How to start a dropshipping business
Run a successful business requiring limited investment
With the increasing popularity of online stores, dropshipping has become a go-to way to kick-start an online business. If you are someone who wants to create an online store but has a limited budget, dropshipping could be the ideal solution for you.
Many people still ask questions like How does Dropshipping work? and How to start a dropshipping business? In this article, we tell you all you need to know before diving into the world of dropshipping.
- What is Dropshipping?
- To Start a Dropshipping Business
What is Dropshipping?
Dropshipping is a way to sell online, where the store serves as an intermediary between the suppliers (who hold the inventory), the sellers and the buyers. In this case, the seller is only responsible for promoting and selling but does not manage the inventory, packaging or shipping.
What is the key to success? Have a well-defined niche, invest smartly in digital marketing, have effective communication channels with suppliers and customers and analyze data to make decisions focused on what your target audience demands.
The way you generate income is the difference between the value you pay for a product to a supplier and the final price paid by the buyer. Where is the Achilles heel of dropshipping? Find authentic wholesalers, suppliers that serve as allies to build and maintain the reputation necessary for your online store to prosper.
Simply when a buyer confirms a purchase, the dropshipper issues the order to the suppliers. This allows you to create a business model without having the product.
Flexibility: Being a service that does not have a physical presence, you have the flexibility to choose the location from which to work. Also, the fact that you can validate without having to risk buying, allows you to make quick decisions and change from the product to the form of promotion, to the extent that the behavior of your customers is giving you information.
Easy to start: It's easy when you find suppliers and you have a clear niche to try. Your efforts will be focused on building a good Minimum Viable Product (A store that is good and safe enough to leave) and in promoting it. In fact, it is recommended to start with a single provider and see how it works.
Low capital requirement: You could say that the biggest capital is the time you invest in determining your niche, choose the products, the suppliers and set up your store or, upload the products and their descriptions if you enter a marketplace.
Low costs: You save having to pay for a warehouse, the cost of packaging, all resources related to inventory management and accounting. As for advertising, you can try investing a few dollars (from US $ 40 a week) on social networks like Facebook and Instagram.
A diversity of offer: If you were the manufacturer of a product, it would complicate the diversification of your merchandise. Instead, because you only manage a list of products, you can have several brands and suppliers that meet the needs of your target audience.
Scalable: If you had a shoe factory, you would sell online in one city and would like to ship to another, the expansion would entail proportional costs. On the other hand, by providing the dropshipping service you can go to more geographical areas as long as you coordinate well with your suppliers while maintaining low operating costs.
Low margins: There is a high competition of actors in the market, which generates a price war. The solution is that you find an adequate market niche and focus on developing a competitive advantage different from the price.
Instability of Inventory: As you depend on several suppliers, if one of them is running out of stock, you have to quickly change the offer in your store. Otherwise, you could lose credibility.
Complexity in shipments: Having several suppliers, shipping costs may vary and this can be complex to handle facing the final consumer.
Numerous factors out of control: Any error in the shipment or in the product affects the reputation of your online store, not who supplies it. Therefore, once again, the key to the sustainability of this E-Commerce model is finding good suppliers.
The returns: One of the main obstacles in the dropshipping are the returns since the suppliers rarely agree to accept returns and even if they accept it, generally you as a store do not receive the notification when they receive the item.
Reimbursements: Handling reimbursements is not easy either because suppliers are generally opposed to issuing refunds. Most likely, they justify that the order was already issued or that they offer to resend. The risks increase proportionally to the increase in sales.
If you are willing to try for yourself and draw your own conclusions, it is key that you know that the most important thing to start is the definition of the niche, parallel to the search for authentic wholesalers.
To Start a Dropshipping Business
Choosing the products to sell
Take a pen and a paper, order a cup of coffee and think about your options, what products can you sell? Set a criteria for yourself, let's say you come up with a list of 5 products that are a definite NO for you.
For exmaple, it might be a good idea to not sell Food products with dropshipping or very low priced goods that might have high return costs.
Study what are the best selling products in the most popular marketplaces. I recommend you check Amazon's Best Sellers section, which they update every hour.
