Dropshipping is one of the easiest ways to sell online.
In a dropshipping business model, you don’t risk a lot of money on inventory, your liabilities are limited, and starting one requires a minimal investment.
What is dropshipping?
Dropshipping is a retail order fulfilment business where you sell merchandise without stocking it. Some dropshippers never even come in contact with the products they are selling.
As a dropshipper, you are located at one end of a supply management chain. When a customer places their order with you, you transfer the order to a fulfilment house, which ships the product directly to the customer on your behalf.
The customer pays you the price you set for them, which is (hopefully) higher than the price you pay to the fulfilment house.
A fulfilment house can be anybody who fulfils the order for you. It can be a wholesaler, a stockist, a manufacturer, a dropshipping supplier, or even a retailer whose shop is next door to your office.
Generally, shipment and other logistics are handled by the fulfilment house.
This makes dropshipping a great option for beginners who want to test the ecommerce waters.
Since you don’t need to purchase or maintain stock, no capital of yours gets tied up, leaving more resources for marketing and advertising.
With the freedom and flexibility this offers, you can potentially generate decent revenue.
How much can you make dropshipping?
The good part about dropshipping is that it has very low overhead and a lot of automation. You can start a successful dropshipping ecommerce store with less than $100. Everything you make beyond that is profit.
There are different levels of dropshippers. It’s not uncommon for a seasoned dropshipper to bring in up to $10,000 (£8,307) per month.
However, as a beginner, you have to invest a lot of your time and efforts to start bringing in $1,000 (£830) to $2,000 (£1,660) per month.
Then, as you grow and more orders start to come in, your earnings will also grow.
4 simple steps to set up a dropshipping business
There are a lot of variables in running your own dropshipping business, from the products you sell, to how much and how fast you choose to scale, to how much you invest in advertising. Following these 4 steps will help you navigate these questions and get started.
Step 1. Select a Niche
Choosing a dropshipping business idea might seem like the easiest task, but this is where most of your efforts should lie, at least in the beginning.
To make the right selection, follow these 3 steps:
- Make a detailed list of product categories and services which align with your passion.
- Search which of these are trending in the market.
- Look for competition for the ones that are trending and also interest you.
After finalising a category, consider these variables:
- Are the products of your selected category medically safe?
- Is there enough demand for the products?
- Is it legal to trade these products?
- How much tax do you need to pay? Different categories may come under different taxation bars.
- Do they have a seasonal demand or do they flow round the year?
Only after you’ve completed this 360-degree evaluation, finalise your niche.
Step 2. Build your ecommerce store
You will need a platform to connect with buyers. In a dropshipping model, your platform typically will be an ecommerce store.
Today, website builders provide you with everything you need to start an online store. Some of them are free, while some charge nominally.
Select a domain name which markets your store and brands it, integrate your dropshipping supplier with your shopping cart software (details in the third step), choose the products you want to sell, and set up a payment gateway.
Doing all this should not take you more than a day.
Make sure you have applied for and procured all the necessary documents before publishing your site.
Depending on where you live, you might need an Employer Identification Number (EIN) or similar, and some local business licences, and you will be fit to launch.
Once your online store is up you are on the map.
Step 3. Choose a dropshipping supplier
A dropshipping supplier like DSers acts like a marketplace connecting you with big sellers around the world.
This means you don’t need to hunt for suppliers or fulfilment houses.
However, the accessibility makes their products highly competitive. You can be a little creative and approach suppliers personally to ask them if they’d consider dropshipping for you.
Once the order comes in, it will be the supplier’s duty to procure the product, pack it, and deliver it.
So where do you come in as the owner? Mostly in Step 4.
Market your dropshipping store
Market, market, market. You need to market continuously.
This is where you need to burn most of your business calories.
One of the great things about dropshipping is that your reach isn’t limited to your city like it might be with a brick-and-mortar store. However, understanding local SEO ranking factors can help boost your store in Google, attract more customers, and improve customer engagement.
There are several factors associated with marketing an ecommerce business successfully, but it boils down to two essential steps:
- Reach as many buyers as possible, using whichever marketing technique that works best for you.
- Retain your customers with excellent sales and after sales services.
These two factors will determine how fast and how far you reach as a dropshipper.
Check this all-inclusive guide that will help you stand out in the dropshipping business, including examples of some of the most successful dropshippers.
Drawbacks to dropshipping
The unfortunate reality is that your growth as a dropshipping business can plateau very quickly.
You don’t maintain stock, and you are positioned at the end of a supply chain, so you can charge only a small percentage as profit.
Secondly, it’s easy to get replaced once you share your customer data with the fulfilment house. This is one of the reasons dropshipping suppliers like DSers are preferred, because they will not share your customer data with others.
Still, dropshipping can be a smart way to enter into a market.
You explore and you study. After fulfilling a few orders, if you find the market lucrative, you start your own retail, wholesaling, or manufacturing—because these are the business models where the real money is.
However, when you’re in the exploration process, the advantage of dropshipping is that if you don’t find the right market immediately you can easily pivot and find the right fit.