If you are into e-commerce and you want to own an online business then you have deffently heard of dropshipping. Dropshipping is the latest and most successful business model in ecommerce. Yet many people don’t know what it is or how to do it yet.
There is no need to worry, as we have created this in-depth article on dropshipping that will help you understand this business model from scratch and we are sure that you will find something interesting for your needs.
Let’s dive in the dropshipping guide for beginners!
What is dropshipping?
Before we tell you how to dropship, first let’s explain what dropshipping is all about.
Simply put, dropshipping is a business model by which a store doesn’t keep the products that it sells in stock. Instead, when a store sells a product, it purchases the item from a third-party supplier and has it shipped directly to the customer.
To understand the process better I will give you an example for a business that runs on the dropshipping model:
- Customer — John Doe visits the website of a store that sells dog food. He perceives dog food to be a convenient product, especially for pets. The company has a vast assortment of products and he chooses one which is most suitable for his needs.
- In order to purchase the product, John enters the quantity of required amount in the shopping cart and then proceeds to checkout.
- The store owner has a contract with a dog food manufacturer and he is aware that John wants to purchase one pack of dog food.
- Instead of buying the dog food himself and holding it in his storage, he buys the product from the manufacturer and receives it after a while.
- The store owner purchases a dog food pack from the manufacturer and places an order to his supplier.
- The supplier then ships the dog food and the logistics shipping company delivers it to John’s address.
This is a great example of dropshipping and it is one of the most popular types of ecommerce businesses today. For a business owner, there are numerous benefits to using dropshipping as their business model.
Let’s cover the dropshipping benefits!
What are the benefits of dropshipping?
- Startup Costs
Dropshipping requires a lot less capital than other more traditional business models. It is important to keep in mind that the amount of money that you save on startup costs will depend on the size of your initial inventory and level of investment. In most cases, you can get a head start with just a few thousand dollars. Remember, the main advantage of dropshipping is that you don’t necessarily have to buy goods in advance and pay for their storage.
- Less time to Start Selling
If you are concerned about how long it will take you to start your business once you choose the dropshipping model, then rest assured — as the admin process for a store can be completed in a matter of hours. Think about it as an e-commerce website builder that is already put in place and all you have to do is add products and fill in the details. My very first dropshipping business was based on Shopify (I will add link to a Shopify review here when it is ready.) It is extremely easy to start your first online store these days. There multiple ready-to-use platforms that require only product import and you are ready to sell.
It is easy to scale your dropshipping business. All you have to do is find a suitable niche for your business, find products and suppliers and the rest will follow. If you do not want to deal with the technicalities of a dropshipping business on your own, you can also choose one of the countless platforms that offer ready-to-use software and include everything for starting an ecommerce business. Another reason for dropshipping to have better scalability than any other business model is that you are not limited to one vendor. Most of the time you can choose to work with multiple vendors if that is necessary. If your main vendor runs out of stock, you don’t close down the store and stop running ads, you just change vendors and continue without any problems. Of course, you have to be certain that the second vendor that you work with has the same quality of service and products.
- High margins
The best thing about dropshipping is the high profits that it generates. On the one hand, you buy products at wholesale prices and you don’t have to pay for their storage, then on the other hand you sell them at retail prices and make even more money. If you are looking for a business model in which you can sell as much as possible without having to spend money on shipping, then this is definitely a good choice. In addition, the dropshipping model allows you to charge a premium price for your products and still make good money.
Important Note: Everything mentioned so far is true if you provide quality product and quality service. You won’t make good money if you threat your customers badly and you won’t make a lot of sales if your product is not high quality. No one will recommend your business if you don’t put in the effort to make it as good as you possibly can.
What are the challenges and pitfalls of the dropshipping model?
We can’t talk about business models without mentioning their bad sides as well. If we conver only the good things then someone might think that this business is easy and it is a money making machine. It definitely could be, but it it is not easy and there is plenty of room for errors. Let me share some important things that you wish to avoid when you start your first dorpshipping business.
- Lack of Control
In most cases you won’t have control over your suppliers and they won’t inform you about every thing that goes on. There are times when a supplier or a manufacturer will stop work or cancel orders for some reason without informing you. That means that you will be left with a lot of unsold products, which means that you might have unhappy customers that can express their anger and disappointment on social media for everyone to see. It is always better to work with suppliers that have a good reputation and are well known for their high quality service.
Some of the frequently appearing problems with vendors are:
- They don’t speak English fluently;
- They don’t offer packaging in English language with your branding on it;
- They don’t offer tracking codes for your customers to use;
These are just some of the main problems that you might face when dealing with vendors. All of these are out of your control.
