How to Start a Dropshipping Business (2021)
What is “Dropshipping”?
“Dropshipping” is the process of shipping goods directly from an external supplier or vendor to the customer, without an intermediary step.
It is the ideal business model for new e-business entrepreneurs.
It is easy to set up and manage and does not require a large upfront investment.
Here are two examples, one with a business model without a dropshipping provider, and the other with a dropshipping provider:
- Products are routinely ordered from the supplier to keep inventory on hand (often MOQs to get the wholesale price).
- Products are stored until the customer requests them.
- Customers’ orders are processed; goods are packed and shipped to the customer.
However, when you have a dropshipping provider, the process will be a little different:
- The customer requests the products.
- The order information is passed on to your dropshipping provider.
- Upon receiving the order, the dropshipping provider charges you a price for the sold product.
- Goods are packed and shipped directly to the customer (you don’t need to store or package them yourself).
Dropshipping is the process of selling a product, on your website, without actually dealing with its storage, packaging, and shipping.
And it has another major benefit
you don’t pay for the product until the customer pays for it, which makes dropshipping an attractive option for people who don’t want to spend much on initial inventory or who don’t want to risk buying products that won’t sell (when a store owner receives an order from A customer, it calls the supplier who will ship the products directly to the customer’s door).
What do you need to start working in dropshipping?
We said in the previous paragraph, that “drop shipping” is a method of fulfilling orders that allows store owners to sell directly to consumers without storing any inventory.
And when a customer buys a product from a dropshipping store, an external supplier ships it directly to them (the customer pays the retail price you set, you pay the wholesale price to the suppliers, and the rest is profit).
And you never have to deal with products or invest in inventory.
In order to sell products via “drop shipping,” you only need to register an account with a supplier.
There are two popular ways to find a supplier for your dropshipping store:
- Through a supplier database, such as (Dropship Direct, Alibaba, or AliExpress).
- Use the integrated supplier directory on your store’s backend, such as Oberlo.
For example, the easiest dropshipping process for Shopify is through Oberlo.
You can get millions of products from the Oberlo Marketplace through AliExpress and import them directly to your store with the click of a button.
And when a customer buys something in your store, Oberlo automates the order.
All you have to do is check carefully that the order details are correct, and click on the “Request” button.
The product is then shipped from the AliExpress dropshipping supplier to the customer, regardless of where they are in the world.
In the dropshipping business model, you are responsible for the following:
- Create a website.
- Create your own brand.
- Choose and market the products you want to sell.
- Determine shipping costs and prices that lead to a good profit margin.
Here are 9 steps that are indispensable for a profitable dropshipping business plan:
- A real commitment to starting a dropshipping business.
- Choose the business idea of drop shipping.
- Conducting competitive searches.
- Choosing a dropshipping supplier.
- Build your own e-commerce store.
- Define the business structure.
- Regulating financial matters.
- Marketing for your dropshipping store.
- Analyze and improve your offers.
Best 5 tips when starting a dropshipping business:
- Conducting specialized research.
- Negotiate with suppliers about financial and economic matters, shipping terms, etc.
- Picking a strategy for how the products will reach the market (marketing strategy).
- Follow all the previously mentioned steps to start the best profitable drop shipping business plan.
- Advertising and promotion.
What are the benefits of “dropshipping”?
- Dropshipping eliminates the need to keep stock on hand.
- Free business from costs (time, labor, and additional financial outlay) for manufacturing or organizing products and storing them.
- If you only ship some of your products, it will free up resources for items that need more attention, and it also allows you to display items that would normally be impossible to ship due to your location restrictions such as very large or fragile goods.
In addition, there is another benefit, which is that your drop shipping provider takes care of the entire physical process of packing and shipping your products. For many business owners, packaging, shipping, and implementing is a huge logistical problem.
And drop shipping in this case mainly uses external sources, since the companies of the drop shipping service providers are often large companies that handle many orders per day, and they may have to negotiate shipping rates that are lower than those that your small or medium businesses can get.
