partner who will manage all the errands on your behalf. So, how does this sound to you?
Well, that’s what dropshipping is all about!
Dropshipping is an order fulfillment model that allows the company to function without keeping the products physically in stock.
It requires no inventory management, no warehouse maintenance, and no hassle to handle the product’s shipping & fulfillment.
Instead, you act as an intermediator who receives the order and passes on the sales orders to the third-party supplier or dropshipper.
The drop-shipper is responsible for picking, packing, and delivering the product to the customers from here onwards.
Know that dropshipping is not a get-rich-quick scheme.
Sure, it may seem like an easy money-making model where you sell products and get a cut for yourself. In actuality, the obstacles, and drawbacks that come with this model are far from easy.
However, by adopting an appropriate approach, the dropshipping business has the potential to turn the tables over.
It can help you build a successful business in a short period of time.
How Does The Dropshipping Business Model Work?
Now that you know what dropshipping is, let’s dive into understanding how it operates.
The Dropshipping business model revolves around three people– the suppliers, the dropshipper/dropshipping store, and the customers.
They are responsible for the order fulfillment, shipping process, and maintaining a physical inventory on the retailer’s behalf.
Since they play a crucial role, as a dropshipper, you have to look for suppliers who are reliable and honest about their work.
One of the most commonly known platform to find suppliers is AliExpress. Other notable supplier directories are Wholesales2B, Source of Goods, and Spocket which has suppliers of original US and EU products.
Your Online Store (dropshipper)
This is the actual e-commerce store or website where customers visit and place their orders for whatever product they want.
For this purpose, you will need to set up a website. Upload the product catalog that includes high-quality product images, the product details, along with a unique but precise product description.
To set up your site, one e-commerce platform that offers excellent services at an affordable rate is Sellfy. You get to have your website set up in as little as 5 minutes.
Most popular eCommerce platforms can be synced with a dropshipping automation platform like Inventory source and Spocket allowing you to have your website up and running in a matter of days.
Other options are BigCommerce, WooCommerce, and Shopify.
Once the customers places an order, you will receive a notification regarding their order details.
You then direct that notification to your supplier so that they prepare the product and deliver it to the customers.
Importantly, you only need to make payments to the supplier after the customer makes the desired transactions.
The process and business model of dropshipping is quite simple. It is the partnership between the retailer and the supplier where the retailer receives the order and forwards it to the supplier.
The third-party supplier then works on the product packaging and is responsible for the order to be delivered to the customers directly.
You can forward the order details in a couple of different ways, depending on what method your supplier prefers.
Ideally, suppliers prefer a direct integration where the order placed on your website automatically gets fed to them, and you don’t have to do anything.
However, many dropship suppliers fail to keep up with times and technology, so when you receive an order, you have to manually forward the details to the drop shipper.
Interestingly, most of the dropshippers put your brand or logos on the packaging slips and invoices upon your asking.
This ensures that your customers never really finds out that the product came from a third party. It appears as if it came from you and your company and your warehouse.
Current Profitable Product Niches
To succeed in the dropshipping business, it is of utmost importance that you select the right product niche, and market it to the right audience.
Based on search trends, research reports, and experts’ recommendations, some of the most popular and profitable dropshipping niches include:
- Beauty and Health Products
- CBD Products
- Car Accessories
- Eco-friendly Everyday Products
- Smartphone Accessories
- Tech Supplies
- Weight Loss Items
- Work from home equipment.
Nowadays, the dropshipping business is grabbing eyeballs as it eliminates the need for location, i.e., office space.
Instead, it requires a laptop and internet connection to open up a business in minutes.
Therefore, many entrepreneurs switch to dropshipping because it is a low-investment model, deals with less hassle, and helps build a sustainable business in the long term right from your laptop.
How Profitable is Dropshipping?
To start any business, it is viable to consider how beneficial it can be for you in terms of profits.
Dropshipping companies are a low cost and high returns business. These business types are not only profitable but thriving since the dropshipping profits have reached over approximately $4 billion this year.
It is therefore reasonable to predict that it will continue to be more profitable in the near future.
Ideally, the profit margins for dropshipping fluctuate between 15 to 45%. However, consumer goods and luxury items (appliances, electronics, jewelry, and more) can increase the profit margin up to 100%.
It boils down to picking a market where competition is low and there is no oversaturation of sellers. You also have to choose the right niche and supplier.
To ensure high profits, one of the ways can be to source products directly from the manufacturers instead of involving suppliers or vendors in between.
If you think that merely listing products on the site will gain you profits, you are wrong.
There is a need for you to be aware of the profitable dropshipping products as well as different techniques for marketing your store. The prices charged should also be fair.
Once you are sure that you have enough knowledge, the dropshipping success rates can become higher.
Setting your foot into the dropshipping business can be lucrative. Before you know it, dropshipping can convert into a money-making machine, requiring minimum input in return.
One of the recent examples of a successful dropshipping business is Notebook Therapy. A Japanese and Korean Stationary (niche) shop that received peak traffic of 45k in May 2020.
Its perfect layout design, great color choices, incredible Instagram following, and amazing blog campaign has managed to attract individuals of all age groups. These are some of the factors that has lead to its success in the market.
How to Start a Dropshipping Business?