- Everyone has access to the same products as you
Don’t think that you will find a winner product and you will sell it alone. People do their market research and they have the same access as you to suppliers who are more than happy that someone else wants to buy from them. This means that you will be competing with other dropshippers and you all want to offer the same product at the same price. At first, this might seem like a great opportunity, but it is not. It means that someone else might sell your product at a lower price than you are selling it and they will get most of the profits. This does not make sense, so make sure that you do your market research before you start selling a particular product.
Note from experience: Don’t get surprised if the unhappy customers from another online store come and spam you with emails about their lost order or how the product that they purchased from your store is bad quality. And when you ask them for their order number and tracking code they provide you with something that is not even close to the sales that you currently have and is definitely not from your store.
But guess what? The customer does not care. They want refund, they want another product for free and they want it now!
Lack of control is not only focused on vendors but on your competitor’s quality of services as well.
- Poor customer service
Not all suppliers have good customer service. Some of them provide really supportive and useful customer service but it all depends on the type of product that you are selling and the support that is required. And even amongst those who do have good customer service, some of them have a hard time communicating with you in your own language.
- Shipping times are nightmare!
If you are selling products from China, you can expect your clients to get their product in 4-8 weeks time frame which is a long time to wait for any product. If you are buying from China, it might take even longer because of the shipping costs that you would have incurred. This can be a major problem especially if the product has to be delivered on time for an event or as a gift. That can lead to a lot of refunds and failed orders.
Okay now you know some of the upsides and downsides of Dropshipping. Now let’s conver how to start.
Where to start from with your dropshipping business?
If you like the idea of dropshipping and you are ready to start you might be wondering where to start from. Don’t worry in this section we will cover everything you will need to know to start a successful dropshipping business.
Pick your dropshipping niche
This is the most important question. Everything depends on what you decide here. If you choose too competitive niche for the budget that you have then you won’t be able to survive the testing phase before your find your winning product. If you choose a niche that is too easy and does not have enough potential you can reach the limit quite soon and to put a lot of effort for not so good of a return on investment and overall profit.
Some tactics to choose your dropshipping niche are:
- Check out the most popular niches on Amazon and see if you can come up with a good quality product to sell in that niche.
- Check Google Trends to see the level of interest for the various niches that you are interested in.
- Check out the top selling product on AliExpress and see if you can come up with a similar product with better quality and better price.
- Check what type of products are the best sellers on Storenvy and Etsy.
There are multiple ways to come up with a niche for your business. The most important thing is that you can’t choose too broad niches and have to find the one that you are comfortable with and can commit to it.
Note from experience: If you think “traveling” is a niche, you are wrong. Well technically you are right, but you are wrong that being that board will lead to anything good. If you think about traveling try going into sub-niches. For example good sub niches for “traveling” are “luxury hotels and vacations” and “mountain hiking and camping”. You see? You can see people that are actually passionate about something and you can sell them things they would love and use. Don’t create a dropshipping store just to sell. Create a dropshipping store to solve problems/make people happy.
Finding your vendor/supplier
The first thing you need to find after you have your niche is a vendor (supplier). Some ideas on where to start looking for them:
- Check out Facebook groups that are related to the niche of your business.
- Speak with people in your niche on social media platforms. I know many dropshippers who have found their suppliers just like that.
- Just start browsing through Alibaba/Aliexpress and see what options you have. Don’t forget for other alternatives like Wish, Amazon, eBay and etc.
- You might find even paid apps that provide you with winning products and vendors to buy from. That will put you two steps ahead of your competition.
There are more options from you to choose from but let’s cover the two main ones.
Dropshipping aggregator vs Dropshipping wholesaler
Dropshipping aggregator is an online service that helps dropshippers find products to sell. They can be very useful if you want to find the winning products to sell immediately. For a fee, you get access to a database with thousands of products and their suppliers.
Dropshipping wholesaler is a platform that provides services and support for those who have already started their dropshipping business. They usually have the best prices and they offer a wide variety of products to choose from.
How to choose the best vendor for your business?
Okay, now you have ideas on where to find your vendors and you probably have a list of ones that you like the products they offer, they have a good rating and you are ready to pick. But how do you pick the right one?
General information that you need to choose
Some good practices are to look for vendors that will provide you with all the information and services that you need. If they are not able to help you with packaging and language translation, then think about doing it yourself. If you get a good copywriter to write your brand name on the packaging in English so that your customers can understand it, it will be worth it as they will have a better experience when receiving their product.
You should also make sure that the supplier can handle any returns or complaints if there are any. If the vendor has a good rating and they are well known, then they should do everything to satisfy their customers. But if you have minimal experience with them or if they are not well known, then make sure that your business will not be harmed in any way.
Check their reviews!
Another good thing is to check for product reviews online. This will give you an idea of how high quality the products actually are. Of course, this will not work with a new supplier who just started a business. That’s why you want to work with experienced suppliers that have built their reputation over time and have put in the effort to be one of the best.
Don’t forget to ask about additional fees!
