What Is Dropshipping?
Dropshipping is selling products without holding or purchasing the inventory in bulk. You basically have an understanding or deal in place with suppliers, wherein you list their products on your website. Once you have an order you can get in touch with your supplier to place the order & tell them to ship it on your customer’s address. They will pack & ship the products directly to your customer.
It’s an easy and popular method to start an e-commerce dropshipping business with least amount of investment although it does have some drawbacks. However, first let’s see how it does help & the steps to start Dropshipping.
Why Dropshipping is Worth It?
You can make money with dropshipping by adding a profit margin to the listed product. You fix up a price with your supplier beforehand say for e.g. I contact a Beauty supplier (XYZ) & fix up a deal to supply me a body lotion for $5 whenever I place an order with them. And then list that body lotion on my website for $8. When a customer orders that lotion on my website then I make $8 but pay only $5 to the supplier. I don’t have to buy in bulk or ship on my own. I simply have to place the order of lotion with my supplier & pay $5 & share the address where I want it to be shipped (that would be my customer’s address).
Do keep in mind that the increase of price should be realistic, as eCommerce space is quite competitive. If you increase it too much, you probably may end up with no takers. So find that sweet spot where you can cover costs like website hosting, marketing etc and still make a decent profit for yourself.
Deciding the Product prices can be a trial & error process but you’ll learn what your customers are ready or willing to pay for the products.
Now do consider that the effort to sell a low priced item & high priced item is kind of the same. You have to choose which strategy would be feasible for you. Volume game or Profit Margin game.
For e.g You can sell 10 items for $5 and say the profit on each is $2, so you make net profit of $20. On the other-hand you can sell a high-end product worth $100 to you & gain a profit of $50 by selling it for $150.
In short a lower priced product may be popular and provide a regular flow of sales, but a higher priced product may give greater profit margins.
5 steps to start making money with Dropshipping:
1. Start your Website
Okay so you need to start with a website which is a big task on its own. Try to stay away from the free service ones, as you probably won’t be able to monetize your site or the maintenance work would take up much of your time. So to save the trouble just go for the trusted names in the market.
This is where most of your startup costs will incur. Find & lock on a reliable domain host such as Godaddy, Siteground or Bluehost. Then install the website software, like WordPress or Shopify (I personally think you should go for shopify when it comes to dropshipping).
It’s important to use these trusted sites as that will enable you to use multiple apps and plugins to run the site & business. It will help to make your eCommerce store efficient and hassle free, eventually giving you time to concentrate on marketing & generating sales.
2. Choose your Category or Niche
Which means you have to decide what kind of products do you want to sell. Like Gadgets, Bags, Clothes, Kitchen cookware etc. You have to think about the cost of these products, the demand of the items, the profit margins you can make, competition and all. Plan it thoroughly. Just because you like a product doesn’t mean it would do well in sales. So study the market before hand and think of the audience. I am not suggesting that you only look into the popular demand products instead do look into a niche segment where the volume may not be great but your margins could be. So keep all these factors into consideration. I mean who knew herbal tea could make profit or linen sites can make profit, we think there is no demand and actually it may be low. But the people interested in such categories can get you good recurring sales. The competition may be low of your niche product making you a good source for the customers. If you deal with super niche products which are not easily accessible then also your profits can go higher. In short choose the product category or categories you want to sell.
3. Finalize your Suppliers & Backups
You have to shortlist some good trustworthy suppliers who can fulfil the orders. Go to sites like AliExpress and search for suppliers who are comfortable with dropshipping the products you want to sell. Either you directly deal with the suppliers & then manually give orders on sale or you can also use apps like Oberlo and Yakkyofy which can be integrated with a shopify website. These apps help to ease out the process and show most of the information in one place. This will surely save you lots of time. Do keep in mind to keep a backup supplier list as well. Just in case one backs out or cannot fulfil orders then you can save time and give the order to the next best supplier.
4. Design the Store Front of your Website
This is where you have to lure in the customers. You can choose to design on your own or hire someone to do it for you. But I think with so many free templates easily available across, you can immediately start on your own. However, if money is not much of a constraint and there is a particular design in your mind or you are inspired by a particular website by all means hire a web designer.
Try to keep things clear and focus on the details. This will make the customers comfortable & confident. Always have a F.A.Q (Frequently Asked Questions) & contact page to help your customers. Nothing is worse than not giving attention to your Customers.
5. Plan an effective Marketing Strategy
Everything is set – now what!? People aren’t going to come on their own you know. You have to bring the audience to your site. And honestly with ample of free resources available on the net , I don’t see any reason for you to not plan the marketing strategy ahead. Facebook Ads, Google Adwords, Instagram, Pinterest are the first channels I would use to bring in the initial traffic. Why because I can really target on the segment which would be interested in my niche. Simultaneously check on the SEO part to get your website pages to rank higher. The right Influencers can also help in getting some sales but may cost a little more depending upon your negotiation.
Develop a plan to promote your products on platforms that your target customer uses.
Be sure to collect the email ids of people visiting your site. You can capture that by offering them a discount code when they sign-up. And then you can send monthly newsletters to your community and promote your products.
Drawbacks of Dropshipping:
We now come to the downsides of Dropshipping :
- Packaging – Depends upon the supplier. There may be no brand mention of yours unless you specifically tell them. And you can’t be sure if they have followed your instructions.
- Logistics – It takes a lot of time for the products to get delivered. As compared to a situation where you hold the inventory.
- Answerable – You have to answer all the goof ups of your supplier. Since the customer is yours & their trust lies in you.
- Low barrier to entry – More competition can work with your suppliers or your suppliers directly can reach out your customers. This increases competition & suppliers can get more sales since the prices would be minus your profit margin.
- Don’t Update – The worse is when your suppliers go out of stock & don’t update you about it. It really puts a bad image on your customers if you aren’t able to deliver their purchase.
But having laid out these cons there are people who have made it big. It’s a convenient way to start without holding stock of items & unnecessary purchase. Low cost could give big returns, if you get the right product mix & reliable suppliers. That wraps it up from my side. Let me know if you have any questions. And if you already run a store then it would be great to know your journey 🙂