Eventually, it’s your call to decide whether dropshipping is the right type of business for you or not.
That being said, if you decide to put in your money in this business, it is essential that you first learn the basics of how to start a dropshipping business.
The learning process can be made easier by breaking it into smaller yet manageable steps, as mentioned below.
Step 1: Figure Out Your Niche & Product
This is the challenging part of starting a dropshipping business, but you can achieve more significant profits if planned right.
A niche is the segment of a market. Hence the more specific your niche is, the better the results will be.
You have to start by researching the ongoing trend and which products are highly in-demand and often used by the audience from different platforms like Google Trends, Pinterest, Amazon, AliExpress, Reddit, and Instagram.
With the rising popularity of the dropshipping business, it is almost difficult to find a niche that isn’t already saturated.
However, new markets and new products emerge practically every week, so the opportunities ought to be endless if searched properly.
One good technique is to find out which niche has an increased demand in the market and products that aren’t readily available in the local markets. This way, you can keep ahead of your competitors.
Once you are done working on the niche & product, search for suitable price ranges that can be assigned to the products.
Remember to keep a price range that is large enough for you to make high profits and small enough for customers to make purchases without giving any second thoughts.
Step 2: Find A Reliable Dropship Supplier
For many e-commerce entrepreneurs, finding a reliable dropship supplier has been no less than a challenge.
Dropshipper suppliers are an integral part of your business. Therefore, it is crucial to find someone who is reliable and honest with work.
They are responsible for recording the number of products in stock, the quality of the product, placing orders for the finished products, and ensure that the orders are delivered within the time committed to the customers.
While you look for a supplier, a good dropship supplier should actually be a dropshipper and not a manufacturer or wholesaler.
You should look for specific attributes in your supplier; the supplier should have some sort of experience and helpful sales representative staff.
They shouldn’t be charging you with huge order fees. They should also provide fast shipping services, and, if required, provide you with referrals on request.
A supplier who is punctual with fulfilling orders and shipping products is most likely to get you happy and satisfied customers.
Therefore, you should find a trustworthy supplier. Then have a discussion in detail about what your brand offers and what you are expecting them to do for your store.
Some good examples of trusted supplier directories are;
● Inventory source
- Aliexpress via Alidropship
Step 3: Apply For A Sales Tax ID
A sales tax allows you to charge and collect sales tax from consumers and is dependent on what obtains in your locale.
While most states encourage you to have a sales tax ID, it isn’t mandatory everywhere.
Therefore, you will have to consult the local government agencies to guide you with further information. This will ensure you meet the proper guidelines for starting up your business.
Step 4: Create Your E-commerce Website
While social media pages play a role in creating an image of your brand in the mind of customers, websites are where real interactions take place with your buyers.
By creating your website, you can build a trust relationship with your customers. You also get to have complete control over branding & design.
There is also no direct competition with other sellers on the same platform. This could contribute to driving your sales up.
Don’t forget to select a relevant domain name that resonates with your niche.
Therefore, it is suggested for you to create a website using advanced tools designed especially for the dropshipping purpose.
If you would like to design from scratch BigCommerce provides excellent design features and support to help you along the way.
You could also start by building your blog yourself through web hosting service providers and integrating with WooCommerce and other relevant plugins.
This is a cheaper option as it requires no monthly subscriptions. You can also get started with creating your ecommerce store with as little as $0.99 per month.
However, to get your website up and running in as little as 5 minutes, ready to use platforms such as Sellfy and Shopify are your best options.
1. Select A Hosting Platform
As mentioned above, you can either go with Sellfy, Shopify, BigCommerce or WooCommerce for hosting platforms.
Sellfy and Shopify are fully customizable ready-made platforms and might charge you a a price for a store setup.
While WooCommerce is a free WordPress plugin and budget-friendly platform, the only payments you need to make are for the domain name and hosting charges.
Alidropship is an excellent option if you intend selling products from Aliexpress suppliers.
You can either opt to use the free easy-to-customize Alidropship themes or you could integrate the Alidropship woo plugin with your Woocommerce store.
Alternatively, Alidropship also offers ready-made premium stores that currently go for $300.
This is a quick and fast way to get your website up and running especially if you are new to ecommerce.
2. Select A Plugin
Although it isn’t necessary to select a plugin to set up your store, keep in mind that the setup process might turn out to be very tricky without plugins.
Therefore, by choosing a plugin, the entire set up process can speed up and quickly connect you with trustworthy drop shippers.
Take, for instance, Alidropship plugin automates the process of importing the dropship products from the dropshipper’s store to your store with just a single click.
3. List The Products
Once you are done with the part of selecting the right product and the right supplier, list the products on your website with reasonable prices.
While listing the products, don’t forget to back your product up with good content.
Write a short description of the products to let the buyers know the key benefits they get from buying the product.
Avoid copy-pasting words from any other site as it can backfire on you, thus violating rules.
Step 5: Analyze, Optimize, And Market Your Store
This is a vital part. If appropriately used, it will work in your favor. When you have your online business, you must focus on building good marketing strategies.
This ensures that you can get the maximum reach and thus make maximum profits.
Dropshipping companies are certainly the ones that require aggressive marketing.
Therefore, strategically plan out which advertisements can be beneficial. Think of what keywords are suitable to integrate in your content that will surely increase your traffic.
