How to Start A DropShipping Business? Complete Guide
The E-commerce market is witnessing an exponential growth year on year. Many experts believe that this is going to be the fastest growing sector in the years to come. While there are many ways of starting an E-commerce business, Dropshipping has emerged as the easiest way in getting things started.
However, there are plenty of unanswered questions, and a newbie may get lost with the jargons. This article aims to cover every aspect one needs to know before starting a Dropshipping business and also touch upon briefly on how to get started with Dropshipping.
As this will be a comprehensive guide, here are the topics that will be covered in the purview of this guide.
- What is Dropshipping?
- Understanding supply chain and fulfillment process: The heart of Dropshipping
- How to find the right suppliers for Dropshipping?
- How to select right products to sell via Dropshipping?
- How to kick-start your Dropshipping Business?
- The different sales channels you can target. Which is the best?
- Running the show: How to run a Dropshipping company the right way?
- What makes a Dropshipping Business successful?
What is Dropshipping?
Many ideas may come to your mind when you hear the term ‘Dropshipping’. Is it dropping products using a ship? This is the most common question. To clear the air, let me briefly explain the concept. Dropshipping is a method of selling products through an online store.
The products are not locally stored and are sourced from a third party. Whenever a customer places the order, you forward or place that order with the third party and ensure its fulfillment.
What’s different with Dropshipping? Zero inventory to be maintained and no production hassle. The idea is to find the right supplier you can manufacture and deliver the goods to your customers.
What are the benefits of Dropshipping?
- Capital requirement is less: Two things which are eliminated with Dropshipping are the production costs and the inventory cost. This considerably brings down the start-up and operating costs. The only investment you have to make is in establishing the E-commerce store and on advertising to drive traffic.
- Both these investments are very minuscule when compared to having an inventory or a production house. Also, with this model, you can operate with a minimum number of employees. There are instances where the stores are being run by a single person and raking in more than $100K in sales a month.
- Getting started is easy: When you are following a Dropshipping model, there are many processes which are eliminated. This makes it one of the easiest businesses to get started with. Here are the things you do not need to worry about:
- Warehouse rent and management
- No hassle of packaging and shipping the orders as it is being fulfilled by the suppliers.
- Accounting is a lot easier with the absence of inventory
- No hassle of handling returns
- Do not have to manage and maintain the stock level
- Location independent: You do not need an office to run a Dropshipping business. You can work from anywhere, and your success doesn’t depend on where you hail from. However, you may face some minor issues while receiving payments. These issues can be addressed as there are enough payment options available these days. In short, all you need is a computing device with an internet connection, and an eCommerce store to easily run this business.
- Variety of products: There is no limit to the number of products you can list in your shop. The key is to plan and find suppliers to the products you have decided to sell. With millions of products online, it isn’t a task to find suppliers for the products you have planned to sell.
- Scaling the business is easy: Scaling is a problem faced by most small-scale businesses. With other businesses, when you start making more money, you will have to hire more resources to match the demand. In Dropshipping, this issue doesn’t exist at all. You can simply have a pool of suppliers to match with the demand of your products.
What are the disadvantages of Dropshipping?
- Low-Profit Margins: The fact that this model of business is easy to get started and requires minimum initial investments is well known. This lures in many marketers to set up shops and sell products online. All this leads to an overly competitive and a saturated market.
Customers compare across different shops and tend to go with the cheapest at least for their first purchase. They aren’t bothered about the credibility and customer support being offered for their first purchase. This is why many sellers price their products at the lowest profit margins. Their main aim is to lure the first time buyers.
However, you can stay ahead of the competition by entering a niche which is less saturated and tailor-made for Dropshipping. I will discuss this in the latter half of the article.
- Issues related to Inventory: While not having to maintain an inventory is a huge positive, it has a small disadvantage attached to it. When you have your inventory, you will have a count of the total number of products available. In this case, when you are sourcing through multiple warehouses keeping track of the numbers of products available becomes complex.
- Shipping: As your suppliers come from different countries, it adds a small complexity to the calculation of shipping costs. You will be in a dilemma regarding the handling of shipping cost. The critical question you will have to answer is, should I pass on the cost to the customer or include in within the MRP of the product?
Passing it on to the customer may not be a wise move. Adding it to the product can work out if you manage to get a good deal with the suppliers. Your aim should be to make it easy for the customer. Also, inform the customers the days it will take to process and ship the order.
- Errors from Suppliers: This is a major disadvantage in this model. You will have to be prepared to take responsibility for possible errors form the suppliers even though it is not your fault. You cannot say to your customers that – ‘Hey it is my supplier’s fault.’
For them, you are the business, and product owner and they expect an answer from you. Be ready to face issues related to improper packaging, wrong products, delayed shipping etc. If a customer emails you about any of these issues, take ownership and act accordingly with a suitable solution.
Is it Dropshipping worth a shot?
I never said Dropshipping is the easiest business to sustain. This model has its advantages and disadvantages. Like any other business, with the right planning and dedication, the problems can be easily overcome.
I will be discussing more on the problems and other aspects and also give some tips which will help you avoid the problems to the maximum extent. Now, let us move on to the next section which is ‘Supply chain and fulfillment process’.
