Dropshipping has been quite popular among entrepreneurs because it allows them to save up warehouse and shipping costs. Although it may sound like an easy fix for eCommerce start-ups, it is quite challenging to maintain a successful dropshipping business model. Having no plan to follow, you may get lost in the process and possibly lose your investment of time and money. This article has collected useful information for you to avoid failure with tips and tricks on establishing a dropshipping business that will stay competitive in the long run.
Dropshipping: Meaning and Purpose
Establishing your brand can be challenging and costly since you have to take care of all aspects of the retail or, in other words, the 4Ps: product, price, place, and promotion. As an entrepreneur, you could start selling a certain line of products that needs to be according to your clients’ liking; otherwise, you may go bankrupt. The price should equal the product value and cover the cost of production, storing, shipping, packaging, etc. The point of sale can be either an eCommerce website or a brick-and-mortar store, and both of them require certain financial support. And, finally, promotion is based on marketing and a strong online presence so that customers can get to know your products and company better.
With a dropshipping business model, you can get rid of having a single product and high maintenance costs and focus on the online presence in social media with the products available straight from the suppliers. Whenever there is an order, your suppliers will pack and ship it directly to the customer.
The aim of dropshipping is to help suppliers sell their products on your eCommerce store. The suppliers provide you with packaging, products, and shipping service, meaning you are free from taking care of any of that. Suppliers do not have direct contact with customers because those businesses focus on creating products rather than selling them. Your eCommerce store can significantly profit from new products without spending money on product-related expenses.
How to Start a Dropshipping Business?
As with every business, you need to create a detailed business plan that will guide you through the process without spending extra time or money on other secondary issues. Every part of your plan has to have milestones that represent your success and progress in creating a dropshipping online store. Here is a brief list of what needs to be done, and if you would like to learn every stage in great detail, you can check the Dropship Unlocked course for an honest review and decide to enrol.
You should also check how you can become a legitimate owner of a dropshipping company in your location and what type of business you have to open to operate online legally.
Research the Most Profitable Niche
Retailers become successful for many important reasons but mainly because their products are in demand. Every market has its audience that you will need to target to promote your eCommerce store. In order to find what is in trend, you need to conduct comprehensive research on the country where you plan to operate in. As a first step in the guide to dropshipping, you should research the most requested questions, products, or interests of a certain group of people. Remember that you cannot target every person. Instead, limit your target audience by gender, age, interests, and location. Some of the markets you might look at include:
- Gaming equipment
- Car accessories
- Office accessories
Next, you should decide what products to sell, whether you want to dropship expensive (e.g., a Sofa) or cheap (e.g., accessories) products.
When researching what products to dropship in a specific market, you should also check who your competitors are and how you can stand out and be unique. Many competitors mean the niche is quite fruitful, while little competition can raise suspicion about its profitability.
And lastly, do not forget to check the market price before you start selling because if the margins are too low, you will need to sell an immense amount to make some profit.
Create an Online Store
The next step in the ultimate guide to dropshipping is to build an eCommerce store before partnering with suppliers. This is because suppliers may have little trust in a vendor that doesn’t have a point of sale. Being unprepared could result in a bad reputation which should be avoided at all costs if you want to have a long-term business.
You can choose a platform to sell the products, and it doesn’t have to be a separate online store. Some platforms that are available for the dropshipping model are:
Some platforms (e.g., Amazon, Shopify, eBay) let you securely charge a customer with debit and credit card, and it is relatively easy to create an eye-catching design with dropshipping platforms. However, such a platform will require a monthly investment to upkeep your website.
Partner With a Third Party
Your business cannot operate without the existing list of products that you can offer your customers. As soon as you build a website, you can start looking for third parties. Focus on those you have in your current location; for example, you could check out trade shows and try to agree with suppliers about some product lines. You should contact them via phone or email, introducing yourself and your company, and negotiate prices favourable for both sides.
If you plan to cooperate with more than one supplier, tracking all the orders from different channels is convenient to avoid omitting or forgetting any customers. Here is the multichannel inventory app for the UK merchants to check out.
Raise Online Awareness About Your New Dropshipping Business
The final step in the ultimate guide to dropshipping is to let people know about your store. To reach out to the big pool of target audience, you need to invest in marketing and SEO. This includes improving your website, planning a marketing strategy (including email marketing, Google Ads, Facebook Ads etc.), and generating sales.
How to Find a Reliable Dropshipping Supplier and Wholesaler?
To run your business, you need resources and products from suppliers and wholesalers. There are a couple of ways you can find reliable third parties. You could try to import goods from, for example, popular Chinese websites, or you could discover domestic suppliers who could offer faster delivery to your customers.