Similarly, you should also strategize on what content needs to go up on the social media platforms to create engagement.
Recently, video ads showcasing product details are the talk of the town.
It is advisable to invest your money in video advertisements to get better results. You can get affordable services on freelance platforms.
Furthermore, you can use social validation strategies like encouraging customers to share their feedback on comments under posts, get ratings, reviews, and publish testimonials on websites to gain the trust of prospective consumers.
Who is Dropshipping For?
While keeping in mind the benefits and drawbacks of a dropshipping business, it is necessary that you hold onto your horses before rushing into making any decisions.
Understand that dropshipping isn’t a business that anyone can start anytime, anywhere they want.
It can be beneficial for some and turn out to be the worst decisions for others. Let’s look into who are the ones that fit the criteria of the dropshipping business.
Dropshipping is a great business choice for entry-level entrepreneurs, especially among Generation Z and millennials, who have just stepped into the world of e-commerce.
It is an easy and attractive model for novices as it involves minimal risk and requires just a little bit of monetary investment.
Since this type of business doesn’t require you to make massive investments, it is also suitable for established e-commerce store owners even if they already have inventory.
They could get into dropshipping to test new waters or see if it can help reduce their overhead with their existing business.
At times, they are considered the lord of the dropshipping business as they are well-aware of the market and know exactly which customers to target to make sales.
A few different types of business people that can also benefit from dropshipping are;
- Budget Entrepreneurs: are literally math wizards. They calculate everything, including their profits and losses, beforehand. Dropshipping ought to be the cheapest method for selling online, as you do not need to make purchases for an inventory. It is favorable for people with a tight budget to manage or want to minimize their startup costs.
- First-Time Entrepreneurs: Although you only need a laptop and a good internet connection, know that an online store isn’t a piece of cake. These types of entrepreneurs are entirely new to this startup game and might face a hard time learning drop shipping. You have to work harder to drive traffic to your website and then figure out ways to optimize & convert that traffic into successful sales. Therefore, dropshipping is a good business choice for those who have just started selling online. With low-investments required, new entrepreneurs are keen to learn new concepts, focus more on learning the how-to’s of running an online store, drive traffic, and boost sales before investing a large amount of money in inventory that may not sell.
- Validating Entrepreneurs: Dropshipping business is an excellent alternative for entrepreneurs who seek product approval or validation before investing in hefty amounts to buy a particular product or inventory that probably won’t sell later onwards.
- Walmart Entrepreneurs: Dropshipping can be an excellent option for people looking to sell many different kinds of products. Selling a huge variety of products is quite challenging without a significant amount of money to buy inventory. Luckily, dropshipping is a good solution because you do not need to pre-purchase inventory again.
On the contrary, dropshipping isn’t the best choice for those who only expect to make huge profits.
If only profits are the prime concern, retailers should contact the source directly, such as the manufacturers. This ensures you get the lowest cost price since you avoid the middleman wholesaler.
Comparatively, profit margins in dropshipping are relatively low than other business models, such as manufacturing.
For these reasons, dropshipping might not be a good option for new startups without a loyal customer base. This is because in dropshipping, the business doesn’t have ultimate control over customer satisfaction through branding and brand experience.
How to Grow Your Dropshipping Business?
Running your dropshipping business is one thing, but growing the company is another.
While it can be difficult to figure out ways to expand your business, managing good customer service, savvy marketing, and finances at the same time can be an added pressure.
However, entrepreneurs are dedicated to crack through these situations and grow their brand.
The process of scaling your business can be exciting, but there are a few things that you should keep in mind before your company really starts to take off.
You must remember that growing your business is not synonymous with growing your working hours to make profits.
Instead, it actually means gaining the ability to increase sales with lesser time invested – through strategizing things and allocating resources mostly.
While you grow your dropshipping business, it isn’t necessary that you have to hire hundreds of employees or add in many contractors with you.
Let your business experience a natural progression. Though it might sound weird to trust others with your brand once you find someone who matches your wavelength, it can be a rewarding move.
It will even give you a competitive edge over others in the market.
Start with listing down tasks that are your top priority, plan out business strategies that can gain you a decent amount of passive income.
Move on to create your brand identity. Then, find out the right suppliers and strengthen your ties with them to make better business decisions.
Tip 1: Build Your Online Store
Using other online marketplaces will surely get you further in the e-commerce field. The fact that you have your online store can truly help in growing your business.
Having your own online store can give you maximum control over your customer experience and brand positioning. It also means lower fee charges and higher profit margins.
The surefire to this approach is to collaborate with different online store builders who will provide you with relevant templates for your website, and all you have to do is add in your products on the site and get going.
Tip 2: Get Yourself An Assistant To Help
Hiring someone to help you with your business can be a blessing because you cannot do all the work independently.
Hiring an assistant can reduce your workload and allow you to focus more on your business’s loopholes.
While you can work on attending to your clients, your assistant can help you with some of the following responsibilities:
- Content Creation
- Customer Support and Services
- Graphic Designing for Posters, Banners
- Recording Inventory Orders
- Search Engine Optimization
- Social Media Marketing
- Website Managing
You can go with two ways for this approach; hire someone you know shares the same location as you or hire a virtual assistant.
You can either hire someone you know and work together in an office space to manage your day-to-day business errands or go with the option to hire a virtual assistant.