Understanding Supply chain and Fulfilment process: The heart of Dropshipping
Do not get overwhelmed by hearing the term ‘Supply chain’, even though it sounds complex; it is a very important aspect of a Dropshipping business. The supply chain is nothing but the journey of the product from the concept stage to the delivery stage. While the real world supply chain does get complex. We will stick to the factors which make up the eCommerce supply chain. Here are the three key elements of a Dropshipping supply chain.
- Manufacturers: These are people responsible for manufacturing a particular product. More often, they do not sell it directly to the public. They aim to produce in bulk and sell it to the wholesalers and retailers.
- While you can buy the products at the lowest rates from the manufacturers, manufacturers expect you to purchase a set number of products. In addition to this, you have to maintain a stock of the items and manage the shipping. You can avoid this hassle by buying the products from wholesalers.
- Wholesalers: These are people who buy in bulk from the manufacturers and bump the price before selling it to the retailers. They too expect you purchase a minimum number of products, but their requirements are smaller than manufacturers. Most wholesalers do not sell the products directly to the public; their main target is the retailers.
- Retailers: When it comes to Dropshipping business, if you own a store and products are being purchased from that store, then you become the retailer. You manage the task of getting the order shipped to the consumer through your suppliers. You profit by selling the product at inflated cost. The margin depends on the cost at which you have got the products from the wholesalers.
Why is Dropshipping not considered as a factor in the supply chain?
You may be wondering as to why Dropshipping is not mentioned as an element in the supply chain. The reason is simple; Dropshipping is a service being offered to you, where only facilitation of buying, selling and shipping happens. You do not produce nor ship the items which makes you just a service provider.
How to find the right suppliers?
Finding the right suppliers is the most important step in establishing a strong Dropshipping business. Before I brief you with the technicalities, you have to know how to differentiate between legit and fake suppliers. There are many retail stores posing as wholesale suppliers. Your aim should be to have direct contact with wholesale suppliers to get the best possible rates.
Spotting the Fake Dropshipping Wholesalers
Because of the rising demand for wholesalers, many middlemen have popped up to get a piece of the pie. This doesn’t help you because they are fake and your margins will take hit. It is quite difficult to find legitimate wholesalers because they aren’t great in marketing or do not see a need for it. Here are some things to look out for when you search for wholesalers.
- Monthly fee: If the prospective wholesaler asks for a monthly fee for conducting business, this is a red flag. Genuine wholesalers do not ask for any such fee because their profits will be covered with the bulk of products they sell to you.
Whoever, if looking for wholesalers in a supplier directory then they would charge a monthly or a one-time fee. These directories ensure to check the legitimacy of the suppliers. This is different from a wholesaler asking for a monthly fee. We will discuss more about supplier directories at a later stage.
- They sell directly to the public: Legitimate wholesalers do not sell directly to the public. If on your research you find that your wholesaler sells to the public then it is safe to assume that they are retailers selling the product at higher prices. Wholesalers always look for retailers and only sell to them.
Finding legitimate wholesale suppliers
Now that you know how to spot the fakes, here are some ways you can use to find the right Wholesale suppliers for your business.
- Call the Manufacturer: This is the best way of finding legit wholesalers. After deciding on the product, call the manufacturer of that product and ask if they could provide a list of wholesalers. This will give you leads to all the legit wholesalers for that product.
Now, simply call all the wholesalers and see if they are open for Dropshipping. If they agree then complete the other important formalities before getting started.
- Google search for Suppliers: While Google search can be a good option to research for suppliers, here are some things you need to keep in mind.
- Conduct a comprehensive: Genuine wholesale suppliers do not really bother about online presence either because they are not dependent on it or they do not see a need for it yet. This means that you have to go further than just page one in order to find what you want. You may end up finding the wholesaler at #85, that doesn’t mean that they aren’t legit, it means that they do not give a damn about SEO, some of them do not even have a website.
- Website shouldn’t matter: Please do not reject a wholesale supplier just because their website looks old and clumsy. As pointed out earlier, they do not bother about having flashy websites because their customers do not use a website to conduct the transactions.
- Use different keywords: Again owing to lack of SEO, The suppliers may not appear when you search with generic terms. Use modifiers like “product”, “Supplier”,”warehouse”,”bulk” etc
- Find suppliers from your competition: If you have had no luck in finding the suppliers so far then it is time to try the old trick. Search for a Dropshipping store which is in your niche. Then place an order on that store, you can then refer to the sender’s address and then get in touch with the supplier. You may not always get a positive response from the supplier but there is no harm in trying.
- Attend exhibitions and Trade shows: The best way to find suppliers is by networking with the right people. Trade shows and product exhibitions are the right places for you to find best suppliers. Do not attend all the trade shows in the town, there are plenty of niche specific trade shows. Your chances of finding suppliers would be greater here.
This will also give you a chance to meet them in person and foster a relationship at a personal level.
- Supplier Directories: Supplier directories will have the database of the wholesale suppliers which is categorized by niche, type of product etc. The suppliers listed here would have gone through a basic screening process. This ensures that at least the first level check is conducted.
Supplier directories aren’t a necessity; you can easily find suppliers for your niche by following any of the other tips discussed above. However, if you are short on time and have a bit of money to spend, there is no harm in going to these directories.
