What is Dropshipping?
Dropshipping is a business model in which the retailer transfers the customer orders and shipment details to the manufacturer or a wholesaler, who then ships the goods directly to the customer.
Even in this digital era, starting a successful ecommerce business used to be challenging and expensive because earlier retailers had to stock inventory and also had to take care of shipping. Thanks to dropshipping, starting a successful ecommerce business has been made easier.
There are many websites offering to teach dropshipping business. But dropshipping due to its evolving and challenging nature as it is, cannot be learned by educational methods but learned through experiential knowledge. No material online can teach you A-Z about dropshipping. However, following some basic principles can guide you to be successful in your dropshipping business and it will be discussed in this article.
Why Dropshipping is ideal for an ecommerce store?
- Low investment, No Inventory/Logistics – Since the items are shipped directly by the wholesaler, there is no need for a warehouse to store inventory and logistics which means low investment. The retailer can focus on just acquiring the customers.
- Sell at a lesser price – The seller directly buys from the wholesaler, there is no middleman. So items can be sold for a significantly lower price.
- Flexibility – Since there is no inventory, If one product does not sell well can switch to other items. One usually had to wait until the inventory is sold out.
Challenges with Dropshipping
- Finding a Dropshipping Supplier – Though there are a lot of suppliers available online, finding a supplier for your niche with low pricing is a little difficult. Also as you might expect, there are even some scammers out there.
- Out of Stock: Sometimes the supplier might run out of stock, but the customer might have paid the money in your e-store. This could create a setback if you are not prepared to handle it.
- Competition & Marketing – Since it is a low investment opportunity, many people started doing it, and there is lots of competition. A strategic marketing effort is required to acquire customers.
We can overcome these challenges when appropriate principles are followed. It could be profitable even to people who are a one-man show or doing it part-time. Let’s see the guidelines for starting a successful dropshipping business.
Choose a Niche
Choosing a niche is the first step towards starting an ecommerce website. The advice you usually find online may go like ‘find a niche of your passion,’ ‘go for a niche with high demand’ or ‘find a niche with less competition.’
I would say, select a niche in which you have a lot of knowledge and insight. If you don’t have insight in the desired niche, spend the time to gain it. You need to be up to date, at least in your specific niche.
Learn in and out about your niche, even about how the items are manufactured. Learn about different products and why a specific product is in high demand in that niche. Find why people will want to buy something from you.
Research the market
Conduct thorough market research in your niche. A niche market is a segment of the market on which a specific product is focusing. Check how big and wide your niche market is. Determine the demand and the competition. For a beginner, it is good to enter a small market. Note the price points of your competitors and read all the customer reviews.
- Know who your customers are. If your products are solving some problems, you should who exactly is having those problems.
- Try to learn how much these customers are willing to spend.
- Find a gap in the market. It would be good if you can add some value to your niche otherwise you will be just another store for your customers.
A low competition may mean that there is little awareness in your market. Spreading awareness might take a lot of time and strategic planning. If planned and executed correctly you may gain the authority in the market. However, research thoroughly about the market before making any investments.
Choose the countries
Currently, the USA, Canada, and Australia are the best known countries to sell dropshipping products. Other countries such as the UK, Germany, France, Netherlands, etc., gaining momentum with dropshipping customers. You can select the countries which you want to sell and find out the wholesalers who ship there and also the local competition.
The underexplored part of the dropshipping business is selling to Latin American countries and Asian countries. There are many legal and other challenges in these countries. However, people are doing dropshipping business there. If you find a way to overcome the obstacles you can even sell to these countries where you have less competition.
Find a Dropshipping Supplier
Finding a genuine and reliable dropshipping supplier is a crucial thing in dropshipping business. Going for a cheap supplier from the first could get you scammed, or the supplier might not provide quality items as promised.
Join business communities or online communities where the other retailers are. Check online forums such as Reddit, Quora or a particular forum of your niche. Cross check the dropshipping wholesaler with the manufacturer. The first dropshipping supplier you get may not be the best one, but you can always find another one. It takes time and effort.
For a beginner, I suggest you start with a popular supplier such as Aliexpress. Later as you expand, you can change the supplier.
Selecting the Products
It is yet another important aspect of run a successful dropshipping business. It is good to start with a list of selected products rather than bringing the whole niche. Don’t start with thousands of items or go so low with 10-20 items. At least have a few hundred items.
Choosing items based on price points
- If you sell an item for $5, with $1 profit. Even if you make 100 sales, you only get $100 profit.
- For a $100 item with $10 profit you just need to make 10 sales.