This global marketplace has a direct presence in the United States, the United Kingdom, Germany, France, Italy, Spain, Japan, Canada and China, and serves clients in most countries of the world.
Investigate the trends of the growing industries in the local market: While having an online business allows you to reach places where it would be physically difficult for you, each country has a different market and regulatory characteristics. If you want to start, do it in a market that you know.
Think logistics: Know what characteristics have the logistics services of your country and what are the costs associated with packaging and shipping. To start, I advise you to start with smaller products and, with the growth of sales, you can negotiate better prices later.
Look for products that have less possibility of being returned: As the shipment is a complex issue, having products with low returns can avoid many headaches.
High margins: Not mandatory, but it's a smart choice, discard products with very low profit margins.
Think of products that require replacement or a repetitive purchase.
Check on the availability of products, are they easy to order will you have problems if the number of orders increased?
Products that you can offer with added value in the online experience. What products could be more pleasant to buy online than physically?
Use the most searched information on Google: If you are going to sell online, one of the strongest channels to find your store will be Google. So there you have very relevant information on what is most sought by people on the Internet.
You have two tools to do it. One is Google Trends that shows you the search trends and the other is Google Adwords keyword planner.
A quick test and see the results: In business, the validation of the client exceeds all market projections. So spend time going out to try if there is an interesting group of people who want to buy you.
Check the social media trends for the products you have narrowed down, is there a buzz around them? What are people asking about with regards to those products specifically?
How to find the right wholesalers?
Search on Google: Nowadays the dropshipping model is well known and there is a lot of information on the Internet, so you can search directly from wholesalers for the products you want to sell.
Keep in mind that the credibility and level of excellence of these are not necessarily reflected in their web facades, since, in general, they are not focused on this. So be patient and do not trust the first page that appears on your search.
Contact the manufacturers directly: You can search the manufacturers of the products you want to offer and ask for information from the wholesalers with whom they work. Repeat this and after you have contacted 5 to 10 manufacturers you will be able to know who the popular wholesalers are in that market.
Investigate your competition: Also, you can order a product from the competition that you think uses dropshipping and when the product arrives you can trace the original shipping address to find the supplier.
Subscribe to a directory: Another way is to search online directories, filter out useless information to make authentic wholesalers visible.
Now, before taking a risk and placing a large order, you can make a test order and see in practice how good or bad the service offered by the provider is.
Signs of good suppliers
Have good sales executives, fast communication, and simple processes (You will stand up for these providers and have to deal with customer complaints). In face of complex scenarios, it is vital that you have a trustworthy and flexible supplier who can support you to solve the problems efficently.
They do not ask for monthly fees. If providers ask for a fixed monthly amount of money, this is a common sign that they are not a legitimate wholesaler.
They have integrated technology such as, real-time inventory and online catalog. Although it is not a common trait of wholesalers, it will always be a relevant quality that facilitates the processes.
You can place an orders with them by e-mail.
They ask you for confirmation that your business is legally constituted.
They charge fees per order since the cost of packaging and shipping is different from the product alone.
Once you have figured out what you want to sell, it is time to create your online store, use your 14 days free trial period to get familiar with the platform.
The best and most sustainable way to build a long-term business is to develop your brand!
Use the Jumpseller Themes Gallery to select the most suitable theme for your product, your online store will be your only interaction with your potential customers, it should look profesional and should give the visitors a sense of trust.
Create a nice looking logo and a cool tagline for your brand! Pay attention to details, have good product descriptions, and high quality product images. Make the visitors experience memorable and make them come back for repeat business!
Use Digital Marketing to sell online
Digital Marketing refers to Marketing through all digital channels such as email, social media, content marketing, mobile networks and search engines. Best thing about digital marketing is the fact it can be free and effective at the same time, however, that does not mean it is easy.
Creating a strategy to sell online required time and thought, luckily, we came with this guide which will be your shortcut to Digital Marketing heaven.
Once your store is online, do not think your work is done, always look to improve as dropshipping is a very competitive industry and you will likely face a lot of competition. Pay close attention to your customers feedback and the social trends and adapt accordingly.