Many may be familiar with the term “drop shipping”, as it’s one of the most popular ways of making money in the online business world. However, the drop shipping process can seem a little intimidating as it can be difficult to know exactly how to get started with this.
I will give you a short introduction to what drop shipping is all about, show you how and where you can get started, and show you what is the pros and cons of drop shipping.
What Is Drop Shipping?
“Drop shipping” is a method in which you as a seller do not keep the products in your inventory, but instead you work with a supplier who sends the products directly to your buyers. That means that you are only responsible for marketing and selling the products.
The profit you will make will come from the price difference between the payment you receive from the buyer and the amount you paid to your supplier.
What To Prioritize When Starting Up a Drop Shipping Business
To achieve any kind of success in any type of business, you need to be willing to put in the hard work to get there. The drop shipping business is no different in that regard. There’s also some steps that is important to follow when you get started with drop shipping.
- Find -your- niche – The niche you decide to go for should be something that you’re genuinely interested in. There’s also many other things to consider when selecting your niche. Selecting a niche with higher priced items may be smart as it requires the same amount of work to sell a $20 item as it does to sell a $200 one.
- Make sure there is people who is looking to buy what you are selling – If nobody is searching for what you are planning on selling, then you are going to fail even before you get started. Google’s Keyword Planner and Trends is good tools to use when checking common search terms related to your niche.
- Find products with low shipping costs – Another important aspect to think about, as products with high shipping costs may be customer repellent.
- Do competition research – Find out if your product has any competition or not. When a product has little to no competition, it is usually a sign that there isn’t a demand for that product. When a product has competition and a high demand it usually means that the business model is sustainable.
- Find the right supplier – This is one of the most important steps as partnering with the wrong supplier can easily ruin your business. You need to find a supplier that you find it easy communicating with, both in terms of understanding each other, and in response speed. Find out if they have the ability to scale with you if your business will grow.
- Build your e-commerce website – Using an e-commerce platform like Shopify is the fastest way to launch a website that supports the dropshipping business model. It is easy to get the site up and running, and it has a lot of apps that could help you increase your sales.
- Attract potential customers – Using social media is very important when trying to attract potential customers. Starting a Facebook ad-campaign is probably the fastest and most effective way in that regard. Facebook gives you the opportunity to place your offer in front of a highly targeted audience. You should also focus on the long-term, using Search Engine Optimization (SEO) and Email-marketing
- Analyze and optimize your business – In order to grow your business, you need to track all the data and metrics available. When tracking every conversion, you’ll get to know where the customer comes from, what path they took on your site that led to a sale, and you’ll then be able to see what works and eliminate what doesn’t work. Google Analytics and Facebook Pixel is two good tools to use for tracking conversions.
Find The Best Drop Shipping Products to Sell
To be able to have a successful e-commerce business you have to search for, and find the best and right products for you to sell. This is probably the most important out of all the aspects of having a drop shipping business.
Doing research and having a short list of products ideas that you are pretty certain is going to sell (based on figures and hard facts) is a good way of determining which products you are going to end up selling.
- The retail and wholesale price are crucial when you’re doing drop shipping. It’s all about finding the right balance. Low priced products usually encourages a larger amount of sales, while the higher priced products might sell less, but earn you more profit per item. Profit margins for drop shipping can be around 15-45% and that’s usually what the retailer (you) should aim at.
- Item size and weight is important to think about when you start selling products as the lighter and smaller items usually are cheaper to drop ship than the bigger items, and give you a larger profit margin.
- Selling sets of products related to each other gives your customers more value and encourages the customers to purchase more each time they decide to buy from you. Think about which items you can sell together, which will serve a related niche.
- Consider the turn-over rate of the products you are selling. This means the rate at which the products is updated, changed, discounted, etc. Being a retailer with an e-commerce store, you’ll spend quite some time publishing content about your product, and having high turn-over rate products will be time-consuming as you’ll need to keep things updated on your site.
Salehoo is a wholesale directory that connects you with thousands of wholesalers, liquidators, manufacturers and other drop shippers from all around the world. You can use the online selling tool to search for, and compare suppliers and products, as well as using other beneficial services.
The Pros & Cons of Drop Shipping
Just like with everything in life, there are both advantages and disadvantages to drop shipping.
- It’s relatively easy to set up as you essentially only need to find a supplier, set up your website and start selling the goods.
- No startup capital – As a starter you will be able to launch your business without investing a lot of money. Drop shipping eliminates the step of having to purchase the inventory as a traditional retailer business would do. The fixed cost of managing your website (hosting, theme, apps, etc) is basically all you have to pay for.
- Low risk – If the business doesn’t sell products it still doesn’t lose anything, so there is basically little to no pressure about having to sell your inventory.
- Great variety of products that you could sell, as there’s a drop ship supplier for almost anything that you would like to sell. You could sell several products at once, or just rely on one great product. It’s all up to you.
- Less control – As the supplier is the one who ships the products, you’ll lose the control of how your brand is represented during the delivery and fulfillment process. Choosing the right supplier is alpha omega when it comes to drop shipping.
- Relatively high level of competition – Since the drop shipping business model is quite popular it means more and more retailers in every segment and niche.
- Tight profit margins – It’s difficult for small businesses to compete on price, and the nature of drop shipping means you aren’t selling a unique product.
Having read through the article, you will hopefully have a better understanding of what drop shipping is, as well as more knowledge about what you should think about during the process of starting up your own drop shipping business. As you can see, starting your own dropshipping business requires a certain degree of commitment, effort and passion to make it work, but the good thing is that it is possible for anyone to start doing it.
Using marketplaces like Ebay or Amazon to sell is a possibility, but the fees associated with these places will pretty much eat away most of your profit, compared to having your own online store, and the competition levels on these sites is very high as well. However, if you’re interested in just trying it out, these marketplaces could be the place to start.
If you have any questions, comments or something you want to share, please feel free to leave it in the comment section below.