Have you ever thought about launching a company without any self-produced products? Or do you believe you need a real warehouse that contains all your ready-to-be-shipped products before you can set up an eCommerce business?
With dropshipping, you can tackle those questions quickly. Without holding any products and paying for inventory, you can sell products online immediately. Amazon – the most prominent world retailer, adopted dropshipping years ago. In 2011, 34% of Amazon sales were fulfilled using a drop shipper, and the number keeps growing since then.
In this post, I will showcase what you need to know when it comes to dropshipping. Before throwing yourself into dropshipping, let’s learn about what dropshipping means, the benefits you can get from dropshipping, and some great ideas to start this kind of business.
Table of Contents
What is dropshipping?
Dropshipping is a business model that entails you to set up your business without holding any inventory. It’s an ideal business model for new entrepreneurs. You open your eCommerce shop, define your products, and find a supplier who takes care of your orders and ships them to your customers.
In this business model, you are entirely free from inventory tasks, shipping labor, and every step in logistics. After the customer places an order on your online store, you pass this order to the supplier to complete the order processing and ship this order directly to your customers. Customers are those who pay for the product. You have to pay the supplier who fulfills your orders only after you already receive money for the product from the customer.
Why should you start a dropshipping business?
Dropshipping is both low cost and low risk. If you implement a well-planned strategy and find the right supplier, you can reap significant profits from dropshipping as you don’t have to worry about shipping hassles and manufacturing – two top concerns of any business.
A big concern of new businesses is the capital investment, as a limited budget doesn’t allow you to pay for large stock quantities. That’s why dropshipping is a good idea as it minimizes the risk, especially the financial risk for start-ups.
You don’t have to pay for the costs of manufacturing your products, the cost of inventory, such as maintaining products in the warehouse, packaging, and shipping the orders. As a result, you can save a lot of time, money, and effort for other essential purposes like marketing, promotion, etc.
How to start a dropshipping business
Find a niche idea
To start a dropshipping business, the first thing you need to do is choose a niche. However, it’s not as easy to define a niche as the rise of dropshipping along with so much eCommerce competition has recently saturated the market.
There is no point in competing with big stores that have broader categories to choose from. However, if you can find the right niche, you can corner a piece of the eCommerce market. Google Trends is an excellent place to start. You can search for keywords and see their popularity in a period.
Here are some tips to choose a dropshipping niche more easily.
- Driven by your interests and passions: You will be more likely to have unique knowledge about what you’re interested in, understand those products and markets in your interest. It helps you to identify a viable niche.
- Scratch your own itch: Solve your own problem. It’s highly likely that others will have the same challenges. So you need to find products that can solve those problems.
- Research your niche: You should identify if others already use your niche. Are there any chances for you to beat your competitors? Or is it worth your time, money, and effort to enter a niche with tough competition?
- Choose a profitable niche: Ideally, the ultimate goal of your business is to make a profit. That’s why you need to ensure the profitability of the dropshipping product or niche idea.
Perform competitive research
Once you’ve determined a potential niche, it’s essential to research the dropshipping competition. Usually, you will find niches that are already competitive. It’s unrealistic to expect to become a successful dropshipping company without competitiveness.
If there are already many established dropshipping businesses with a strong reputation and profits in the niche, think twice before trying to launch your business in that space. Ask yourself some questions like, “can your business survive with the competition of well-established dropshipping firms that already have a lot of loyal customers?”
In another case, if your niche has little or no competitors, it might be because the demand for those products is not high enough. Thus, it might be more challenging to start your business with an untapped dropshipping niche.
Find a supplier
There is no rush to choose a supplier for your dropshipping business as the right supplier will bring in profits, and the wrong one will ruin everything. To partner with a suitable dropshipping supplier, there are so many factors you need to take into consideration. Even when you already know your customers, you must ensure that your supplier can provide you with high-quality products and services.
There are many dropshipping suppliers out there. Based on your product type, your target customers, and your financial resources, consider choosing a domestic or an oversea supplier who addresses your needs the best.
Build your store
If you can’t afford to outsource your website to a professional website design and development company, use a simple eCommerce platform such as Magento, Shopify, etc. These platforms allow you to set up your store without a technical background. Besides, there are lots of available features as well as easy-to-integrate apps/extensions that help your store increase sales.
It would be best if you did not overlook factors that support an eCommerce website efficiently. Your website should be easy-to-navigate and mobile-friendly. Take time to create a good user experience (UX) as it has a powerful impact on customer engagement with your store and their purchasing decisions.
Promote your business
Instead of waiting for customers to come to your store, you should take steps to help people to find you. By using Google Analytics, you can know where the prospects are coming from and which groups of prospects are likely to become your real buyers. Then, you will have the essential materials to start a marketing campaign.
You should not miss out on the two most viable and profitable means of marketing – Google and Facebook. Try a Google campaign to make your products appear on Google Shopping when people carry out their search. Facebook is now a beneficial playground for many eCommerce businesses; that’s why your products should land on customers’ feed when they are surfing around the social network.
It’s also vital to optimize your site for ranking on search engines. If your pages or your products appear on the top of the search result page, customers are likely to check out your site.
It’s crucial to keep track of all the data and metrics that contribute to growing your business. All you need to do is to set up your Google Analytics account, and this software will do all the work. It automatically collects data that gives you an in-depth insight into your audience.
If you are using Facebook ads, make sure you place a Facebook pixel on your website. This tool collects data when users interact with your website and your Facebook ads. You can track all the conversions that reveal how your website is performing and more deeply understand your target audience.
Like any business model, dropshipping also comes with many complications that you need to take into consideration before investing.
However, it is an ideal business model for those who are new to the eCommerce area. Once you identify your profitable niche, find the right supplier, market your product well, and deliver good customer service, you will easily thrive in dropshipping.
Guest author: Jade Nguyen is a content creator at Avada Commerce, a book lover, and a hodophile. She loves to learn skills and practical knowledge to excel at marketing, especially content marketing.