Irrespective of their location, virtual assistants only require a stable internet connection, a laptop, and a phone.
Speaking different languages can be a plus point since you don’t know who your customer will be.
While talking about hiring virtual assistants, you can easily outsource location independent. These remote workers perform the job responsibilities at very reasonable rates.
For this purpose, you can search on platforms such as Remoteco. A reputable platform for outsourcing virtual assistants.
Outline the job description and the responsibilities to ensure that anyone you hire has a comprehensive understanding of the system on which your dropshipping business operates.
Tip 3: Market Smart
The mere word of mouth isn’t the best way to scale your dropshipping shipping.
It is essential that you plan out and work on the growth strategies regarding your business.
A component of this is implementing marketing tactics that are low-cost and, at the same time, effective. Good marketing can increase the growth rate of your existing business.
When it comes to marketing, a lot of business owners are not willing to spend bucks on it.
A few tools and tricks include both paid and unpaid solutions, and owners can use resources as per their interest.
What matters the most is how you spend your money rather than how much money you are ready to pay. Make sure you understand the difference!
Using resources like investing your money on the pay per click advertising will be a smarter move for your dropshipping business.
From Facebook to Twitter to Instagram, almost every social media platform offers pay per click Ads.
Now, it’s up to you on which ads you are likely to invest money in since not all ads will bring in the desired traffic you need.
Therefore, research well when it comes to marketing and online advertising of your brand.
Tip 4: Dip Your Toe In Multi-Channels
As your dropship business’s roots spread further, the smart choice is to start selling your products on different platforms, namely Amazon, eBay, Shopify, Etsy.
This will allow you to reach a diverse audience. It is important that you make sure that the products you intend to sell on different sites are already stocked enough in the inventory.
If not so, it might portray a negative image of you and your business, thus losing potential customers.
This should not discourage someone who is keen to start with their online dropshipping business.
It’s a signal to remember to be prepared and plan things out to avoid any future chaos.
Hiring assistants and using relevant inventory management software can be a great source of help.
Tip 5: Keep An Eye On Your Competitors
Today, if you look around, you will hardly find any company that operates independently from its competition on the market.
Keeping up with the fact that it doesn’t matter if you own a known brand or are new to the e-commerce industry, competition never dies.
Therefore, you must keep track of your competitors and their activities. It will help you stay alert with new marketing trends and keep you motivated to make better business decisions.
Analyzing your competitors is one of the best ways to grow your dropshipping business.
You can quickly convey the trend to your dropshipping supplier, add the product into inventory, and begin advertising it on different online platforms.
Additionally, in case if the hype of a certain product dies down, you can simply stop selling that product without worrying about being stuck with the excess stock in the inventory.
Tip 6: Utilize Your Email List For Your Brand
While emails are the most commonly used medium to communicate, it is also a direct way to communicate with the audience.
A comprehensive email list is an essential tool to have for any business. The email list mainly comprises of email addresses of the recipients who are often targeted and are continually engaging with your brand.
Your email list is the key to effective communication with the customers – keeping them up-to-date with the launch of any new products and any discounts if you offer.
There are two significant advantages of growing your business through your email list.
The first is that this form of marketing doesn’t cost you anything extra – you’re not paying to send out emails.
The second is less competition. You don’t have to compete with other sellers in emails.
Emails are simple and can work wonders to increase traffic to your site.
The Benefits of Dropshipping
Being easily accessible to all, dropshipping is an aspiring business model for entrepreneurs of today’s time.
With dropshipping, you can test and validate different business ideas within days, and that too, with limited downside.
This helps a lot in developing strategies to choose and market in-demand products accordingly.
By setting up a dropshipping business, you can benefit from this popular model in many ways:
- Easy setup – Running an online business gets a lot simpler when you do not have to deal with physical goods/products. With dropshipping, you don’t have to stress over managing the warehouse, shipping products, tracking inventory, handling return shipments, or maintaining stock levels. Instead, you have to follow three essentials steps: find a drop shipper supplier, set up your website, and start selling products right away.
- Flexible Location – Dropshipping businesses can be run from anywhere. The only condition is that the place needs to have a strong internet connection. So, as long as you are able to establish time-to-time communication with your suppliers and customers, you can run and manage your online store from anywhere.
- Less capital is required– In the retail business running retail operations such as purchasing and maintaining inventory can be a bit costly. It can take up to 60-80% of your startup costs. Traditional retail models required huge capital for buying inventory. While dropshipping eliminates all these operations as you never have to purchase and/or own inventory upfront, making it a convenient business model to run. You just need to source the product from a third-party supplier and begin your dropshipping business with little money.
- Lower risks and Low Overhead – Since you don’t have to purchase an inventory, you don’t have to sell anything, and hence you don’t have anything to lose. With little or no pressure on you, dropshipping proves to be a lower risk business model. This also means that your overhead expenses will be relatively low. A lot of dropshipping stores are run from homes, requiring little more than a laptop and a few recurring expenses to operate smoothly.
- More time to invest – To make more profits in traditional retail business models, you need to invest more of your energy and much more of your resource pool. While in dropshipping, it’s a bit different. All you have to do is send in a dozen orders to the drop shipper supplier and let them handle the rest while you make profits and invest your time to develop strategic business plans worth to benefit you.
