One of the easiest ways to make money online is by starting a dropshipping business.
The Corona Virus pandemic which hit the globe in 2020, caused a massive increase in online learning and online businesses.
Starting an online business is the new norm, and it’s something you should consider doing this year, even as a side hustle to make some extra cash.
One of the easiest online businesses to start is dropshipping. Dropshipping is one of those e-commerce businesses that is rapidly gaining popularity. So
What Is Dropshipping?
Dropshipping is an e-commerce business where online stores select and market products that they do not own or stock.
The difference between dropshipping and other retail e-commerce store models is that the store owner (you) does not own, stock, or have any control over inventory.
The store sets the price and the supplier fulfills the order and ships it to the customers.
The customer has no knowledge that you the store owner is not the one who actually packaged and shipped the product.
How Does It Work?
In dropshipping, the store owner (you),
- Select products from a manufacturer or dropshipping supplier.
- Sets a price ( higher than the dropshipper/manufacturer’s cost of the product)
- Markets the products
- Customer places an order
- You deduct your commission from the order amount (the price that you set – the dropshippers product cost).
- You send the order details to the dropshipper and pay the cost.
- Dropshipper/manufacturer ships the order directly to the customer.
While dropshipping is an easy business to start, it does have advantages and disadvantages.
Advantages And Disadvantages Of Dropshipping
Like most things, there are always two sides, and dropshipping is no different. It has both pros and cons attached to it.
So, what are the
advantages of Dropshipping
Dropshipping is a very lucrative business opportunity that is quickly gaining popularity for a number of reasons.
Some of the reasons why it is such a popular business model are:
1. Extremely low start-up cost
The start-up cost is less than that of a brick-and-mortar store as you don’t have to purchase inventory or pay for a warehouse to store products. You only pay for products when the customer places an order.
2. It’s easy to set up and get started
It is very easy to start a dropshipping business, all you need is an e-commerce platform and manufacturers/dropshipping suppliers.
You don’t have to worry about ordering products and managing stock levels, keeping track of inventory, packing and shipping orders, or dealing with returns and replacements.
3. Operate remotely
This business model is one that can be done from anywhere in the world as long as you have a computer and internet access so that you can easily communicate with suppliers and customers.
4. Huge selection of products
There are many products that you can choose to dropship worldwide regardless of your niche.
You can also choose multiple products to sell to your customers from different suppliers at the same time at no extra cost.
5. Lower risk and easier to test
If the business is not making any or enough money then you can simply quit and try another business model.
Or perhaps switch niches and products to test and see if that produces better results. You have the flexibility of trying out different products and niches until you find the one that works best for you.
6. Easier to scale
This business model is much easier to scale than the traditional retail business model. All you have to do is send more orders to suppliers and generate more profits.
Additionally, you can upsell and cross-sell different products.
Disadvantages of Dropshipping
While dropshipping has its benefits, just like any other business it also has a few downsides.
A few of its disadvantages are:
1. Lower profit margins and high competition
Low profit is one of the biggest drawbacks to this particular online business model.
Depending on your location and specific requirements, or niche, suppliers may charge you more for shipping the products, which will cut into your profit margin.
Because it is such a highly competitive business, you may have to lower product prices in order to keep up with the competition.
2. Inventory supply is dependent on suppliers
You are completely dependent on your suppliers, you have no control over which items are in or out of stock.
Customers can place an order for a product and find out that it’s out of stock and there isn’t anything you can do about it since you are not the one in charge of stocks.
3. Delivery, customer support, and shipping issues
Because you are not the one that ships the product, you have no control over when the customer will receive their product, but the blame will be on you if it is late, damaged, or missing.
You are the one that will have to deal with customer complaints and other issues. You’ll have to answer questions and provide updates regarding their purchase.
Also, if a customer orders more than one product from different suppliers in your store, you will incur multiple shipping fees that will be your responsibility.
This would result in lower profits for you.
4. Branding and customizing issues
Generally, you’ll have no control over how the product is designed, packaged, or shipped. This is all done by the supplier.
However, some suppliers will facilitate customizing per request.
Now that you know the advantages and disadvantages of dropshipping, does it interest you?
If it does, let’s find out if it’s right for you.
Who Is Dropshipping For?
Although this business model is easy to get started and has a very low start-up cost, it is not for everyone.
Because the competition is high and the profit margin is low, it requires a lot of patience. So, if you’re looking for a get-rich-quick scheme or you’re short on patience then you might want to skip this model.
