Dropshipping
What is dropshipping?
Dropshipping is a retail fulfillment method for eCommerce stores. It removes the need to keep the products you sell in stock. Instead, you buy the items from third-party suppliers and have them shipped directly to the customers. Dropshipping removes the need to handle the product directly, which saves you time and resources.
Dropshipping is different from the traditional retail model in that the store owner doesn’t own or stock inventory. Instead, you create an online storefront and purchase inventory as and when needed from a supplier (usually a manufacturer or wholesaler). The supplier takes care of the shipping and order fulfillment process for you.
What is a dropshipper?
A dropshipper is a supplier or manufacturer who manages inventory for a merchant and helps with order fulfillment. This gives the merchant more time to focus on other important tasks, such as how to draw more visitors to your online store. You can seek out dropshippers present in the US, or any other country in the world, using databases connect to an app that links you and your store to reliable suppliers everywhere.
Pros of dropshipping
Dropshipping is an excellent business model for online entrepreneurs due to its accessibility. You can test different business ideas with dropshipping while facing little to no risk. You learn about how to pick and market the most in-demand products. Here are more reasons why dropshipping is popular:
Less capital
A big advantage of dropshipping is that you can launch a store without worrying about investing thousands of dollars in upfront inventory. In the traditional model, retailers have been tying up a lot of capital in purchasing inventory. You do not have to purchase a product in dropshipping until you make a sale and the customer pays you. You can start sourcing products and launch a store without worrying about sourcing, storing, or moving inventory.
Easy to start
It is easier to run an eCommerce business when you do not have to deal with physical products. In dropshipping, you do not have to worry about:
- Paying for or managing a warehouse
- Shipping or packing your orders
- Tracking and handling the inventory
- Taking care of returns and inbound shipments
- Ordering products and managing stock level
Low overhead
Your overhead expenses come out low because you do not have to purchase inventory or run a warehouse. Many dropshipping businesses run efficiently from home, requiring just a laptop and internet connection to operate. However, the requirements will increase as you grow, but would still be less compared to traditional business requirements.
Flexible location
You can run this business from just about anywhere with a solid internet connection. As long as you can communicate with your team and clients smoothly, you don’t have to worry about working from an office.
Diverse product catalog
You can offer a wide array of popular products to your customers because no pre-purchasing is involved. As soon as your supplier stocks an item, you can sell it in your store for no extra cost.
Evaluate demand
Dropshipping is good for both launching a store and testing the waters for launching a new product category. For example, you can test the appetite of target customers for a new product line by dropshipping. It enables you to evaluate a product’s demand before buying a large inventory.
Easy to scale
If you get three times the number of orders in a traditional retail business, you need to work three times. By using dropshipping suppliers, you get to grow your business with fewer pains and less incremental work. And while sales growth brings in additional work, like customer support, you have the chance to scale well compared to traditional businesses.
Cons of dropshipping
Just like all business models, dropshipping has a few shortcomings.
Shipping can get complicated
It is easy to calculate shipping products if you are sourcing products from only one supplier. However, many dropshippers use more than one supplier, and shipping can get complicated in the process. Moreover, multiple suppliers will have different billing systems.
Solution: Start with one supplier and then grow your vendor network from there.
No control over product branding
Dropshipping means you have little to no control over product branding. Some people go the extra mile by arranging a photoshoot of their products and creating a website with compelling visuals. But like most dropshippers, you may not have the resources to create your own branding.
Solution: Find suppliers open to placing your brand name on your products and packaging.
Customer service issues
It is good to stay detached from inventory issues until you have to deal with a complaint from an angry customer. If the suppliers fail to deliver your order on time, you are the one who has to face the wrath of the customer. Your customer service should be ready to apologize, explain and avoid getting negative reviews.
Solution: Maintain swift communication with the customer. Also, take steps to set realistic expectations upfront to avoid negative reviews of your business.
Low margins
Dropshipping has a low entry threshold, meaning you’ll have a lot of competition as you start your eCommerce business. It would help keep your prices low initially to stay in business and attract more customers.
Solution: Merchants who keep their margins low don’t pay much attention to how their store looks. We recommend doing a better job at designing and making your store look like a professional brand.
How to start a dropshipping business?
You can start a dropshipping business by taking the following steps:
Step 1: choose an idea
What you sell matters a lot in dropshipping. Start by researching the best ideas for your business. Many people will suggest you look for a niche you are passionate about, but this is only the beginning of the process. Dropshipping is a mix of passion and profit, leaning towards profit. The best dropshipping ideas are always the most profitable ones. After all, isn’t it easier to be more passionate when you are making more money?