- Streamline sales efficiently – With you working with a drop shipper partner, you can easily eliminate the process of shipping products yourself. Instead, you can utilize the time to get more traffic to your website and convert that traffic into making more sales.
The Drawbacks of Dropshipping
Everything comes with both advantages and disadvantages.
While the benefits mentioned above presents dropshipping as a very attractive model, encouraging many to start with their own online stores or expand their existing businesses.
Just like any other venture, dropshipping has drawbacks. Let us have a look at the shortcomings of dropshipping:
- Errors from the supplier’s side – Have you ever been blamed for things where you weren’t at fault. In the case of a dropshipping business, if the supplier messes things up with the customer’s order, the retailer will have to take responsibility for the fault and apologize since the brand is the face of the retail process. Therefore, it is crucial to choose the right supplier to protect your brand’s reputation.
- High level of competition – Dropshipping business is a relatively easy business model, i.e., more and more retailers in every segment and niche. Unless you figure out a way to differentiate your business from everyone else out there, the competition ought to be detrimental. You can do this either by adding more value to your content or revising marketing strategies to attract more customers.
- Issues due to shipping complexities – Working with multiple suppliers to source different products can complicate the shipping costs. Although by selling various products, you can make huge profits. However, it can be counter-intuitive if retailers have multiple suppliers for these products and thus create confusion. Based on the location and product type, each supplier will charge you a different shipping cost. Transferring these varying costs can negatively impact your profit margins and your brand.
- Lower profit margins – Low margins pose to be the most significant disadvantage of dropshipping businesses. Since dropshipping companies are easy to start and require minimal costs, many competing stores set up stores and sell items in an attempt to generate revenues. This goes without saying that it increases competition and ultimately affect the profit margins. Depending on the type of products you sell and your niche, you have to think outside the box to increase your profit margins. The vendors and suppliers can charge you higher prices for dropshipping products. This means it can eat into your razor-thin profit margins. That is why it is important that you strategically plan out ways to compete with them and increase your profits.
- Significantly lower control – Here, you do not own or ship the product yourself, so you don’t get to experience the whole situation if in case the packaging is damaged or broken since you don’t have control over the shipped products. Fortunately, these days there are many applications that can help retailers sync with their suppliers and allow them to experience various processes like shipping, fulfillment, checking up on the inventory, and more, in real-time.
Finding the Right Dropship Products to Sell
The success of the dropshipping business greatly depends on the selection of the relevant product or niche.
The niche you select will speak volumes for how well you will do with your dropshipping ideas.
Therefore, you should choose a niche that has low competition and high search dropshipping products.
Or, you too can ride in the trend wave and go for products that sell like hot cakes for a period!
While no such thing as the “perfect” product for dropshipping business exists, it is wise to research and shortlist product ideas that you are sure will sell, getting your profits in return.
We will list down a set of criteria that can help simplify things for you as you select products:
● Consider the Retail Price: With a dropshipping business, it is crucial for you to consider both the price you’ll be selling at and the product’s wholesale price.
You have to be extremely careful with the way you price your products. There’s always one right price. You have to keep in mind that you can drive in more sales at lower prices, but the profit margins you make will be smaller for each product.
With higher prices, the sales will be less, but the profits are greater for each item. This is where you have to find a price that works for you and the customers.
Dropshipping’s profit margins can range from anywhere between 15% to 45%, and that’s what you should stick with too. Of course, this also depends on the product.
● Consider the Size & Weight: The costs for packing and shipping for different products can vary, depending on the amount of packaging material needed and the efforts (either manual or machine efforts) put in to ship the product.
Putting it that way, then shipping smaller and lighter items are easy and profitable. At the same time, dropshipping larger and heavy products can get you huge profit margins.
However, it’s always safer to start out with smaller products.
● Consider Cross-Selling Products: By selling related products together, you will add value to your customer’s expectations.
This will help you build returning customers, who keep ordering from you. For this, you need to carefully research which products serve a particular niche can be sold together.
For example, suppose you drop ship a tripod stand. It would be efficient to drop ship a camera bag, lens cleaner, cables, and other camera-related accessories too.
Alongside, strategically plan out the pricing of your products to make your sale worth for you and your customers.
A good strategy is to sell your main product (in this case, tripod stand) at a lower price and therefore a lower profit margin.
At the same time, you can cross-sell other components/accessories (camera bag, cables, etc.) of the main product at higher rates, thus making up for your lost profit.
● Look for Durability: If you work on the durability of your products and goods, you will be able to build a loyal customer base who order from you repeatedly.
Many retailers can use this opportunity by offering their customers various subscription options and discounts to ensure that there are always repeat purchases.
Dropshipping Mistakes to Avoid
As you start with your dropshipping business, try to avoid some common mistakes:
The selection of the product/niche shouldn’t be based on your likes or dislikes. It should base upon the research, fact & figures, evaluation and should validate the market demand.
Do not opt to sell knock off products. This is a cheap trick and it won’t help you build a customer base. Not to mention, it’s also illegal in many countries. These kinds of frauds will let you lose your valuable customers, ultimately affecting your sales. Avoid this type of product to avoid losing profits.
You don’t have to follow what’s trending. Many people believe that selling a product that everyone else is selling is the right thing to do. Indeed, this is nowhere near true.
