Dropshipping is an eCommerce business approach in which store owners process orders through third-party vendors or suppliers; the third-party dropshipping supplier takes responsibility for fulfilling the order to the customer.
It is unique in the sense that the retailer does not store inventory but instead delivers customer details to the supplier who ships the orders on the retailer’s behalf. Thousands of people make a comfortable living through dropshipping, and there is no reason you can’t do the same.
How dropshipping works
Dropshipping is based on a simple concept. It includes 3 simple steps
The seller (drop shipper) publishes items he/she wishes to sell through his online store. The customer sees the items and places an order through the drop shipper’s website.
The retailer gets the order details and forwards customer information to a dropship supplier (this process may be manual or automated).
The supplier then packs and delivers the required products directly to the customer with the store owner’s branding.
Advantages of dropshipping
Establishing a dropshipping business is relatively straightforward. All you have to do is find a supplier, set up a website, and sell goods. Done the right way, it is easy to manage with minimal investment.
Minimal setup cost
Although traditional business ventures require massive amounts of startup investment (warehousing, purchasing inventory), dropshipping removes all these hurdles and costs. All you need to pay for is the cost of running and maintaining your website.
With dropshipping, you needn’t worry about renting or buying an office.
Since there is no need to hold inventory, your business has little to lose. Furthermore, there will be less pressure to make sales.
You don’t need to have an office or warehouse to run a dropshipping business.
Dropshipping lets you sell anything you want. You can enter any niche, and you don’t have to commit to any one supplier
In the conventional business model, you must work harder to earn more. Since the supplier ships the products to the customer, you can offer thousands of products without holding inventory. The shipping process is more straightforward, reducing the risk that items will be damaged in transit.
The drawbacks of dropshipping
Like everything else, dropshipping has disadvantages. Here are some of the most significant:
Relatively low margins:
Since you’ll be purchasing single items, you may have to pay a higher price. Most wholesalers and manufacturers do not dropship, which means you’ll have to buy from (more expensive) retail vendors. It is a costly arrangement that hurts your product margins
Full liability for losses.
You will be held responsible for anything that goes wrong when the supplier ships products to your customers, and it will affect the perceived value of your brand.
In the dropshipping model, sellers have no say over the way their brands are portrayed to the customer. This happens because the supplier handles the order fulfillment process.
If you have several suppliers for a single order from your customer, you may experience transportation problems. Different suppliers charge different shipping rates based on product type, location, and other details.
With eCommerce rapidly gaining popularity, dropshipping has become a fiercely competitive industry.
Is dropshipping ideal for you?
Dropshipping does not fit all business types. However, there are several entrepreneurial models for which it is an ideal strategy.
Validating entrepreneurs: with dropshipping, you get the freedom to try out new products before investing in inventory and stocking. Stocking products involves taking on the risk that they will not sell. The strategy allows you (the entrepreneur) to lower risks and validate the demand for products before acquiring inventory.
Budget entrepreneurs: with dropshipping, you can sell online at a minimal cost. Consequently, it is the ideal model for entrepreneurs with limited budgets or startup companies interested in cutting their expenses.
New entrepreneurs: if you’re selling online for the first time, then dropshipping is the best model to implement. E-commerce can be tricky. If you have no prior knowledge of digital marketing, then it’s best to start with dropshipping until you can handle the challenges that come with full-fledged eCommerce fulfillment.
Furthermore, because dropshipping requires little investment, you may use it to build brand value. It also gives you room to learn about online selling, conversion optimization, driving traffic, and other eCommerce fundamentals.
Large-scale entrepreneur: if you want to sell a wide variety of products, this business model might be the right one for you. Dropshipping lets you offer thousands of products that would require large amounts of funding to maintain if you were holding inventory.
How to find drop shipping niches and products
Choose the right niche.
Find ideas. Take a survey of everyone around you (yourself included) study what people like to buy online, what they like to take on vacation, and so on. This will give you a rough idea of the kind of products and niches that are good for dropshipping.
Study your competitors: study other dropshipping brands to find niches that might be too competitive, then ignore them. You may use google search, AliExpress, and Facebook search for this endeavor. For more on that, you may want to read “how to find the best product niches for dropshipping in 2020.”
study customer loyalty: Avoid products and niches that are dominated by national brands-
Target expensive niches: the higher your product cost, the higher your profit margins will be.
