This is the most detailed article on dropshipping you will find anywhere. No scam or sales pitches here, just the truth, written by folks who have used dropshipping to create a large successful business.
I will teach you everything you need to know to get your own dropshipping business off the ground while avoiding the costly mistakes that can kill a new dropshipping business.
Starting a dropshipping business is one of the easiest ways to make money online. If you’re thinking of starting a dropshipping business – either as a side hustle or a means to leave your full-time job – you can save yourself time and set yourself up for success by following the simple steps outlined below.
But first, what is a dropshipping business
Dropshipping business involves selling products through online stores where the retailers do not keep a stock of goods. A customer purchases an item from your store at retail price. The retailer transfers the customer orders and shipment details to either the manufacturer or wholesaler, who then ships the goods directly to the customer. All you have to do is set up the retail website, find customers, and handle customer support.
There are thousands of people around the world who make five-, six-, and seven-figure incomes from drop shipping, and there’s no reason why you can’t do the same.
If you’re contemplating dropshipping, consider taking the following business and financial steps. Some are mandatory from the outset, while others are just a good idea, but dealing with them upfront will save you time and avoid challenges when you start.
How Dropshipping Works
In more simple terms, dropshipping works like this:
- A customer purchases an item from your store at retail price.
- The order is forwarded to your supplier by you (you pay the wholesale price)
- The supplier ships the item directly to the customer under your business name
- You alert the customer of shipment.
This means that you – the dropshipper – don’t have to buy and store bulk stock, which saves you from investing a lot of money upfront. It also eliminates the risk of buying in bulk and not selling all of the products, leaving you out of pocket.
This is why dropshipping is so popular – it requires minimal investment but reaps similar benefits to traditional retail models.
How much does it cost to start a dropshipping business?
The truth is, it can range anywhere from $0 to about $1,100, depending on how much of your money you want to put in.
What are the benefits of dropshipping?
There are at least five good reasons that almost any retailer should consider dropshipping.
- Minimizes startup risks
- Lowers product costs
- Lower storage and logistics costs
- A broad product offering
Is dropshipping profitable?
Yes. Dropshipping is a low-risk business model that allows you to sell products to your customers without incurring huge running costs as a wholesaler would have.
How big is the dropshipping market?
The global dropshipping market size was estimated at USD 149.4 billion in 2020 and is expected to increase in 2021.
How to Start a Dropshipping Business
Step 1: Choose your market segment
Choosing a market segment is the first step to starting a dropshipping business. . After all, if you choose a poor product segment, you won’t get many sales, and your dropshipping venture is unlikely to succeed. Thankfully, there are millions of options to choose from when it comes to picking a market segment. It’s just a case of figuring out the best option for you.
The rising popularity of dropshipping means it’s becoming harder to find a segment that isn’t already saturated. But new products and segments are emerging all the time, so the opportunities are almost endless…
A common misconception about dropshipping is that you can be successful and profitable in any segment, but that’s not true. If you choose a segment that’s already saturated with sellers or dominated by major brands, you’re going to face an uphill battle with your new business.
Here are a few guidelines to help you choose a dropshipping market segment that will make you money online:
· Find out what’s trending
Selling products that are currently popular is one option. In fact, you don’t need to know much about the product or your customers. Identify which products are trending, and because of their popularity, marketing costs should be below for you.
You can check Amazon and eBay to identify which products are in demand. The best place to start is with the search bar, as this will suggest items that are currently getting lots of searches.
· Identify gaps in the market
By now you should have a good understanding of which products are in high demand. You can now start to look deeper into where the real money-making opportunities lie.
One of the most effective methods of generating these insights is by reviewing sold items through eBay’s advanced search feature. This will help you assess whether products with high search volumes aren’t being catered for by any other merchant on the marketplace or perhaps aren’t being sold at the right price.
- Research the competition
Is the niche you’re interested in over-saturated? If so, is the competition easy to beat? You’ll often find that the product/segment you’re most interested in joining is the one that nearly everyone is already a part of. This doesn’t mean you can’t go into the segment. Just be prepared for some competition.
- Ensure the Segment is profitable
The main reason you’re entering into the dropshipping business is to make money. Therefore, you need to check the profitability of every dropshipping segment and product idea that you come up with. Ideally, you want a profit margin of at least 30% after shipping costs, seller fees, and taxes, but you should be aiming for margins of 100% or more.
The first step to starting a dropshipping business is about choosing a product segment.
Step 2: Find a Supplier of your Product
Finding a reliable supplier is the hardest part of starting a dropshipping business. You rely on suppliers to keep your product in stock, uphold product quality, and promptly ensure orders are shipped to your customers. As a dropshipper, your supplier is your most important business partner.