In the end, you will have to perform additional checks after you have finalized your wholesale supplier.
How do we define a Good Supplier?
So far we have been focused on finding ‘good’ suppliers. Now, let us touch upon what makes someone a ‘good’ supplier. Here are some signs you need to look out for.
- A Good team and Industry focus: Any credible business should have a good team of professionals. They must have in-depth information about the product they are selling. The staff should be capable of understanding your requirements and give you the best possible deal. Their communication should be on point because that is critical for your business.
- Responsive and dedicated support: They must have a dedicated support staff to deal with your issues. It would be perfect if they assign a specific representative to address your queries. A single point of contact helps in getting your queries resolved faster.
- Understands technology: While the majority of the suppliers do not keep updated with the technology. It is always a good sign if they have an updated website. Also look for other features like real-time inventory, updated data feed etc.
- Location of the supplier: It would be beneficial to choose a supplier who is located centrally. Your audience is global and long wait times may hit your business prospects.
- Follow an organized flow: As you scale your business the processes your supplier follows becomes very important. They should have a stringent process so that they do not botch up with every fourth order. They must have an error-free fulfillment process. No customer would like to have a wrong product or not have tracking information etc. Ensure the suppliers have a good quality control process in place.
How can you pay the Suppliers?
Most suppliers accept the two payment options mentioned below
- Credit Card: This is possibly the best payment option and is widely accepted. The supplier is guaranteed of the money and you can take in all the benefits of using a credit card frequently. You do not have to constantly write checks which may become a bottleneck when you start getting huge orders.
- Net Basis: Some suppliers allow you to pay on ‘NET’ basis. You pay the invoice for a certain number of days like 30 or 60. Based on the number of days it is termed as ‘NET 30’ or ‘NET 60’. However, you will have to prove your credentials or establish the trust for suppliers to offer such an arrangement. Paying on NET basis can be considered as the supplier is lending money.
Choosing the Best Products to Sell with Dropshipping
In this section, I shall talk about some best practices, tips to follow when choosing your niche or product. This is fundamental to the success of your business in the long term. When choosing a product, you will have to keep aside your interest aside. The niche/ product you like may be over-saturated or may not be a match for this business model.
This is why your decision must be based be market research and the data you gather. I have discussed some criteria you have to keep in mind while choosing a product.
- Have your manufacturing unit: When you have your own manufacturing unit, you can easily experiment with the pricing and other factors. If you manufacture products which are rare, you could get a premium price for it.
- Selling at lower price point: While this may seem like the easiest way of getting some sales, the strategy is bound to fail if you plan to run the business on a long term. Your focus must be on delivering the best possible customer experience and a good product. People really do not care about the prices when they want what they want. Also, competing with giants like Amazon and Ali Baba is just not possible for a small sized E-commerce store.
- Adding Value: There are various stages when it comes to a consumer. It starts with research stage and ends with a purchase. You play a prominent role in all these stages. By adding blogs and other content which can help the consumer can get you more leads and also get some repeat buyers.
However, this approach is suitable for all niches. You must look for some unique ways of giving that value added to the consumer.
- Products with components: People generally turn to the internet whenever they need information about a product which has multiple facets to it. No one would Google for toothpaste but people do Google when they have to find a product which has many components. Keep this in mind when you are looking for a product to start with.
- Having high-quality Product Images: Images are the only medium through which you can communicate with your audience. Having high-quality product images allows the consumer to get a sense of the product they are about to buy. Adding zooming capabilities is also found to increase conversions. Try to get images from the supplier and never add images from bringing brands, if you do not have the right to use images, you can be sued for copyright.
- Add buyers guide: Add content which can be useful to the consumer. They shouldn’t be just long piece of content, they tipis you share should be actionable, and it must address a problem. This will help in building the trust around your website/store. Consumers do not mind spending a few extra bucks when you give them so much value.
People have varying buying habits. There are some who demand a lot even when they are paying a very low price and some others who do not really bother as long as they get their product. This is why you will have to target the right demographic with your product. Here are some good buyer groups to target:
- Hobbyists: Money is something which won’t stop people when they love something as a hobby. From collectors to bikers, this class of people always look for products which are rare and goes with their hobby.
- Businesses: If you are looking for long-term, volume rich clients then you have to target businesses. Having a portfolio of business clients really helps you in having a constant flow of orders. Once you have established a rapport with the clients, the chances are remote for them to cut off their business.
- Repeat Buyers: If you sell products which have a smaller shelf life or is frequently replaced then you can easily build a nice base of repeat customers. You can launch targeted discount offers after a specific amount of time; inform the buyers of all the latest launches etc. Social media and email marketing are the two powerful tools using which you can achieve this.
- Finding the perfect price point: While consumers really do not care when they buy stuff under $100, if you are planning to sell products upwards of $200, you may have to have a robust support team. They must be equipped to take all the questions for the consumers.
Buyers would have questions regarding the size, usability, delivery etc which has to be addressed quickly. If the support is slack, do not even consider selling high ticket items because people do expect the store to be active in terms of support.
- The MAP factor: To promote a level playing field, some manufacturers will ask you to set a minimum price if you are sourcing products from them. You cannot price lower than MAP if you have agreed to the manufacturer.