Before signing the agreements with any of them, you should ensure that their goods are of high quality, since you have no control over the customization of the product. Another thing you should pay attention to is how easy it is to get in touch with the suppliers. If there is a delay or a mistake in the order, you will have to inform the third party that shipped it. And lastly, it is better to partner with more than one wholesaler, just to be sure you will not be left without products to sell.
How to Run a Dropshipping Business?
Once you decide what niche you want to occupy, you should analyze your competition and decide how best to build your business. Knowing your competition is crucial since they have already succeeded in this market so you can learn a lot from the approach they have taken. To sell more products and attract new customers online, you could implement paid ads alongside organic traffic. This means customers come to your store of their own will. It also means that the ranking of your specific product is on the first page of Google.
And this is why you should focus on the SEO of your website, which stands for search engine optimization. You can use email marketing, putting products on sale, and asking customers to leave reviews. There are extensive benefits to focusing on SEO too which include::
- Enhanced user experience
- Improved authority and credibility
- Improved traffic
- Gain of loyal customers
- Business growth
SEO is not a one-day strategy that you can leave, and it will do its job. You need to make an effort to understand how to optimize your store, what needs to be changed or added to your site, and how to rank higher in Google. To gain this knowledge, you can self-learn and simply hire a professional to assist you.
Numerous applications and sites can assist you in analyzing your website, some of which are free (e.g., Keyword.io) and paid (e.g., Ahrefs). SEO helps you improve the content you share with your customers, and it points out the mistakes done in the redirects, links, meta tags, etc., on your dropshipping store.
An additional tip to running a successful dropshipping fulfilment model is attention to your customers. Excellent customer service should be on top of your list; otherwise, your business may cease to exist, lacking good reviews and positive feedback. Never ignore your customers and always try to answer their questions; it could be useful to create a FAQ group on Facebook or write a blog post about the process of purchasing on your website.
Advantages and Disadvantages of Dropshipping
To answer your doubt whether it is worth opening an eCommerce store and becoming a drop shipper, you need to know what benefits you can yield from the business.
Low Start Investment
Dropshipping is the business model that requires low investment to start an eCommerce store, mainly because you need to spend money on online stores and marketing. Other aspects of retail are taken care of by a third party.
Having No Inventory and Brick-And-Mortar Store
One of the biggest benefits of dropshipping is that you are not bound to one place but can work basically from anywhere in the world. Since there is no store required and no inventory, you can operate your business from any location and still contact existing or new suppliers.
Dropshippers save lots of money because they do not produce or store the products. Since they sell online, they work on marketing and gaining more and more potential customers. Every online business needs to build a strong online presence and increase the traffic to the website.
Dropshipping can also be considered a fulfilment model that can provide useful insight and data about customers’ preferences, current trends, and niches on the rise of popularity.
Shipping and Returns are Suppliers’ Responsibilities
The third parties are in charge of shipments and even customers’ returns back to your suppliers. Since you don’t own a warehouse, you cannot accept the products sent to your office or home. Depending on the agreement, the charges for the return service may vary.
Even though the number of dropshipping stores is on the rise, you can still research a specific niche or even create one and work hard to evolve it and sell the new products to customers. Working in a market that is not in demand can be challenging, so you can open another dropshipping store to deal with more popular products. The advantage of dropshipping is that you can always open another business and apply the processes you have mastered operating your first dropship online store.
A Sellable Asset
If at one point you would like to open up your own brand or a product line, your current eCommerce store can be a valuable business asset that could be sold. If you believe that you have created and developed a profitable and well-managed online store, it could be worth quite a sum.
Every business has its disadvantages that have a huge impact on whether you are ready to open it, and dropshipping is not an exception. Some minuses can warn about future challenges you may face.
Profit Margins are Lower Than in Traditional Retail Store
Profit margins are your company’s profitability after all the expenses, which are relatively low since you purchase products and don’t manufacture them yourself. If you decide to create your own product line, you can get a higher profit margin; however, your supplier sets the price when dropshipping.
Lack of Information About Inventory Stock
Having no inventory seems like a big advantage in dropshipping since it decreases the costs and gives you peace of mind. However, what you lack is how much stock is left in the warehouse. For example, when you agree with a supplier, you advertise the product on your website, but you are unsure whether your supplier can fulfil the order in time.
Another issue that can occur is the ordered products of the same product line that are available only from different suppliers, meaning you will lose a bit of money on shipping costs.
The competition among dropshippers is challenging, especially if there are more similar businesses opening up. When running a dropshipping store, you should consider what market is most profitable, what costs are involved, and how much you can sell the same products to be better and more attractive for customers than your competitors.
Dropshipping model is a great idea for entrepreneurs who want to research the market before launching their own business. It gives practical experience in managing orders, customer inquiries, and how to do business with third parties. As an additional skill, you’ll learn in-depth marketing strategies and earn a nice income without investing huge amounts.