Fees are the last thing that you want to worry about when dropshipping. Some suppliers will give you a very good price for the product and it will seem like an awesome deal, but then they will charge you extra fees and before you know it, your profits are just about half of what you thought they were going to be! That is why it is best to negotiate with your suppliers and ask them for the final price that includes everything. This way there are no surprises.
Ask them how do they ship their products and from where!
As we mentioned earlier shipping times can be an issue that’s why you need to ask them how long will it take for your customers to receive the product, from where are they shipping, what are the prices for shipping and what is their return policy. This is important as you have to consider it when you are setting your prices, your own return policy and shipping times on your website.
Make your business official!
Hey, this is super important! Yes, this is cool but it is not a game. You are going to run a business and if you want to make money without opening a business and actually running one you will have quite bad experience.
If you don’t pay taxes, you don’t send invoices and you run a shady business you might end up on the wrong side of law. You don’t want that. After all you are trying to make your life better and not worse. Don’t think that you can outsmart the system (no matter of your country).
Choose your sales platform
Oh this topic is quite extensive, I will cover it in-depth as soon as I can but let me give you some general advice on what you can use and what to look for.
Some great dropshipping sales platforms are:
- Magento – Magento is a very popular e-commerce platform. It has its own marketplace, it’s customizable and it’s SEO friendly.
- WooCommerce fro WordPress – This is a popular e-commerce plugin for WordPress and it has over 5 million installs. So if you are planning to use WordPress this might be your first choice.
- Shopify – This is one of the most popular e-commerce platforms for dropshipping. It is easy to set up and has one of the best integrations for Dropshipping. In my honest opinion, Shopify made Dropshipping popular and Dropshipping made Shopify popular. You can find tons of articles on Dropshipping with Shopify. I will add my own soon here!
- Bigcommerce – This is a very popular e-commerce platform that was launched back in 2007 and since then it got over 1 million customers..
When choosing your platform you need to consider the following things when you are running a dropshipping business – time, effort, money and potential. They have to save you time, they have to be easy to use, they have to be fairly cheap (or free) for you to start and they need to have a lot of potential for your business to grow. After all you don’t want to build a business with limitations.
How to market your dropshipping business?
Some of the best ways to advertise and market your dropshipping business are:
- Social media platforms – Social media is a great way to reach out to your potential customers and show them what you have. If you are serious about your business, you need to create a Facebook page for it, an Instagram account, and a Twitter account. Link them all together and start creating content that will catch your audience’s attention. If you think that this is too much, then you can just focus on one of them.
- YouTube – Create a YouTube channel and start making videos related to your niche. Be sure to connect your channel with your social media channels and install the YT app on your website. If you think that YouTube is a saturated platform then you can try other video platforms like Dailymotion, Vimeo or etc.
- Blogging – Start writing about your niche on your blog. You don’t need to be a professional writer. Just write in a way that you would want to read yourself. Make your content easy to read, useful, and with lots of images. Remember you might have different sites for different topics so keep it simple. SEO will help your business a lot and you will get new visitors and potential customers thanks to blogging.
- Paid advertising – This is probably the fastest and best way to get new customers, but it’s definitely not the cheapest. You will need to have a budget and you should do your research before you start advertising with any paid service. Try out Facebook ads and Google Ads. They are quite popular and there are tons of articles, videos, and guides on how to start with them. (Yes, I will link my own articles here when I am ready with them 😉 )
- Email marketing – Email marketing is another strategy that you could use to grow your business. If you for example have a store about mountain hiking and camping, then it’s natural that you will send some emails about the topic. This is also a great place to automate your sales campaigns and to provide a lot of value to your audience. Threat them good and they will make you good money.
Bonus historic information about Dropshipping
Dropshipping has its roots in the late 1990s when an entrepreneur who went by the name of Matt Clark launched a startup called Digital Altitude. Clark noticed that there was a deficit of good information for people who wanted to start their own businesses. His solution was to open the online “Digital Altitude University,” which provided information, tools, and services that would give people the base they needed to build a company. One of the services that Digital Altitude provided was drop shipping, which helped entrepreneurs to avoid inventory costs and still make money. But it wasn’t until 2009 after Clark shared his knowledge in a bestselling book entitled ” The Business Model Blueprint,” that drop shipping really took off.
If you are a true entrepreneur this business model will be perfect for you to start your journey in digital marketing and business ownership. I am the perfect example. I started my journey when I was only 18 with my very first dropshipping store which sold cheap jewelry. Now I am 25 and I run an digital marketing agency and I have tons of successful clients. Don’t worry if your business will work out or not, just start, you will definitely end up better than you were before with more experience, hopefully with more money (if everything runs smoothly) and with new skills in your arsenal!
If you are interested in more articles like this one. Make sure to follow my blog and to read my other articles about dropshipping, digital marketing and SEO.
See you soon!