If you are planning to build an authority site with a lot of content and are here for the long term, then it would be ideal to find manufacturers who have the MAP pricing policy.
- The Marketing plan: Finally, before you choose a product, think about the marketability of the product. List various techniques you could use to market your business. You cannot start a business and then after some time think of customer acquisition.
You must have a clear idea and understanding of all the marketing channels. Depending on the resources you have, allocate the funds to each channel. Experiment and test to find out the best marketing channel for your product.
It doesn’t matter if your product is amazing and revolutionary. If there is no interest in that niche then selecting the best product also doesn’t help. So, always look for a niche in which there is existing demand or else you will have to spend that extra bucks to create the hype and demand around the product.
Fortunately, in today’s internet era, there are enough tools which guide you in the right direction when it comes assessing the demand. Let us have a look at some of the prominent tools which can help us with this.
- Google Keyword Planner – Where do people go when they want something? Yes, you got that right, they ‘GOOGLE’ it. This means Google has all the data. You can access this data through the Google keyword. After the recent update, the keyword planner no longer gives an exact number of searches. They give a range which is still quite useful.
You can leverage this data and find if your niche has demanded. Try different versions of the keywords related to your/ niche, if you see that there is interest among people for those keywords, you can further make in-depth research and pull out some more keywords.
You can use all this data to build a content marketing plan later. Start a blog and build content around the keywords. Slowly but surely the organic traffic may become your leads. This method allows you to assess the demand and also form a base for your future content plan.
- Google Trends – The Google keyword tool gave you data related to specific terms. If you are looking for niches which have gained popularity or have grown over a period of time then you can make use of Google Trends. Google trends give you all data regarding a keyword. You can determine the interest around the keyword as they provide even the historical data.
This form of research is necessary for you to determine the demand for a product. The niche/ product you plan to sell should be evergreen and must have a rising trend. You cannot bank on viral trends and build a business model around. I am not saying that it is not possible but that would need a lot of capital and is not sustainable for a long term.
Google trends also allow you to compare various terms. You can pull all the data regarding related terms too. In addition to this, you can get specific data about YouTube search, Google image search News search, Google shopping etc. Here are some more features of this tool.
- Find Historical data: It is obvious that you wouldn’t want to get into a niche which has a declining trend. To build a sustainable business you will have to target niches which have positive demand and grows year on year. You could even get data for the past ten years and see how the interest around the product has grown over time.
For example, let us check the trends for the keyword ‘marketing’ and see how it has grown over the past few years. From the graph below it is evident that this keyword has been seeing a very positive growth.
- Top and Rising Terms: This is another useful piece of information you can extract from Google trends. This shows you all the terms related to the base keyword. It also displays the terms which are growing very fast under the ‘rising terms’ and keywords which have always been at the top under ‘Top terms’. Both these datasets can be very useful when deciding the niche/ product.
- Demographics: Wouldn’t it be useful to know where are your visitors coming from? Google trends allow you to know just that. Depending on the keyword, you can see from which part of the country are searches coming from. This allows you to determine if the product is popular only in some states or if it is popular nationwide. You could even get city wise interest about a product.
One more important aspect when you look for a product/ niche is the competition in that space. Driving traffic to your store is possible with either paid advertising or organic traffic. For paid advertising, you will need to have a deep pocket as you will have to do a lot of split testing before you find a good audience. This is why many depend on organic traffic which is also called as free traffic.
In order to drive traffic to your website, you will have to do some search engine optimization. In simple terms, these are some things you will need to do so that your site becomes more visible in the search engine. It is not easy as it sounds and certainly not something which can be covered in this guide.
There are a plethora of things you should learn when it comes to SEO. However, I will discuss four basic metrics which you must have a basic Idea about. Then you can head over to MOZ SEO guide to get in-depth information.
Number of Links pointing to the Domain – Let us assume you have found a good niche/ product. However, you will have to assess the competition before you go ahead and start your store around that niche. There are various factors you may have to look into when assessing the competition. I will start with the most important factor which is, the number of unique links pointing to a domain. Here ‘domain’ is nothing but the website address of an E-commerce store. Let me explain with an example.
For ex: Let us assess the completion of the keyword ‘buy guitar online’. When you Google this phrase, depending on your location you may receive varied results. Assume the 3rd result for this query turned out be “randomstore.shopify.com”, now this is the domain you will have to evaluate.
Getting back to my explanation, you have to check how many unique links are pointed towards “randomstore.shopifiy.com”. Note that I am stressing on the point ‘unique’ because having 10 links from the same root domain ‘cnn.com’ is equivalent to just one domain.
Hence, your goal must be to evaluate how many unique links the site has. You can use tools like Moz, Ahrefs and SEMrush to determine the number of root domain links. For this example, I will make use of Moz, while it is a paid tool the feature to check unique domains is still free. Head to Moz and input the competitor’s link, it will show you the unique links the website has.
Now you may be asking, what is the number to look out for when assessing this factor? Here is a rough range based on which you can decide.
- 0 to 50 links from root domains: This would be considered as low competition. Reason being, if you are producing good content and keeping your site updated, acquiring 50 links is not a tough task. However, you must also be aware of the quality of the links. It is tougher to get a like link from ‘cnn.com’ than a random ‘anylink.com’.