In addition to not having to stock up on physical inventory, dropshipping can prevent other logistical problems. You don’t have to worry about overstocking or shortages on your part, and your company is not at risk of changing trends that cause certain products to suddenly fall in your favor or not.
And if you ever need to expand your selection of new items, many suppliers have a variety of goods that you can offer from very specialized items to famous or classic sellers.
Between the ability to expand, and the flexibility to choose your company’s location, dropshipping naturally enhances the ability to expand.
The biggest benefit of dropshipping is that the store owner only buys the product when the customer does.
Instead of investing in thousands of products to get wholesale prices and pay for storing those goods, business owners get to invest their resources in other parts of the business.
This eliminates the risk of buying products that may not be sold with you.
It also raises the initial cost of the product to zero.
Moreover, for companies trying to stick to a simple cost structure, or want to start without a large capital, dropshipping is the answer.
On a similar note, dropshipping is a great way to test new products or ideas, and it gives you the opportunity to test the market in real-time, without having to invest resources in testing.
What are the disadvantages of dropshipping?
- It seems so attractive that everyone wants to start working with it, right?
- This is exactly the biggest disadvantage of drop shipping, or it could be.
- This means that you are unlikely to be able to rely on branding your products on their own to make the sale.
- Especially since, you are not only competing for the sale itself, but also for AdWords and the search engine to attract people to your website.
- There are some other common gaps in drop shipping, and they can all be traced back to the poor selection of a suitable drop shipping provider without sufficient research before.
- If someone describes to you a beautiful product they got from a website, in a way that makes it look like a completely different product, then you should not rush to certify and take the level of quality into account.
- Some companies may describe a cheap option as an ideal base material or use cheap packaging to save costs, or they may have a poor quality inspection system.
- You will be lucky to be the first buyer before you do business with them.
- The further away you are from drop shipping providers who meet these specifications, the less likely you are to hear customer complaints.
- However, it is not the drop-shipping provider’s responsibility to get your money back.
- When you buy a product wholesale, in most cases the supplier stops taking responsibility for the product as soon as it reaches you.
- But suppose you decide to adopt a “no refund” policy instead, and a customer runs into a quality problem.
- Your policy may save you money in the short term, but you will also lose a repeated customer that could cause bad reviews to spread quickly.
What else do customers expect?
After many famous customers’ experiences with Amazon stores and supermarkets, fast shipping has become a requirement for them.
However, this does not mean that customers expect their orders from the specialist e-commerce store to reach their doorstep within two days, as shipping from dropshipping suppliers can sometimes take up to 6-8 weeks.
If the customer is not aware that you are shipping products from abroad, waiting for a long time (unexpectedly) to receive orders will not leave a good impression on customers.
One final warning about dropshipping:
When you compare dropshipping prices to wholesale prices, it can be expensive.
But remember; you pay not only for the wholesale product but also for dropshipping.
This means the manufacturer must compensate for the time, logistics, packaging and shipping supplies, and the shipping cost itself.
Therefore, your profit margins on direct shipped items are usually much lower.
The trade-off here is that you do not have to invest in the logistics of your implementation.
The above-mentioned disadvantages of drop shipping do not mean that it is a bad or inappropriate business model for you.
How do I choose the best dropshipping providers for my business?
Remember that the dropshipping business model is very flexible
so you can use more than one drop shipping for different products depending on their strengths.
However, it is often best to keep a small list of trusted suppliers, so that you can keep communication open with them and develop strong and solid relationships between you.
When choosing your drop shippers, provide a solid idea of what you want your business to look like. This will help you analyze a range of factors, such as:
- What commodities do they provide? And at what cost?
- Are there additional fees?
- What are the payment options?
If you get answers against your favor, your choice will be hasty.
How long did these providers take to complete their job?
Experienced suppliers are usually the best, with a track record of reliable and safe shipments dating back a decade or more.