Avoid highly returnable products: don’t drop ship products with style and preferences as they have extraordinarily high return rates, and you don’t want that.
Avoid seasonal niches: selling products with stable demand helps you maintain constant sales volume – it’s a good thing because it allows you to predict consumer behavior trends.
How to find dropshipping wholesalers (suppliers)
After you’ve found the right niches and products, it’s time to look for dropshipping suppliers. You can use several strategies, remember though, that this may be the most challenging part of starting your business.
Before you reach out to potential suppliers, you should prepare. Have all the legal paperwork, plus your business vision and mission ready. Most reliable suppliers will ask for verifiable proof that you represent a legal business before partnering with you.
Talk to manufacturers
Product manufacturers know reliable wholesale partners because they often work together. Ask (politely) for a list of wholesale distributors and call them to schedule meetings so you can see if they dropship. Some manufacturers will have drop shipping programs for resellers.
Whether it’s in an actual book or digital database, your work will be a lot easier if you have a database of suppliers sorted by their products or niches
Use google to find reliable, high-quality suppliers. You should know how to do search engine research for the best chances of success. There are several eCommerce blogs and forums that will provide useful information on how to find reputable suppliers.
Visit trade shows
Trade shows are the ideal way to connect with manufacturers and dropshipping suppliers. Look for tradeshows within your niche and attend them whenever possible.
Pro Tip: It may be hard to know whether you and your drop shipper will be a good fit. Consequently, you should ask all the necessary questions and verify that they can deliver as promised.
Qualities of reputable suppliers
The following tips will help you find reliable, high-quality dropshipping suppliers:
They should possess sufficient infrastructure: at the very least, a good supplier should provide a comprehensive digital catalog, real-time inventory updates, customizable d searchable order history, and customizable data feeds so you can manage your operations. If your supplier lacks technological capacity, they may fail to deliver when you need to scale up your operations.
Your supplier should have helpful sales representatives. It is wise to look for dedicated representatives who can help you quickly sort out technical problems.
The ideal supplier should be orderly, punctual, and efficient. Customers value fast shipping and will buy from retailers with the shortest delivery times, even when it’s more expensive. For this reason, you should find drop shippers who can deliver between 24-48 hours, without fail. You should also partner with suppliers who have the lowest failure rates. You can evaluate their punctuality by placing a test order.
High product quality
Reliable suppliers Provide quality products. The best products will satisfy your customers and get you positive testimonials and product reviews.
If you’ve reached this point, you know what dropshipping is, how it works, its benefits and drawbacks, and you’re sure you want to start a dropshipping business. You’ve also identified a profitable niche and found the best suppliers. Now it’s time to really get to business
Launch your online store/website
Manage your inventory
There are several inventory management platforms available online. They will handle the most strenuous tasks for you, but you’ll still have to manage stock – even if it’s not on hand.
Develop a customer acquisition plan and evaluate your metrics.
You need customers, and one of the best ways to get them is through targeted ads. Launch Facebook and google ads campaigns to target your audience. This will help you generate quick sales. For longer-term results, consider search engine optimization and email marketing. They will help you cut back on your advertising spend.
Pro tip: Remember to track your conversion metrics. Knowing where your customers come from and how they buy will help you optimize your marketing strategy. You
Optimize the order fulfillment process
Order fulfillment optimization will help you keep your customers satisfied and avoid disputes. For optimal fulfillment, follow these rules
- Give customers tracking numbers, so they know when their products are processed and shipped,
- develop a strategy for returns processing or exchange policy to handle damaged goods.
- Once an item runs out of stock or is discontinued, do your best to find it for your customers, your customers will appreciate your effort and come back.
- Have a clear returns policy, provide clear shipping communication, and reliable customer service.
Choose a dropshipping platform.
While it is possible to run your dropshipping business manually, it can be highly stressful and leave you prone to error. The ideal approach is to choose a dropshipping tool to help you manage things.
Whether you’re just starting a dropshipping business or looking to simplify your current setup, Wholesale2b offers a comprehensive dropshipping solution that grants you access to the best dropshipping suppliers through a single dashboard. With no credit card required, its risk-free solution will streamline your dropshipping operations and help you get the best products for your customers.