- 50 to 250 links from root domains: This is an expected range for most of the sites in medium competition niche. This is still a green signal because getting 250 links is not an impossible task. Proper planning and a long-term link building approach can surely help you in building such a link profile.
- More than 250 links from root domains: This can be considered as a high competition niche. Building more than 250 links is not easy for someone new to the world of SEO. You must think before approaching such niches. You must ask yourself if you have the resources and will to acquire so many links over a period. If the answer is yes, then you can go ahead. However, be ready for a long and testing phase of business.
Domain metrics/ Authority of the competitors – Google considers 200 ranking factors when evaluating a website. While the number of links is a very important factor, the quality of the links also plays prominence. A link from ‘tech crunch’ is much more powerful than a link from ‘John’s random blog’. In addition to this, there are other factors like domain age, page speed, amount of content etc. which is considered by Google.
Based on all these factors a score is assigned to every website. This score is popularly known as ‘PageRank’ abbreviated as ‘PR’. While Google has made it very clear that it no longer gives importance to Page rank. Many SEO experts still believe that it is a good metric to look into.
There enough sites on which you can check the PageRank of any website. I’d suggest you go use the search stats for Firefox extension. If you do not want to install an extension, you could check the PR manually here.
Here is what the PageRank metric means. You can get an idea of the overall strength of the site based on the PageRank.
- PR 1 to 2: Fairly new sites with limited content and authority. Having a low number of links, this indicates either a niche with low demand or a low competition niche.
- PR 3 to 4: This is the range of PR for decent sites with good amount of links and content. However, with some planning, content and link building, these sites are not difficult to beat.
- PR 4 to 5: These are considered to be high competition websites as they have a high authority. You would need a constant flow of content and links from good authority sites in order to beat such websites.
- PR 6+: Enter this niche only if you have a dedicated SEO and marketing team. This requires the highest level of planning and implementation. If you do not have the budget or resources, stay away from this niche.
It is great to have metrics which can be attached with numbers. There are many qualitative features which Google considers while ranking a page. This can only be analyzed by visiting the competitor’s site. Below are some factors which you can look into.
- Content Quality and usefulness: Evaluate the top ranking websites for content quality and usability. Get into their website and see how easy was it to navigate and find what you want. How detailed the product descriptions and other aspects are?
Do they have a blog informing customers with all the tips related to the product? Do they have multiple support channels? If your answer is yes to all this, then it would be difficult for you to beat them. You will have to either find something unique to differentiate from them or research for a different niche.
Or if you see the top sites have a broken navigation and there is a lot of scope for improvement – it is a perfect find!
- Online Reputation: When it comes to sites which sell online, the reputation of the business becomes an important factor. A site with solid reputation over the years will still do better than the good-looking sites mainly because they deliver the best when it comes to important things.
You aim must be to build a site which is both user-friendly and also delivers the best of service. Having a dedicated support team always helps, all customers demand is timely communication about the purchase.
Kick-starting your Dropshipping based Business
Until now, we have covered all the fundamentals related to Dropshipping. Also learned a thing or two about choosing the best niche or a product. Now, let us look into financial and business planning that you will have to do before starting with your Dropshipping based business. Whenever you are planning to start an online venture, you will have to have a mindset to endure the tough journey.
You will have to understand the time you need to give for the business and the commitment required. Let me quickly cover some those aspects in brief.
The level of commitment Required
The internet world has reduced Shopify to a side hustle. People posting pictures with their lambos and what not. They are either not showing the amount of hard work they had put in or they are looking to sell a course. You need to understand that Dropshipping is like any other business, the dedication levels required is the same.
Do not think of allocating a few hours a week and then expect of making millions in revenue. It just doesn’t work that way. You will have to rather spend time or money. Let us look into each of those aspects in detail.
Investing time into your business
This is probably the best way to start any business. You may have a lot of money to get things done. However, it is recommended to try things yourself when you start for the first time. There so many things that can go wrong and it would be best if they are under your control.
You will also get an Idea about the time required to perform a particular activity. This will allow you to decide on the tasks and money required for the outsourcing of those tasks. This approach is much better than spending money on business the first time, here are the reasons why we feel so:
- You will understand and learn about the processes involved in Dropshipping, this will help you in hiring the right talent when you expand the business.
- It helps you in understanding your customer, getting a sense of what audience want and in turn helps you come up with better decisions.
- Your money is more concentrated and you will avoid spending it on unreasonable things
- Running a business allows you to evolve as a complete entrepreneur
Now, let us speak in real terms, a majority of us will not have the courage to quit our jobs until we have set up an alternate income stream. That doesn’t mean that you cannot open a Shopify business on the side. You could run a successful business by spending just 15-20 hours a week. Making $1000 a month with this side hustle is not a difficult task. However, the effort has to be put in day in and day out.
If decide to go into Dropshipping full time, then utilize the time to come up with stringent processes which can lay a strong foundation for your business. Also, channelize your money into marketing strategies and implement them.
It is not that every strategy will work but once you find a winning formula, you can scale it to make more profits. Based on data, with continued efforts and tweaking it would take around 12 months for you to replace your full-time job with Dropshipping income.