- With who do they ship?
- And if they use a specific shipping provider, is it well known?
- Can their shipping provider deliver shipments to anywhere in your target area?
- Do they have restrictions on the type of merchandise they can ship?
- Whom are they shipping for?
- Are they using the same service your competitors are using? (And this isn’t necessarily a bad thing if you think you can compete with them from another side.)
- Will you be their biggest client? Smallest client?
- What customization do they provide for shipping?
- Can you put your brand on the box?
- Can you add coupon codes, marketing guarantees, or contact information?
- Do they send out order notification emails?
- What is their return policy?
While searching for a suitable dropshipping provider, keep in mind that you don’t need to stick to asking your questions to the drop shipper himself.
Handle it all with caution and care, and then decide for yourself if their reactions match what you are looking for.
Benefits of drop shipping from several suppliers:
Many benefits come with choosing more than one dropshipping suppliers for your business.
Here are the most important ones:
- More products available.
- More commercial relations.
- Personalized stickers and tags.
- Evaluate the quality of your product.
- A greater understanding of your customers’ experience.
How can we increase the chances of success in dropshipping?
If you are ready to try dropshipping, there are some guidelines you can follow to increase your chances of long-term success.
Just because there are, no costs associated with purchasing and managing products, that doesn’t mean you should treat the drop shipping company as being risk-free.
You still have to devote a lot of time to finding the right shoppers, and building your website professionally.
You should do your research before and treat it all as a real long-term investment.
What will you sell? How competitive is the market? How will you gain clients and differentiate yourself?
Most of the people who run the drop-shipping model see the greatest success when they locate their marketplace in which they will organize their products like a pro while making sure that every product they sell in that market will fit their niche audience and fit their brand.
After creating the list of potential suppliers, you must execute test orders and wait for the products to arrive. As a customer, you should think of the following things:
- How long does each order take?
- What does the unboxing experience look like?
- What is the quality of the product itself?
This can help you choose between potential suppliers or verify that the one you like provides a good customer experience.
Once you choose a dropshipping provider, remember that the products themselves may not be the defining factor of your business.
This is another reason why test orders are a great idea because they allow you to receive the product and describe its features and benefits as the customer would.
You can also take high-quality professional photos of the product in a way that shows it clearly so that it is equipped with unique descriptions and images that differ from all other pictures of the product, and then you will be ready for excellence.
A well-executed marketing plan may be the key to real success, so you have to invest time and resources in every part of it, starting from finding your target audience to communicating with influencers in your specialty on social media.
Targeted ads can also be a great way to start your own website and make your brand a primary base for your customers.
When it comes to returning policy, communication, shipping, and customer service
- If anything goes wrong anywhere during the process, you will do your best to not be a permanent barrier between your customer and the drop shipping provider you are dealing with.
- Understand the typical return rate for each product so that you can notice if it is high when a quality problem is indicated.
- If you suspect a quality problem, report your concerns to the dropshipping provider, or find a new supplier.
remember that drop shipping is not an all-or-nothing model.
- Many of the most successful companies use a hybrid model, as they manufacture or ship some products internally and only use a drop shipping provider to fill the gaps.
- For these businesses, shoppers are not the main profit catalysts, but rather an easy and affordable way to provide customers with the “extras” that they will appreciate.
The most common questions when starting a drop shipping:
Although drop shipping is a great way to test a new product or supplier, it has many limitations as a viable long-term business model.
Therefore, inquiries about its details remain a matter accompanying all stages of its work.
Among the most common questions for drop shipping workers are:
- Customer Service: Who deals with customer service and returns?
- Quality matters: How do I deal with product quality issues?
- Product description: How do I deal with product photography and description?
- International Orders: Can drop shipping receive international orders?
- Shipping costs: Who pays for shipping costs?
There is no limit to the amount of money you can make on your online store.
So it’s time to increase sales, make profits, and use drop shipping.