Usually, markets are saturated with products that are trending, which means you will have a lot of competition.
Therefore, if you still want to go with trending products, carry out extensive research into the cycle of trends to know precisely how consumer interests change.
You can even use tools such as Google Trends to help you better understand the trends.
Never rely too much on your vendors. Doing so can land you in many troubles.
For example – if you partner with only one vendor, there are chances they can raise the prices they previously charged you with or they can keep you oblivious of the situation like running out of a certain product you expect them to provide.
Then how will you deal with this situation? Therefore, you must always have a backup plan to save you from such failures.
Another way is to sign up for a contract stating everything to ensure that your suppliers know what you expect from them.
Avoid making the order information challenging to access. While you aim to provide a quick and easy process for your customers, make sure you make it happen too.
Commonly, when you offer customers the promise to offer efficient services, they require evidence to believe.
Therefore, only after you discuss with your suppliers, inform your customers with estimated ship dates, and frequently update their order status. This way, you can monitor orders and handle any troubles coming like late shipments.
Try figuring out ways to compensate customers if the order has some problems.
When the customers receive a damaged or broken parcel, they are already dissatisfied with you.
Rather than adding fuel to the fire, offer them alternative solutions to avoid losing your potential customers.
Avoid return complications. This means if you still haven’t developed return policies, sit with your supplier, and work on it.
Having no return or refund policy can make things messy. Therefore, build an efficient return policy system to save you and your brand’s reputation.
Finding the Right Dropshipping Supplier
As a retailer, you have a definite role to play. Nearly more than half of the dropshipping business is dependent on the supplier.
Therefore, it is advisable for you to search for a supplier who is reliable and can be trusted with the work.
Remember, in situations where your vendor or supplier commits a blunder with the specific order, it isn’t the supplier at fault but, you and your company will be held accountable for the ruin.
In order to avoid such complex situations in the future, get on the bandwagon for finding the right dropshipping supplier.
Here, we have listed down some tips to keep in mind while finding the right dropshipping supplier:
● Find a dropshipper who delivers excellent quality products: Never ever compromise on the quality! High-quality goods/products can help you get a high customer satisfaction level, which means less returns. High quality products can also lead to increased sales through repeat orders. Customer reviews and statements can help boost your business. Therefore providing top-notch quality to customers is essential.
● Find a dropshipper who has experience in the field: There is indeed nothing that can beat experience. Collaborating with a dropshipper who already has experience in the dropshipping industry can do wonders for you. These experienced drop shippers can help you with situations you thought you will never get out of. With their experience, they can suggest solutions or ways to handle adverse circumstances without harming your brand’s reputation.
● Find a dropshipper who meets deadlines and is efficient with fulfilling orders: Late shipping times can gain your customer dissatisfaction. To ensure a happy customer, it is essential that drop shippers ship products within a day or two. Therefore, we recommend you place a sample order with a supplier beforehand to get an idea of how their process works and make decisions accordingly.
● Find a dropshipper who is familiar with technicalities: For your business to prosper and expand further, it is important to keep going with the time. Keep yourself updated with the latest techniques in the market because it certainly won’t be wise of you to call-off a partnership merely because they aren’t progressive. Therefore, look for drop shippers who have proficiency in technology and can work well.
To keep things simple, you can even use Google in your search for dropship suppliers.
Several incubators and accelerators dedicated to e-commerce, which show up as search results, can provide you with dropshipping suppliers’ directories, including contact numbers, website URL, and information regarding what products they dropship.
Search for those who supply products as per your interest, extract out their relevant contact details, and send them a brief formal email where you address all your queries to them. This way, you can have a clear picture of how responsive and helpful they are.
While you search for the right dropshipper, you need to deal with this situation with a proper plan. It isn’t always possible that you and your supplier will be the right fit for each other.
However, it is possible to have a detailed discussion before you start working together. Make sure that none of the sides take advantage of each other. Retailers and suppliers have a long term relationship with each other, so building trust is necessary.
While many people perceive the dropshipping business as a get-quick-rich scheme, keep in mind that everything isn’t the same as it seems to be. Many scam merchants out there will eventually drag your business to shut down. In order to refrain, it is advisable to research carefully before you crack any deal with anyone.
Taking appropriate measures, analyzing situations earlier on, and asking relevant questions will eventually help you meet a supplier who is suitable to your business needs. Once these affairs are sorted, investing maximum time in planning new systems will be a worthwhile contribution to your business.
Running Your Dropshipping Business
Here you go! Now that you have done enough of your research, you are all set to run your dropshipping business and create a real buzz in town.
However, you must realize that setting up a business and managing its day-to-day affairs are two separate things.
There are certain aspects regarding how to run a dropshipping business, which is unavoidable for a retailer, including brand marketing, return/refund policy, directory issues, client servicing, and more.
We will discuss these aspects one-by-one in detail below.
Market Your Brand Well
If your brand isn’t known, do you think you’ll be able to make huge profits? Or will you be able to build trust with your clients if you do not market well? Well, that’s where marketing comes in!
With good marketing, you can strengthen your brand identity and create a sense of confidence among people to shop for products under your brand name.
Marketing is a vast field with millions and thousands of strategies that can help position your brand rightfully.