Doing business with the wrong supplier can ruin your business, so you mustn’t rush this step. Conduct proper due diligence. Make sure to ask many questions and learn what their production capabilities are if your business grows exponentially. You want to be certain they have the ability to scale with you.
How to Find Reliable Suppliers
There are some ways to find good dropshipping suppliers. The methods below are listed in order of effectiveness and preference.
- Contact the manufacturer: If you know the product you want to sell, contact the manufacturer and ask for a list of its wholesale distributors. You can then contact these wholesalers to see if they dropship and inquire about setting up an account with them. This way, you will be able to identify the leading wholesalers who are dropshipping suppliers in the market.
- Searching for suppliers online: You can type your product plus “supplier” into Google and see what comes up. Or you can search for your product on websites like Alibaba.com or Aliexpress.com. China-based suppliers use these websites to sell their goods.
- Using a wholesale directory: This is a database of suppliers that are organized by market or product. Many directories (Salehoo, Doba) employ some screening process to ensure the suppliers listed are genuine wholesalers. You can contact them in just a couple of clicks and have confidence in their ability to provide good service.
Step 3: Choose a selling platform to use
So you’ve decided on a product, and you’ve lined up a supplier – now you need a place to start selling and making money. Choosing the right selling platform or online marketplace is crucial to your business’s success – but which platform is best for you?
It would help if you decided between selling on the popular e-commerce platform or start your own online store. It’s recommended that you start selling on a popular platform because they take care of so many problems of running a business that you may not have the resources to handle. As your business scale, you can then consider launching your own website.
Step 4: Finance Ready
One common mistake entrepreneurs make when starting a business is not taking financial management seriously. Every money-making business needs to always look out for financial loopholes that can ruin the business and prevent such from happening.
Financial activities such as tax remittance, wages, and invoicing should be taken seriously from day one. It would help if you also learned to keep your business and personal finances separate as much as possible.
Step 5: Marketing your product
Now that you have a selling platform for your dropshipping business, you need to attract customers to your store. This is where marketing comes in. There is this popular quote in business that says, “Nothing happens until someone sells something.” The major purpose of venturing into a dropshipping business is to sell something. This can only be achieved by constantly looking for innovative and less cost-effective ways to promote your business.
Marketing is the art of persuasion. Sounds expensive, right? But it doesn’t have to be. You can take the fast path that you have to pay or the slow path that’s free to gain new customers. Let’s take a look at both strategies in more depth.
Fast and need payment.
- Facebook Ads for Dropshipping
Facebook is one of the world’s largest social media platforms. It’s a great place to advertise your products as you can tap into a huge audience. Facebook ads are a good option for the following reasons:
- It’s easy to get started.
- You can control how much you spend each day.
- You can target highly-specific age groups (location, interests, relationship status, etc.)
- Yield fast results
- It helps to increase brand awareness.
- Google Ads for eCommerce
You can buy ads for your store to appear at the top of the page for the keywords you want to rank for. Google ads are a good option for the following reasons:
- You can achieve great exposure in search results.
- It’s the largest advertising platform in the world (Google search, Youtube, Gmail)
- You can target highly-specific age groups (location, language, device, etc.)
- Social Media Influencer Marketing
Influencer marketing has become a huge part of customer acquisition for retail brands in recent years. It could play an important part in your dropshipping business. It can be particularly effective if you are in a trendy segment. For instance, if you’re selling a new style of handbag, you could reach out to an Instagram celebrity with a large fan base and ask if she/he will share a post of her with the bag, tagging your business. The cost of influencer marketing depends on how famous the influencer is. A post from Rihanna might cost $250,000, while a post from a model with 10,000 followers might only cost a few hundred dollars.
Slow but free
- Content Marketing
Content marketing is meant to involve creating valuable content that helps to build an audience that you can then convert into customers. It’s not as explicit as advertising and should always be more about serving your audience than your brand.
- Social Media Marketing
It’s getting harder and harder to achieve organic reach on social media, but it is still possible. If you can consistently create and share great content on your social media channels, you’ll eventually build a following, which you can then convert into customers.
- Email Marketing
Building an email list is still one of the most effective ways of acquiring customers. It would help if you had a way of capturing email addresses, such as a request to sign-up at checkout or a discount that requires an email address. Once you have a decent list of email addresses, you have a way of reaching a large group of people regularly, for free.
Start your dropshipping store.
Whether you’re a new entrepreneur or looking for a passive income, a dropshipping business is a low-risk & low-cost way to start selling online. We hope this guide has helped you decide whether or not dropshipping is a viable business option for you.