If you want to set up your dropshipping business idea instead of following lists, here are some resources and tools to check out:
- Google Trends is the ideal tool to check which niche is going on an upward or downward trend. However, it is not enough to tell on its own whether a niche will pay off. Some niches might look promising but won’t have enough search volume to conform to their popularity.
- Browse popular sites in your niche. For example, if you want to sell skincare items online, check out the top skincare brands. It gives you an idea of things you should be adding to your store. You can also check the best-selling products of competitors to add similar products to your shop.
- Check the order volumes for products you wish to sell. Order volume is a huge sign of the popularity of a product. However, don’t rule out products with low order volumes because they could be newer, upcoming products.
2. Do a competitor analysis
Once you decide what to sell, you need to know who your competitors are and the marketing strategies they use to promote their brand. There are a lot of ways to research your competitors.
- Google the name of the products you want to sell. See who shows up on top for that search query. The top ten results will give you a good idea of your competitors in a certain location. If you are selling at a different location, you can use third-party tools to collect data.
- Search on Alexa or SimilarWeb to find niche competitors who do not show up on the general search. These websites will give you a good idea of possible competitors, their websites, and any advertising they use.
- Put your detective hat on and see what your competitors are doing on social networks. Check the number of followers on your competitor’s page, the engagement they get, and the kind of ads they put. See what they are doing right and whether you can use a similar strategy for your business.
3. Find a dropshipping supplier
If you’ve created an online store on Shopify, you can use a dropshipping app like Oberlo to find suppliers for your business. Once you register with Oberlo, you can search for the product you like and choose suppliers from the results that pop up. You can see reviews, ratings, and how long the supplier has been on the platform.
When you have a list of suppliers and their ratings, you can move onto the next step, which is contacting those suppliers. Ask them important questions like average delivery times, minimum order quantities, and shipping times.
By this point, you should have a list of possible suppliers that meet your requirements. The next course of action is to make a sample order from them and compare the results. Compare the shipping times, packaging style, speed of service, and keep the customer in mind when doing all of this.
4. Build your online store
There are a few elements that are crucial for building a dropshipping storefront. Before you set up shop, make sure to consider the following:
- Domain name: Your business’s domain name matters a lot, especially if you are building a brand for the long run. Make sure to choose a unique and memorable name. You can come up with domain ideas by using a free domain name generator. Dotcom domains are globally recognized and rank better than other top-level domains.
- Platform: You’ll need to pick an eCommerce platform when building your store from scratch. Shopify is the most detailed eCommerce platform in the market. It comes with all the sales, marketing, and SEO features you need to build and grow an eCommerce business. Plus, with various dropshipping apps, Shopify makes it easy to find suppliers and source products for your new venture.
- Themes: Themes are essential to design a great look for your store. The theme of your store should reflect your branding in the best possible way. Shopify offers free and paid themes. You can start with a free theme and buy level up for more customization as you make sales and earn more profit.
5. Market your business
After finding your product and setting up a store, it is time to market your business. This is an important phase in your dropshipping journey. Before you start, make sure that you are completely satisfied with the look of the store and ready to welcome customers. Then, follow these marketing strategies to bring people to your store:
- Facebook advertising: We recommend keeping your initial budget low, so you can a/b test and bring more people to the store. Initially, you won’t have a best-selling product, and it isn’t easy to sell to a new customer base. At this point, you should create several ads to see which one performs best and then leverage the insights you gain to inform your future campaigns.
- Retargeting: For those who have a limited budget, retargeting ads are efficient and measurable. These ads aim to get your products in front of audiences who’ve already paid a visit to your store. They’re great for converting browsers into paying customers. Retargeting is actually the secret behind that quick first sale.
- Influencer marketing: Influencer marketing is another effective strategy for getting exposure for your business. Even if you do not have big bucks to hand out to influencers, you can offer them free products in exchange for endorsements. Influencers have many followers, good credibility, and cross-platform reach, making them an ideal channel for reaching a wide audience base.
6. Optimize, optimize, optimize
Once you lock an idea, build a store, and start marketing, you can begin to analyze the performance of your activities. You might discover that some business activities are very successful while others require some re-strategizing. Build on the successful ones, and see if tweaking the low-performing campaigns leads to better results.