If these strategies are incorporated into your business smartly, it will bring in the desired web traffic as well as increase your sales tremendously.
Therefore, you should have a well-planned marketing strategy that will help you stand out against your competitors.
Utilize Social Media Platforms Wisely
Often noticed, drop ship business owners usually utilize social media platforms after they have launched their business – like creating a Facebook page or setting up Instagram and Twitter accounts. After creating accounts, the next thing they do is dive into a desperate scramble to increase followers and make social media work for them.
Nevertheless, it rarely does. At least not when this is the approach!
For a successful dropshipping business, social media platforms can prove to be invaluable tools that, if used correctly, can get your business off the ground.
Integrate social media in everything, right from the get-go. You should plan and decide what content needs to go up on social media that will not only get you customers but will speak volumes about you and your products.
Several social media channels have the option for pay per click advertising (PPC Advertising).
Commonly including Facebook Ads and Google Ads, this type of marketing works by trading money for traffic to the ad buyer’s website.
With this type of digital marketing, you can promote, advertise, and convert customers to your website.
Know What Your Customers Have To Say About You
It is essential to know what your customers think about you and your products. Customers’ feedbacks and their ratings can play a role in building your dropshipping business’s reputation.
Understand it in this way- When you explore other e-commerce web pages such as Amazon or eBay, one of the first things you look for is what the customers have to say about the particular product.
This could go a long way to influence your decision to buy the product or not. Well, in the dropshipping business, the case is the same as those of e-commerce websites.
Remember a few good reviews can positively affect your brand and drive more traffic to your portal site.
An infallible way to satisfy customers is by letting them experience excellent customer service that includes clarifying their queries, high-quality products, short shipping times, and asking for suggestions in areas to improve.
Using customer reviews as testimonials on your website can help you get more traffic.
In research, about 80% of the customers have favored the importance of customer support an online store provides while making a purchase.
Good customer reviews can help build the trust factor and enhance the goodwill of your business.
The 3R’s – Refunds, Returns & Replacements
You have to remember that when you start an online business, the 3R’s for dropshipped products are ineliminable. Initially, it may seem unfavorable, yet you have to deal with it as it is a part of running an online store. You have to implement proper policies and follow procedures for refunding, returning, or replacing any damaged order. Although this procedure may sound increasingly onerous, however, if the user claims a return of the product within the duration set by the supplier, it definitely won’t be a problem. The only hit a retailer gets – restocking fee, a supplier charges with. Take it as an inconsiderable downside of an online business. As a matter of fact, it will be sensible of you to discuss general returns & refund policies with your dropshipper supplier so that you convey accurate information to your customers.
1. When The Supplier Is At Fault
Know that when your vendor misses out on anything while preparing the order, it is their responsibility to make it up for their mistake. They can do this either by compensating the money to the customers or replacing the defective product with another. Therefore, you should communicate with your vendors to know what ways they adopt to get rid of such situations. It is advisable that you should carry your conversations in written i.e. through emails, to keep a track of everything.
Imagine if the supplier denies to make it up for the error he made and leaves you all alone to suffer the damage. Well, in that case, you should immediately take legal action against the supplier.
2. When Products Are Out Of Stock
If a customer places an order and that particular product is out of stock, let your customers know about it right away. You can tell them to wait and replace their order once the product is restocked. You can also assure them of a full refund if you are unable to fulfill the order.
Everything revolves around communicating with customers. You can ask them for their email addresses or contact details so that they can be updated about it as soon as that particular product is back in stock. This strategy can get your customers for the long-term.
3. When You Have To Handle Dropshipping Inventory
As mentioned earlier, the dropshipping business model eradicates the need to own a personal inventory, but as a retailer, you have to maintain inventory orders if orders aren’t automatically forwarded to the dropshipper suppliers. This process might eat a lot of your time and be tedious, but thanks to technology, you don’t have to stress it anymore. With inventory management online software’s help, you can directly connect your suppliers to your online store and automatically divert orders to them.
4. When Orders May Seem Suspicious
Even though we discussed how dropshipping suppliers can scam you, but mind it that these fraudulent activities aren’t restricted to them only. At times while running an online store, you may undoubtedly encounter swindling dropship orders from customers, more likely fraudulent customers.
So, how can you figure out that something is wrong with the orders? One of the ways is to check the shipping address and billing address; if they are different for a particular customer, this calls up for an action from you. Even the customer’s name can be different on either of the addresses. This is where you need to differentiate which orders are genuine and which ones are a fraud.
The Customer Support Of Your Business
One of the factors that determine the well-being of your business is the customer support you provide to your customers.
Remember that a good and effective customer support system can sort many of your chaos.
Here, we will list down some commonly used and popular mediums of customer support in the e-commerce industry:
● Email Support: This type of customer support is a professional way of extending support towards customers. As you establish your business, the next thing you should do is work on designing domain emails for your portal, such as [email protected] It will prove your worth as professionals and establish your brand identity as legitimate among customers.
● Live Chat Support: These days, several brands use a live chat support system on their sites. This type of customer service & support system is in demand among business owners because it is quick, but not as intimidating as posting queries on the public forum or making a phone call. Of course, suppose you decide not to invest in this anytime soon. In that case, you can engage your customers on social media through Facebook Messenger or direct service messages on a platform like Instagram. Nevertheless, live chat customer support can be a better option for the future when your business scales up.