All this may seem a like a lot of work but here are two reasons why it makes sense in the long-term
- Once you have put in the initial work and have seen initial success (you have figured out the traffic part) maintaining the business from this point will require lesser time than your full-time job demanded from you. In addition to this, you can easily scale this business model.
- Seeing Dropshipping as a replacement for a day job is great. Many of us miss the major point when you are building a business like this, you are also building an asset which can be sold later. All the effort that you have put to build and grow the business will materialize when you plan to sell your profitable business for 10-20x the income.
Investing money in your business
Growing a Dropshipping business solely with money power is quite possible. However, I am not an endorser of that approach. It is very important for you as a business owner to understand every detail of your business. If you simply spend on hiring people to do all the stuff for you, you end up learning nothing.
All these costs of having a programmer and a marketer will slowly eat up the profits. I am not saying that you will have to do all the activities related to the business, but you will have to be the focal point. Every process has to be designed and set by you. This helps in creating a system which could be easily scaled with money.
Different Sales Channels you can target – Which is the best?
If you have read the article till now, you would have a basic idea about the Dropshipping eco-system, finding the suppliers, researching the products and establishing a business. The next task is to choose a medium through which you will sell your products to the consumers. You can either choose to sell on your own or list the products on Amazon or E-bay. Let us now look into the features of each of these channels.
E-bay is a very popular E-commerce website and is known for the bidding model it follows. That is how it differentiates itself from the mighty Amazon. E-bay has a large consumer base you can leverage on. Here are some of the advantages which make E-bay a good choice for Dropshipping.
The goods of selling on E-Bay
- Get started easily: The process of opening an E-bay account and selling your product is simplified. You can straight away start selling your products without having to go through any kind of verification.
- Leverage the organic traffic: When you list on E-bay you directly get access to the traffic of the website. People with buying intent would already be browsing the website to find their product. Just imagine an audience of millions for your product. If your product is unique and in a good niche, you can start making sales real quick.
- Minimum Marketing: I have already explained the importance of marketing for a Dropshipping business. However, your marketing requirement will be less or bare minimum when you list on E-bay. You will have the free organic traffic and you yourself do not have to drive traffic to your website. Ensure your list is optimized and 90% of the work is done there.
The Bads of selling on E-Bay
- Fee for listing products: While the access to traffic is a pro, in order to get access you will have to pay a small price. This is based on each sale you make and the type of product you sell. It ranges between 10-15% depending on the product category. This can be a major disadvantage if you are selling in a competitive niche and your margins are already on the lower side.
- Constant updating of listings: With the ease of listing comes a lot of competition. To stay ahead in this race you will have to constantly update your listings. You must ensure that your listing is optimized so that it appears on the E-bay search and also tinker with the prices frequently.
- No Customization: You cannot design your listing page as per your wish on E-bay. Each of these pages has to conform to the template and listing guidelines provided by E-bay. This makes it difficult to make the page different and having an identity for your brand.
- Lack of customer relationship: E-bay controls the way you do business. It is very difficult to brand yourself and be unique. This means that to the consumer, very seller may seem to the same. Some buyers may come back with repeat orders but that percentage is minimal. These marketplaces just provide a platform to sell; they do not want to focus on you and certainly wants to avoid you from building your own brand.
- You are building an asset for E-bay: Even if you get thousands of sales on E-bay, you are not building an asset for yourself. E-bay can any day decide to pull off your store as it is ultimately on their platform.
Selling on Amazon is similar to Dropshipping on E-bay. Amazon receives more traffic than E-bay. They even maintain their own stock of products and sell it to the consumers. However, the number of third party sellers on the platform is much more than the in-house selling they do. This is why everyone has space if their offering is unique.
The Goods of Selling on Amazon
While a majority of the pros are similar to that of E-bay which includes free organic traffic, Non-requirement of an SEO and marketing strategy. In addition to this, Amazon also provides fulfillment warehouses. This allows you to store your products in those centers, whenever an order is placed for your product, it is packed and shipped by Amazon. Even post-sales is managed by Amazon which makes the selling process very easy.
The Bads of Selling on Amazon
- Fee for listing products: Listing fee is common for any marketplace which allows you to sell your products, Amazon charges 10-15% listing fee depending on the type of product you are selling. This is a huge disadvantage if you are working with low margins.
- Sales Data Exposure: Amazon has been infamously known for using the sales data for their benefit. While this is not illegal, it certainly not a good aspect of Amazon as a seller. They can easily understand the products which have a market and then launch their own products in that niche. This will eventually affect your sales and overall profits.
- Lack of customer relationship: All these platforms exist to serve themselves; their main focus is on providing the best of choice to their consumers. They do not really care about the sellers. This is exactly why you do not see updates to make your selling experience easier. Your brand/store should follow the templates and rules set by Amazon.
- No Customization: As explained above, you do not get any options to customize your store and give it an independent brand feel.
The above ways of Dropshipping have their own pros and cons. If you want to build a long-term business without being dependant on third party websites, then opening your own store is an ideal option. This is preferred by most entrepreneurs who take this up as a long-term opportunity. Let me explain why by discussing the pros and cons of Dropshipping with your own store.