Dropshipping is right for you if you’re,
- A new entrepreneur with a limited start-up budget: This is due to the fact that it has very low start-up costs (domain name, hosting, e-commerce platform) and low to no monthly overhead expenses.
- Just testing out different business models, products, and niches, or trying to validate an idea. You basically have nothing to lose if the business fails.
- Looking for a way to generate passive income as a side hustle. This requires some time and patience.
- An entrepreneur that sells multiple products across different niches.
At this point, I guess you’re wondering how profitable a dropshipping business is.
Well, let’s take a look at some of the factors that determine its profitability.
How Profitable Is It?
Despite the fact that the competition is high and the profit margin on a dropshipping business is very low, it can be a very profitable business venture.
Its profitability depends on
- The niche you choose
- The products you choose
- Finding the right supplier, who you can rely on. Or a manufacturer that you can get supply from directly.
- Your pricing
- Time and patience
In the long run, your big win will be on average order volume (AOV).
Let’s talk a little about how to
Find Dropshipping Products To Sell
Are you someone who believes that there is such a thing as the ‘perfect product?
I don’t mean to be the bearer of bad news but there is no such thing as ‘perfect, at least not in this world.
While there is no perfect product, there are great products that are just right for your audience.
Did you notice that I said audience? That was intentional.
To find the best dropshipping products to sell, you need to
1. Choose a specific niche and audience
Don’t try to be everything to and for everyone, instead, focus on a specific area within an industry. The more specific you are, the more branded you’ll become and your audience will know you’re the go-to guy or girl for items in that niche.
Some dropshipping niches that are doing well are
- Tools and home improvement: home decor, home organization, smart homes, kitchenware, indoor gardening tools
- Lifestyle: posture correctors, water bottles, hiking gear
- Fashion: crop tops, hair clips, barrettes, head scarves, metallic clothing
- Tech: wifi 6 products, wireless tech, wearables and accessories, 360 degrees cameras and accessories
Those are some of the trending dropshipping niches right now, so if you’re interested in starting a dropshipping business you might want to look into one of those.
2. Consider your pricing
Believe it or not, how you price your products is one of the determining factors for the success of your business.
If your price is too high potential customers may feel the need to shop around for cheaper prices. That will result in you making fewer sales but with a higher profit margin.
On the other hand, if your price is low your profit margins will be much less, but you might get a boost in sales and volume will make you a winner.
There are pros and cons to both sides, you just have to do market and competition research and find that sweet spot for pricing your products.
3. Look for smaller items
Although smaller items carry a lower profit margin it is a better option to start with because they are easier to ship.
The reason for that is, the smaller it is, the lighter it is and that means the less you’ll be charged by the manufacturer or dropshipping supplier for shipping the products.
Heavier items will cost you a lot more to ship and you also have to take the location into consideration as well.
4. Upselling and cross-selling products
Picking products that have related or required accessories is a good idea, this gives you the opportunity to cross-sell and upsell different products and generate some extra profits.
So when choosing your products look for other products that will go well with or complement each other.
For example, if you sell yoga mats you should also consider selling yoga mat bags.
5. Low-durability products
Consider selling products that have limited shelf life and need to be replaced every so often, as this will bring you repeat sales.
Products that are disposable and renewable are low-durability products.
6. Hard to find products and need products
Look for products that are not easy to find locally. These are products that can only be found online and shipped.
If your customers can’t find it locally then they’ll have no choice but to get it online.
Also, consider products that customers have no choice but to buy because they need them. Just think of some things that you don’t want to buy but have to buy.
Dropshipping products that appeal to business persons and hobby-driven persons will be good for your business.
Now, let’s look at
Finding The Right Dropshipper
A big part of your success as a drop shipper will depend on your supplier.
It is important to find a good dropshipping supplier or manufacturer and build a great relationship with them.
There are a few criteria to look for when searching for a supplier. Some of which include but are not limited to:
1. Suppliers with experience
You’ll need to find suppliers that have experience in the business because they are the ones who will be in charge of the entire process of your dropshipping business from the moment you place the order.
This means that packaging, shipping, and delivery are all in their hands, however, if anything goes wrong the blame is on you. Your brand and reputation will be damaged.
That is why you need a supplier who knows the ins and outs of the business, can rectify problems, and have great customer support staff to answer customers’ questions.
2. Technologically advanced supplier
Technology is the present, future, and beyond. As a result, you’ll need to find suppliers who are tech-savvy or at least have a team that is, so that they can keep up with all the changes.
