The e-commerce business has become a source of income for many around the globe. There are different ways to do e-commerce business. One such popular e-commerce model of business is Dropshipping.
Dropshipping is an interesting way to earn money online where you sell physical products without having to maintain any inventory.
There is no need to own or rent a warehouse to store the products. The drop shipper does not have to deal with shipping and handling of products too.
Why choose dropshipping?
- 1 Why choose dropshipping?
- 2 Dropshipping legal or illegal?
● Easy to start
The investment needed is very low. You can start this business with investment as low as $3. Even the kids can start this business. The process is quite easy to understand, and hence anyone can start earning with drop shipping.
● Zero inventory management
In dropshipping, all you need to focus on is marketing, merchandising, and promotion. There is no need to worry about managing any inventory or packing of the products that you sell.
● Get easy access to a wide range of products
You can find millions of products and suppliers who are looking to sell them. You have to look for the products that are trending in the market and proceed accordingly.
● A business entity is not necessary
A known business entity is always helpful to start any business. However, if you are thinking of starting a business in drop shipping, you don’t have to worry about having an established business entity.
● Decide your retail price
The rate at which you sell the products is your own decision. Hence, the margins are within your control.
● Easy scaling
Once you get set with drop shipping you can hire virtual assistants to handle the order volume.
Dropshipping legal or illegal?
Dropshipping is very similar to the online stores, with the only difference lying in the fact that as a drop shipper you only handle the orders while your supplier looks after the packing and shipping of the goods.
So, in this business too, you will have to acquire the sellers’ permit to make dropshipping legal. Once you have the permit your business is 100% legal.
Many known companies depend on drop shipping to promote the sale of their products.
However, brands like Amazon and eBay do not permit drop shippers to sell their goods. So, dropshipping their products is illegal.
Buying from another retailer and having them ship the products to the customers is also considered illegal in dropshipping.
As long as you are dropshipping from your website with a proper business license and sellers permit, it is a completely legal business.
Getting Started with dropshipping
Starting dropshipping is not very difficult. Here the procedure has been broken down into simple steps to make it easy for a beginner:
1). Starting the website
This is the first and easiest step to start dropshipping. The platform you create for your e-commerce platform will depend on the budget and features needed.
Nowadays there are many easy options to create this platform. Shopify, WooCommerce, and BigCommerce are some great platforms where you can get your website created and host it.
On Shopify, you can start the website immediately without any technical knowledge. But it is a costly option.
On WooCommerce you will have to need some prior knowledge in the field of technology as you will have to host the website on your own. The charges on these platforms are pocket friendly.
2). Find products which can maximize profit
The margins in dropshipping tend to be lower as compared to other e-commerce businesses. Hence, to ensure maximum profit you will have to look for products that have high price tags.
Personalized products are in demand and people willingly pay for such products. Products of makeup, food, cleaning are also in demand all the time. Products with an existing followers base can also bring in constant income.
Search engine optimization is also an important step to ensure a rise in traffic online. Here is a simple product guideline to help you choose the products which can increase the margins:
- Focus on products that have ambiguous inherent value.
- Take orders that have an average value of at least $50
- Repeat business and cross-selling are the keys to successful dropshipping
- Choose the products which are always in demand. Hence, avoid electronic items.
3). Finding Suppliers
The internet is full of scammers. It may be a tough task to find genuine wholesalers. So, how do you identify a genuine dropship supplier?
- The genuine dealers will never charge you with a monthly fee for giving access to the product catalog.
- The focus is always on selling their products in bulk and not run a membership site instead.
- The wholesalers never sell their products to the end customers at wholesale prices.
Choosing the right supplier is important for your business to flourish. You also have to develop trust with the suppliers.
You can always test the dropship vendor. Check how fast the product gets shipped, how well it is packed, and what is the quality of customer service.
Also, find out about their drop ship fee, return policies, discounts, pricing, and if customizations are available. Once you are assured that the supplier can meet your requirements, you can start your business.
Contact the Manufacturer
Manufacturers have a list of wholesale suppliers to whom they sell their products. Contacting the manufacturer directly is the easiest way to get a list of genuine wholesalers.
You will save time and can be saved from the scammers on the internet. If you get lucky then you might end up with a big distributor with a large catalog of products.
Such distributors make the work easier. You can place orders for multiple items from a single distributor and reduce your drop shipping fee.