The Goods of selling on your own store
- Independent: You are an owner of the store and you can run it the way you want. You will have complete control over what your customers will see. Based on the feedback you receive, you can easily customize the store for better conversions. You can keep the product pages and descriptions up to date and need not follow any template.
- Easy to design: opening an online store has never been easier, thanks to Shopify as it makes the process hassle-free. You can choose from thousands of existing store designs. Added to this, you can customize the themes to match your brand and messaging. Adding products, payment gateways, customer service etc has been made easy with the help of Shopify apps.
- Mobile optimized: The number of mobile shoppers have increased and have surpassed the desktop numbers. The mobile versions of E-bay and Amazon aren’t well optimized for mobile view. If you choose to host your store with a well-known provider, the chances are that your store will be highly optimized for mobile traffic, this becomes very important as the percentage of mobile shoppers is increasing as we speak.
- In addition to this, platforms like Shopify have made it easy for you manage your entire business through your mobile. All options are mobile optimized and you can handle the store from anywhere.
- No Third Party fees: As discussed, all the platforms charge a fee of 10-15% for the sales you make on their platform. When you open a store, you do not have to pay any kind of fee for the sales you generate. This will allow you to have a competitive pricing strategy and increase the sales potential.
- Building an asset: A store on an independent platform allows you to build a brand of your own. This will help you in building a loyal customer base and increase the brand following. As and when you grow in sales, your store is growing in revenue. If any time you feel like selling the store, you can get 15-20x the profits you are making monthly. This is not the case when you dropship through E-bay or Amazon. The store is their property and they can choose to ban or suspend at any time.
The Bads of selling on your own store
- Traffic generation: With E-bay and Amazon, you did not have to bother about traffic. Your products would have an audience of millions by default. When it comes to your own store, you start from zero and have to strategize various traffic generation methods.
- Marketing: Brand building is not an easy task; you will have to maintain social media profiles to be connected with your potential customers. You must also test different marketing channels and then remain active on the best social channels.
Running the Show: How to run a Dropshipping based e-Store the right way
You may have decided to get into Dropshipping. There are a few things which I would like to cover before you get started. This will help you in understanding the problems associated with this business and how you can tackle it effectively. The last thing I would want is you being frustrated and quitting on your Dropshipping aspirations. The suggestions that follow are mainly based on the below two principles.
- Be ready for Bumpy Ride: Dropshipping can be the easiest and convenient way of doing business but you will have to also understand that it comes with its own price. There are some things which can go wrong and it is critical that you aren’t frustrated and tackle those situations professionally.
- Adopt an easy going mentality: Dropshipping eco-system may demand you to have the best of tracking software. If you chase for the best you may end up spending thousands of dollars without even finding an appropriate solution. Try and understand the problem and then choose the most viable solution. It is not necessary that the solution has to be perfect.
With the above mindset, here are some issues you are likely to face. I have given you some tips to make you understand.
You may have the best of suppliers’ fulfilling the orders for you but there are times when they too make some errors. The gravity of the error may be as small as shipping to a wrong address. However, the consequence of this error is delayed shipping and re-fulfillment of the product. Here are some things you can do in such a scenario.
- Take responsibility for the mistake: While it is true that the mistake is because of the drop shipper. You cannot say that to your customer. Your customers wouldn’t even know that you are Dropshipping. Reply to their query with an apology and brief them with what you are doing to fix the problem.
- Go the extra mile: To make up for the mistake, depending on the gravity of mistake, you could offer them a refund or free shipping of their favorite product. This will help in building a positive relationship with the customer and a positive word of mouth.
- Make the supplier accountable: Whenever a supplier makes a mistake, hold him accountable for the same. Most of the suppliers own up and offer free shipping or refunds. Do expect them to pay for the ‘Go the extra mile’ part. You are doing that out of courtesy and increase your store reputation. If the supplier habitually commits errors, you should give a thought to changing the supplier.
Having multiple suppliers ensures that you have the product in stock. You will not face low inventory issues and can also provide geography based shipping depending on the requirements of the buyers. There is one problem associated with having multiple suppliers, this could lead to problems in order fulfillment. Here are some ways to choose the ideal supplier.
- Use one Supplier: If you have found a reliable supplier, there is no reason for you to hunt for more suppliers and making the process cumbersome. Route all the orders through that supplier; you could even automate the process as you are only dealing with only one supplier. Ensure that the supplier stocks up enough products if you plan to use this method. The last thing you’d want to do is re-route the orders due to limited stock levels.
- Choose based on location: Choosing the suppliers based location will help you save time on shipping, closer the supplier, faster is the fulfillment time. This method not only helps in saving time but also helps in offering to ship at competitive prices.
- Based on Availability: How many times have you left a store because the item wasn’t available at the time of checking? This can happen to your store too. This is why routing the products based on availability ensures your store is never out of stock.
- Route based on Price: If you have a list of suppliers and find the difference in prices they offer, you can route the orders through the supplier who has the best pricing. This may sound easy but it is really difficult to find suppliers with a significant difference in pricing.
- Storing payment information: Your store will be dealing with sensitive payment information. Whenever a purchase is made, the user would have to input the payment details of their card. Storing this information can mean a lot of hassle to you. You are responsible for keeping the data secure. You will have to complain with PCI rules and undergo audits.