3. Punctual suppliers
Having suppliers that are on time will boost your business and get you one step ahead of your competition.
Customers are more likely to return to your business because they got their delivery on time, as a result, they trust and depend on you.
4. Suppliers with quality products
Because the dropshipping product margin is so low, you’ll find many products that are of low quality and at a cheap price.
Low-quality products will scare away customers, so try to find suppliers that stock quality products.
5. Suppliers with testimonials and product reviews
You also need to find suppliers that have referrals, nothing beats hearing from others about how the supplier’s service is. If they have a high number of referrals with good comments, then chances are they are reliable.
Also, look for product reviews, this will help you to determine the quality of a product.
With a good supplier and quality products, your cancellation and return rates will be low, customers will be satisfied and happy, and your customer’s lifetime value will be high.
A few things you’ll need to find out from suppliers before choosing one are:
- Do they have a return policy? If yes, what is it?
- Does the products have a warranty?
- Are the pricing terms negotiable? What are they?
- Is there a clause for free delivery?
- Do they have reliable customer support? Is support available 24hrs?
- Are there additional or hidden costs?
- Can products be customized if requested?
- Do prices fluctuate often?
One important thing to look out for while looking for a supplier is scams.
It is very easy to get scammed in the dropshipping business, so do your due diligence and protect yourself.
Checking each supplier’s reviews, domain age, and address are some things you can do to protect yourself against dropshipping fraud.
Finding a dropshipping supplier is easy, you can Google it or search the dropshipping marketplace.
The top dropshipping supplier platforms right now are
- Aliexpress
- Oberlo
- Wholesale2B
- Doba
- Dropship Direct
You can find more information on dropshipping suppliers in this article.
The most popular shipping methods that are used by suppliers are:
- China Post: Free and affordable shipping cost with delivery taking 20–50 days.
- ePacket: Free and affordable shipping costs, delivery takes between 15–30 days.
- UPS/DHL/FedEx: Express/fast shipping costs and delivery takes between 5–15 days.
- AliExpress Shipping: Affordable shipping costs with up to 15 days delivery.
Dropshipping Mistakes to avoid
Because venturing into the world of dropshipping is so easy, there are mistakes that can be made just as easily. It would be wise to try to avoid making as many mistakes as possible.
Below is a list of mistakes to avoid in order to have a successful dropshipping business.
- Don’t choose products based on what you like. Remember, your taste is different from everyone else. Research, research, research, that’s the key to your product’s success.
- Avoid products that have a lot of competition, which means the market is over-saturated. Find those sweet spot products.
- Don’t just build your store, sit back and expect people to find you without any marketing. Use social media, PPC, SEO, and other methods to promote your business.
- Selling low-quality products or products of no value to your customers because they are cheaper for you. Focus on quality and providing value.
- Have multiple supplier options, that way you won’t have to rely on one or two vendors. Always have options.
- Letting suppliers off the hook when they mess up your orders. Make sure they pay for the mistake. However, you have to make it up to the customers and assure them that they can rely on you.
Those are just a handful of mistakes to avoid in your business.
Now, you’ve been given a lot of information about dropshipping, so let’s finally talk about how to start a dropshipping business.
How To Start A Dropshipping Business
Once you’ve decided which niche you want to build your dropshipping business around the rest will be easy.
To get started
- Choose a niche
- Do competitor research
- Find some suppliers (more than one). Remember to get testimonials and reviews
- Sign up for an e-commerce platform like Shopify, Debutify, BigCommerce, and Volusion.
- Design and add products to your store. You can hire someone on Fiverr to take care of all that for you if you prefer to have someone do it.
- Add a blog section to your business (optional).
- Use every method possible to market your business.
- Make your product offers better than your competitors.
- Be consistent and persistent, and provide value and quality products.
- Promote daily
- Be patient, remember it is not a get-rich-quick scheme.
Wrapping up
A dropshipping business can be done by anyone that is patient.
It is the ideal business model for beginners because it requires very little cash to start, it’s easy to set up and does not require you to have a warehouse or handle any packaging and shipping details.
This guide was meant to help you understand how dropshipping works, the pros, and cons of dropshipping, how to find the right suppliers and products, as well as if it’s right for you.
Hopefully, it has done just that and more. If it has, your next step is to decide if you’re going to start a blog section on your site.
Having a blog section is a great way to boost traffic to your dropshipping store.
So, if you’re looking for an easy start-up, low-cost business that you can earn passive income from? Dropshipping is the perfect business model for you.
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