- Don’t sell cheap products like $10 or $20
- Sell products which are a little expensive, mostly below $2000
- Don’t go very expensive either above $3000
- The cost of customer acquisition is high in the initial stages. So choose products to balance them.
Customers want free shipping, and in the initial stages, you might have to bear the charges to give free shipping. Choose products that can be easily and cheaply shipped and will not get damaged in shipping. If you sell large products, they might get damaged during shipping.
Marketing is a crucial factor for starting any business. For a dropshipping business, you need to come up with a good marketing strategy. It may be Pay Per Click ads like Facebook ads or Google ads, Affiliate marketing or using some influencer, SEO or social media marketing.
- Find who your customers are and find the best strategy which suits your potential customers.
- Don’t try to copy other’s strategy blindly. Something which works for your competitor not necessarily would work for you.
- Spend stringently. Don’t think spending more money on marketing will bring you, customers. A lot of businesses have failed in this area.
One of the best methods of marketing is Content Marketing; It is ignored by many ecommerce websites. Start publishing content (blog, Images, video, etc.,) even before launching your ecommerce website because you could gain subscribers and authority for your website.
Make a Plan (budget Included)
Now you know your niche, your market, and your potential customers. It’s time to make a plan. Make a detailed plan along with the budget. Plan how much you are going to spend on creating your website, how much for legal and tax professionals and how much on marketing.
With the knowledge, you have gained plan how many customers will buy your products with regard to time and how much profit you gain, how your sales are going to grow and how much you are going to reinvest. Do the math. If you couldn’t come with a profitable result, go and research again. Come up with a profitable solution.
In business, everything may not go according to plan, but it is good to have a plan and follow it. When things are not going by the plan, it’s good to research more and improvise.
Legal Base for your dropshipping business
It is important to protect your business through proper legal documentation and contracts for your business. Ecommerce laws and taxes differ from country to country, state to state in the case of USA. The best approach is to hire or seek professional help to make a policy in compliance with the laws and taxes. The legal bases to cover are:
- Registering your business
- Sales Tax Nexus
- Licenses and permits
- Business insurance
- Payment Gateways
- Trademark, Patents & Copyrights
- Data Protection
- Age restrictions
Read more to learn all the legal considerations in detail.
Creating a Website for your Dropshipping store
One last thing to figure out before launching your business is which platform to create your website. There are multiple platforms with which you can build an ecommerce website. Some people prefer using Shopify, as it is easy to build and maintain an ecommerce site with Shopify.
But with Shopify, you have to pay a monthly subscription for your domain & hosting and separate monthly subscriptions for all other apps which you use. It is quite expensive, especially when you are on a tight budget.
We suggest you use an affordable and reliable platform which isa WordPress. WordPress freely provides an important tool known as WooCommerce plugin, which is used millions of ecommerce store owners all around the world. You could get economically priced domain & hosting plans for a WordPress website. There are many other affordable tools in WordPress for your ecommerce dropshipping business; some are even free.
Website designing and launching
A major thing to avoid is pouring money and time into designing and styling your ecommerce website. In the beginning, informative and straightforward designed website which is easy to use is enough.
First, launch your site and working on bringing traffic to your site. Once you start making money, you can change the aspects of your website. You can observe that leading ecommerce websites like eBay and Amazon are simplistic in design and style.
Do you want to build a ecommerce website for free? Read out article so that you can build a free ecommerce website within 5 minutes with WordPress.
Give 3x better customer support than your Competitors
When you are yet to be established as a brand, customers find it difficult to trust and may have some doubts and questions about your authenticity. Newly launched ecommerce stores mainly get customers through word of mouth from a happy customer. So it is essential to keep your customers happy and satisfied so that they can recommend you to their friends.
So customer service is one area where you can really shine. Many ecommerce websites only provide email support, which is outdated and has practical difficulties. You can show a difference from all your competitors in your customer service.
Customers want instant information, or they would go somewhere else. So providing best customer support for pre-sales questions through phones calls, live chat or a readymade FAQ list is essential to boost sales.
If you are a part-time business person, having a knowledge base in your ecommerce website through which customers questions and other issues have answers would be very useful because you may not be available to answers all of the customer support.
Patience is the most important thing that you require to start a successful dropshipping business. Many of the dropshipping ecommerce websites have closed even before making a single sale. They failed because many of them wanted to make money just by following the latest trends.
Running a successful dropshipping business is not a sprint but a marathon. It requires dedication, hard work and most of all have patience.
Having a solid business plan with concrete research is crucial for a dropshipping business, and they take time. Have patience and become successful with dropshipping.
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