- All this can be avoided by either using Shopify to open your store or by choosing not to store credit card/ payment data. You can focus on providing your customers with the best of support and after purchase assistance.
- Dealing with Fake orders: As with any business, Dropshipping is not isolated from fake orders. However, with preventive measures as discussed below, you can avoid this to the maximum extent.
- Implement AVS – AVS stands for address verification system, with this feature the customer has to enter their address along with the credit card details. This reduces the misuse of raw credit card data. The feature has helped a whole lot in curbing the fraud orders issue.
This is one of the major issues being faced by every Dropshipping business. The reasons can be many and sometimes beyond your control. A customer can issue a chargeback if they are not happy with the product, if you have not delivered the product etc. You have to deal with chargebacks immediately because you risk losing the merchant account if the ratio of chargebacks is high.
You must have clearly stated the terms of return in the return policy. This depends on the supplier and how the return policy they follow. If they have a wide window for returns you can have a generous refund policy. Make sure to check with the supplier before you create the return policy and post it on the store website.
Customer support is a vital element which can differentiate you from the competitors. Ensure to provide the best of support. Just having an email to manage your support can get cumbersome as your business grows. You will have to go for third party software to provide a hassle-free experience to your customers. These solutions also help in reducing the burden on your team.
There many helpdesk solutions like Help Scout, Zendesk, and Desk etc which offer customer support solutions. Using these platforms you can easily assign tasks to specific team members depending on the issue. This helps in quick resolution of the issue.
You can also provide support through phone and then route it through these platforms. Having phone support adds a badge of trust to your business.
What makes a Dropshipping business successful?
It is time to end this comprehensive guide on Dropshipping. I hope that this helped you in understanding the fundamentals of this business and the expectations to set before you start. Before I conclude, here are some closing tips which will help in ensuring the success of your business.
- Value Addition
You must always look for ways to add that extra value to your customers. The Dropshipping industry has cut throat completion. To stay ahead in this league you will have to give more than just the product. The value addition can be in any form. It can be in the form of discounts, blogs informing the consumers, free shipping, priority customer support etc.
- Prioritize Marketing and SEO
Having a marketing strategy is very important. You have to announce your entry in the space and this is only possible by marketing. They are channels you can choose to market your store. The two main channels are social media and organic search. Paid advertising is also an option which can be explored when your business is making some profits.
In the first year, you have to spend a majority of your resources on marketing and traffic generation. There are plenty of free resources on the internet which provides highly actionable and informative content related to marketing. You could follow the top blogs for marketing like Hubspot, Kissmetrics, Seth Godin’s Blog and top SEO blogs like MOZ, SearchEngineLand etc. These resources will help you to be in sync with the changes in the industry.
- Be specific and specialize!
When there are thousands of products being sold online, being specific and unique does help a whole lot for your business. The possibility of you being successful is higher when you specialize in a specific niche or product. You must be the ultimate resources when it comes to that product.
For example: Instead of selling pots, selling organic pots narrows down the competition and also allows you to establish yourself as an authority. The number of sellers in this may be less or they may not be providing enough information to the customers. This is where you can improvise and provide the best of service.
- Think Long Term
Building and owning a Dropshipping based business is equivalent to building any other offline/ online business. There is no shortcut to earning six figures a month even though some gurus online state so. They either got lucky with the product or the success is short-lived. Treat the business as an asset. The value of your asset grows with every milestone you reach. The milestone can be in the form of increased traffic, sales or revenue.
Having a long-term mindset also helps in setting clear goals for the future. Keep working towards those goals and building the value of your asset. The more work you put into the business, the more will be the value of it.
- Customer First Attitude
Always keep the customer on priority by providing the best of services. It is your duty as a business to provide the best possible product and service. However, with the advent of social media even the smallest of mistakes can lead to bad reputation to your business. Be extra careful when dealing with customers who seem to be fussy. Provide them with all possible solutions and record all the conversations you have with the customers.
When you maintain a high level of transparency there is very little room for negative comments. Always be willing to refund if the customer is not happy with the product for legit reasons. Do not be with a mind-set of saving pennies which could later hit your entire business due to bad reputation.
- The Final Step – Get Started!
I really appreciate your interest in Dropshipping and commend you for reading the article till the end (if you have). However, I have seen that many find peace in reading and not taking action for whatever reasons. Do not procrastinate or ‘wait for the right time’, the right time may never come unless and until you take the hard step of starting the business.
Be prepared for an interesting and challenging journey, I would like to repeat, this is not easy and requires your complete dedication and time. There are times which can be frustrating and you may even think of quitting. Just do not hit the exit button early and keep trying.
It is now time to conclude this article, I hope that this will help in starting your own Dropshipping business. Dropshipping is an evolving form of business which is why you have to be updated with all the updates. I advise you to follow popular E-commerce blogs like the Shopify Blog and ecommerceFuel.
You may have a ton of questions regarding the topics I have discussed above. Feel free to contact us and I assure the best of assistance to you. If you need help in setting up, customizing and building your shopify stores, we would be more than happy to help. I would like to end the article with a phrase –‘There is no right time or wrong time, your good time begins with the establishment of your business’