This is considered the most difficult part of dropshipping. You will have to convince the genuine distributors that you are serious about the business and will be beneficial for their business.
They also look out only for the legit retailers. So, you have to have all things prepared before you reach out to them.
Visit the Wholesale trade shows
Face to face meetings are always the best part to start any relationship, be it personal or business. Trade shows are a great place to find suppliers for your dropshipping business.
You can see the product catalog also. Such shows are usually free of cost and require you to have a business license.
If you can develop a strong personal relationship then this will help you develop your business with such suppliers.
Find suppliers from competitors
This is a simple way to get information about a genuine supplier. Order something from a competitor of yours in the dropshipping business.
Once you get the delivery you will know their suppliers. You can contact the supplier for building business relations.
How much money can you earn from dropshipping?
Honestly, the dropshipping business has much lower margins when compared to other online e-commerce sites.
On average the margins may range from 10% to 40%, however, this is just an estimate. The margins are strongly dependent on how the business is managed and the products which are being sold.
It has been found that dropshipping can give you higher margins when you deal with high priced items like perfumes, makeup, jewelry, or the large kitchen and garden equipment.
With such items, you can make a good profit on a single order. you can also earn well by selling customized items like coffee mugs, key chains, cushion covers, photo frames, etc. Personalized gift items are always in trend and people generally pay a lot for such items.
Marketing and sales should be the area of focus as a drop shipper. You have no inventory to manage or shipping to look after, hence, put all your energy in marketing the products on your site.
The better marketing you do, the more customers will reach out to you. Give the customers a reason to visit your site out of the hundreds and thousands of sites that are available on the internet.
The way you deal with the returns and provide support to the customer in case of delivery of defective items will say a lot about your business.
It is advisable that you deal with return and customer support on your own and never rely on your suppliers.
You should also be able to give your customer an appropriate answer when he/she orders for products that are out of stock.
Give them options to either wait for the product or suggest similar items. If it is a case of an exchange of items, then make sure you refund their money as soon as possible in case of the unavailability of the item.
If you are doing business with several suppliers and your customer places an order for items from different suppliers, you have to ensure that the customer is informed about how the packages will be delivered.
You will have to explain to the customer that the order will be delivered in parts. In such cases, the shipping costs will also be varied. You have to deal with all such things smoothly for achieving 100% customer satisfaction.
You can also have a sale section and give interesting discounts on various products that will attract customers. With proper planning and the right moves, you can increase the margins to 50%-60%.
Another great part of dropshipping is the fact that it is infinitely scalable. Once the business has gained a lot of customers and has become popular, scaling becomes easy.
What are the pros of dropshipping?
The business has gained popularity in recent days owing to the benefits that it gives. Dropshipping is something that anyone can venture into. With a computer or laptop and a strong internet connection, you are set to start dropshipping.
Here are the pros of dropshipping:
● Zero setup cost
Free open-source platforms are available for you to start your dropshipping website. The investment may come in the form of a small fee that you pay to these platforms for their services.
On average the investment may range from $2 to $52, which is much lower than the investment required for setting up traditional e-commerce sites.
● Risks are low
The investment is very low, so even if the business fails the loss is almost 0. hence, dropshipping is considered to be a business with practically no risk involved.
There is no pressure to sell the products because you don’t have a storehouse full of goods to sell.
● Location is not a problem
Dropshipping can be done from anywhere at any time. Location is not a constraint in this business. All you need is your computer and the internet. You can hire virtual assistants when scaling the business.
What are the drawbacks of dropshipping?
The idea sounds quite interesting given the zero investment and no risk. But handling dropshipping can be a tough thing to do.
Setting up is easy but running the business is difficult and not as easy as it sounds. Here are a few cons of dropshipping:
● Lowest prices are a myth
Most people venture into dropshipping assuming that they can get products from the wholesalers at really low prices. This is not true, however. The distributors often charge extra for dropshipping.
So, you will have to select the products very carefully and then select suppliers with the least possible price.
● Shipping costs have to be high
The amount you charge for shipping the order has to be high. The suppliers will be taking a huge amount of what you earn. So to ensure you get a margin the shipping costs that you charge from the customer have to be high.
● Management can be a nightmare
Most dropshippers relax thinking the suppliers will take care of the delivery and packaging. However, there is much more than just shipping the products.
You will have to manage returns, exchanges, and also provide strong customer support. Managing both suppliers and end customers may turn into a nightmare.