● Phone Support: With a phone support system, you can tackle issues within minutes. This mode of customer support system proves to be the quickest and one of the most efficient ways of connecting directly to your customers. It can also help you get feedback from the customers. Some phone support examples include Google Voice that will provide you with a free number that will connect calls to the number you specify.
● Social Media Support: Well, in this case, social media is the actual representation of who you are and what your brand is about. Many times, customers turn to social media pages even before contacting the brand itself. Since social media platforms are public forums, it is important that you hire a responsible customer support representative who will undoubtedly engage in ways that will convert visitors to regular customers. Additionally, it will also establish good faith between the customers and the brand.
Dropshipping FAQs for Beginners
If you are interested in e-commerce, this complete guide covers all the essential aspects required for starting a profitable dropshipping business. Dropshipping has gained immense popularity recently, and many entrepreneurs have already begun to make millions by using this business model.
However, the dropshipping business concept is still relatively new to many new entrepreneurs worldwide. Therefore, this section will answer some of the most frequently asked questions by the beginners.
What is the meaning of dropshipping?
Like any other business model, dropshipping is also one of the types of business models that allows you to run an online store without stockpiling any inventory.
Once the customers place their order on your site, the suppliers will handle everything from now onwards.
They will be responsible for preparing the product and ship it from their warehouses to the customer’s doorstep. So, you don’t have to worry about storing products, packaging, or shipping the products.
Scroll up to learn more about dropshipping.
How can I start a dropshipping business?
Well, it is no big issue if you are a beginner in the e-commerce field. You can still start your own dropshipping business. You need to conduct extensive research for a niche that will work best for you, discover products you are interested in selling, create a website where customers can directly connect with you, look for hosting platforms to further simplify procedures, and start optimizing content and market your brand.
How does the dropshipping model operate?
A simple business model, dropshipping works around three main aspects; customers, drop shippers, and suppliers.
Once a customer places an order on your website, you as the retailer will receive a notification with the customer and order details.
You will pass the order details to the supplier and instruct them to directly ship them to the customer’s door.
This means with a laptop and stable internet connection, you can run and manage your online dropshipping business from anywhere.
Is dropshipping a profitable business?
The answer to this is yes! Dropshipping is a low-risk and low-investment business model that allows you to sell products to your customers without suffering from substantial running costs.
Also, keep in mind that with lower costs, you can easily make profits with a dropshipping business a lot faster compared to any other business model.
Not to forget, price your products in a way that can cover your marketing and shipping costs without compromising on your profits.
How do I promote my dropshipping business, and where can I promote it?
Promoting a dropshipping business can be a challenge if not done properly. You can promote your dropshipping business and products through different social media platforms.
Advertise using paid marketing schemes like Facebook Ads and Google Ads. You can promote it across various social mediums like Facebook groups, Instagram stories, and posts, Twitter, and even use your personal network for this purpose.
Do I need to make huge investments to start my own dropshipping business?
The answer is no. You don’t have to make huge investments if you intend to start with your own dropshipping business. Although there are items that will require you to invest money in order to get started, like setting up your website, domain name, test orders, online marketing, and advertising.
Do I have to purchase products for my online store?
No, you do not have to purchase products to run your online store. And that’s the beauty of the dropshipping business; there is no need to purchase inventory upfront.
You simply have to forward the customer’s order to the supplier and let them handle the rest.
However, to be sure enough with the product quality and shipping procedures, it is advisable to test a sample from your suppliers beforehand to avoid future chaos and ensure customer satisfaction.
Do I need to register a business entity to dropship?
Yes, you have to register your business entity once you start making sales because the majority of the payment providers, including the customers, can ask you to prove that your business has such credentials.
However, acknowledge the fact that business licenses vary from country to country. Hence, you should contact the government agencies or representatives to guide you further on this matter.
Here we conclude our definitive guide on dropshipping. At times for the sake of online business stability, you have to think of ideas outside the box.
If you have made it here, you now are well-familiar with the term dropshipping – how does this business model work, and what steps are essential to set up a dropshipping business.
Setting up your own business isn’t easy, but it is also not impossible. It does require you to put in a certain degree of commitment, time, effort, and dedication to making it work successfully.
With this guide, you must have realized that creating a business isn’t just the only thing but also following through and learning how to run it efficiently is equally important.
The best thing about dropshipping is that you have the leverage to learn through testing your products and ideas.
In case if things don’t seem favorable, you have the option to remove or drop the idea of that particular product from your online store.
Luckily, you do not have to worry about getting stuck with that product forever. This business model will provide you with a safe space to experiment with your ideas without letting you go through any major loss.
will also boost the confidence of the business owners and allow them to integrate their choices in their business.
The most attractive feature of dropshipping is that it doesn’t require huge upfront cost and a lower risk approach for e-commerce entrepreneurs to test new product ideas.
It encourages more and more people to participate in entrepreneurship. This type of business model is cheap, easy, and could be more profitable than the traditional retail business models. Therefore, dropshipping appears to be an exciting business model to venture into.
Nevertheless, making millions through dropshipping isn’t possible overnight. For exponential e-commerce growth, make use of the mentioned smart tricks. Learn the basics and see how your store begins to boom!