How to get started with dropshipping

Dropshipping is a competitive field, but if you set your business up right and market it well, it's a great way to start a side hustle. Find out why.
Mar 2, 2020 • 8 minute read
Gauri Gautam @GauriMelb
Technical Co-pilot
Cover photo for How to get started with dropshipping

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Dropshipping can help you build a low-cost business, but only if you do it right

Dropshipping and online businesses have transformed the way retail industry works today. As an order fulfillment method that doesn't require you to maintain stock, dropshipping has become a key component for the success of eCommerce businesses. So, read on to find out exactly how this model works. The article also outlines how you can set up dropshipping in a few easy steps and why it's considered one of the best ways to source products.

What is dropshipping?

Dropshipping is a process in which the store purchases the item from a third-party vendor rather than maintaining a stock inhouse. Also, once the purchase is through, the item is shipped directly to the customer. In other words, as a store owner, you don’t undergo the hassle of handling the product at all. However, this isn't the reason why dropshipping has become popular.

The biggest advantage of a dropshipping model is that you're not required to maintain an inventory or stock products at your end. This drastically reduces overheads and increases your profitability. In other words, you only purchase from suppliers after your customers have bought the product online.

Why you should choose dropshipping

Dropshipping can be the perfect solution if you find yourself in any of the following situations.

Research purposes

Dropshipping is an excellent way to begin your online business. It helps you mitigate risks when you are trying out new manufacturers, products, and suppliers. Think of it as a trial period. You want to start an online retail store but you're not sure what products you want to deal in. with dropshipping, you don’t have to stock up piles of a product before knowing how it will work for your business. So, use it as a market research process that helps you test waters. Use it to gain practical experience with different products before you settle on the best option for your business.

Valuable products

Valuable and high maintenance products usually require special storage and shipment. If your business deals with such products, then drop-shipment can be more profitable than storing and shipping them yourself.

These products can be valuables, fragile goods, heavy products or products with special storage and shipment requirements. Unless your business is set up to handle such products, you shouldn't pay extra to store or ship these products.

Protection

More specifically, protection from market fluctuations. Dropshipping protects you from market fluctuation as it acts as a backup plan. For instance, if you're experiencing a seasonal overflow of demand, then you can always approach your dropshipping partner to fulfill the gaps in supply that you may have from your regular purchase channels. In other words, it helps you fulfil orders on time and keep your customers happy.

Shipment strategy

Your shipping costs increase when you move further from your warehouse location. Instead, using a dropshipping model for far-flung locations can help you save unnecessary shipment expenses. Therefore, as a business strategy, dropshipping is highly profitable, especially if you're expanding your business reach geographically.

How to select the right suppliers

The success of your dropshipping strategy depends entirely on the suppliers that you partner with. Therefore, keep the following criteria in mind while shortlist the right suppliers,

Legitimacy

First and foremost, make sure that the product supplier runs a dropshipping business as well. Some suppliers who may claim to offer dropshipping services are just manufacturers or wholesalers and don’t have dropshipping expertise. This can lead to unnecessary delays and poor handling of goods.

Experience

Experience is an essential skill for a dropshipping supplier. Since the supplier is taking on a considerable responsibility of ensuring that your orders are fulfilled, you should be sure that they are capable of delivering as per your expectations.

Therefore, experience in the business along with an effective customer support system is a must. You can test the post-sales customer service for yourself. If the customer rep sounds helpful then it's a good sign. However, if you feel that the support service isn't helpful then look for a partner elsewhere.

Cost efficiency

Since you're hiring dropshipping services there'll be a cost attached to it. However, these fees shouldn't run into a large amount. Typically, a dropshipping supplier will charge a few dollars for stocking, packaging, and shipping services. Anything more should raise red flags.

It's important to remember that the dropshipping charges will directly impact your bottom line. So, select the supplier accordingly. Also, find out the supplier’s policies regarding damaged products and returns. Do they offer fraud insurance and protection? Knowing these upfront can save you both money and trouble later.

Speed

Most dropshipping fulfillment businesses are based out of China. Therefore, you can’t expect immediate delivery. However, make sure that your selected suppliers can deliver goods to your customers as fast as possible.

Typically, delivery takes around 1–2 weeks. Anything more could upset your customers. Find out how long the selected suppliers take to ship goods to countries where you intend to reach your customers. Ultimately, select a supplier that meets all your shipping requirements.

Product quality

Make sure that the products are the same as what's advertised. The best way to do this is by requesting samples. Check them for quality and see if they match the images advertised on your site. This will help you decide whether you want to commit to the supplier or not. Also, make sure that your suppliers use high-quality images. This will help you sell the products on your site.

References

Request references. They'll tell you volumes about how the supplier conducts its business and any of its shortcomings. An established and reliable supplier should willingly offer to connect you with their existing partners who can verify their business and services. You can also read customer reviews to find out about the supplier. However, reviews written online can always be manipulated. Also, they can be old and may not give you a clear picture of the current situation.

Once you've verified the selected suppliers, make sure that you enter into a legal contract to protect your interests. Make it a comprehensive contract outlining the product quality, delivery timelines and any other requirements specific to your business needs.

How to set up a dropshipping business

Once you've selected the niche in which you want to operate as an online business, it is time to secure a supplier and get an online presence. This can be done in one of the two ways. You can either use popular marketplaces like Amazon, eBay, and Etsy or build your own online shopping website.

Marketplaces

Amazon

As the most popular online marketplace, Amazon has over 300 million users and offers excellent order fulfillment services. While the fees may vary depending on certain parameters, most sellers are charged around 15% of their product’s sale price. It's an excellent option to begin your dropshipping business.

READ MORE: How your storefront can rank on Amazon

Etsy

While Etsy may not have as many customers like Amazon, it does have a niche clientele. Over 80% of sellers on Etsy are women and it is an extremely popular platform with the fairer sex. As a trendy marketplace option, Etsy focuses on handmade goods, arts, homeware, and crafts.

eBay

eBay stands somewhere in between Amazon and Etsy. With over 170 million active users, eBay is popular for auction options as well as being a standard online retail platform.

Setting up your own online store

Simple and convenient ecommerce platforms like Shopify support dropshipping business models excellently. You don’t need a background in technology to get started. However, you can always hire a web designer to create a custom site that's more suitable for your online business requirements.

While this business model requires an investment up front, it gives you complete control over how you want to brand your products and design the store layout. Also, you are not dependent on any third-party platform. This means that you are not paying any fees thereby, increasing your profit margins. However, the biggest benefit of having your own store is the elimination of direct competition on the same platform.

READ MORE: Which ecommerce platform should you choose?

Marketing your business

Now that you have set up a dropshipping partner, it is time to get cracking and start advertising your business.

Dropshipping lives and dies on whether or not you can drive traffic to your online store. That means marketing is the most important activity you can undertake. If you want your dropshipping business to be a success, it's never too early to invest in marketing strategies. And it's a really, really good idea to get some expert help.

Facebook Ads

The key to Facebook advertising is to start small. Just as you are testing waters with the dropshipping business model, a small-scale Facebook advertising can help you assess and revisit the marketing strategy, if required.

READ MORE: How to get started with Facebook Ads

Influencer marketing

You don’t have to hire the influencer directly. Instead, you can offer them an affiliate commission to see if they provide you with the required conversions or not. Also, this model helps you lower your overall risk. It works for the influencer as well as the more they help sell the more commission they make.

READ MORE: Influencer marketing that won't break the bank

Email marketing

Online platforms like Shopify offer inbuilt email marketing features that you can use to build your email lists and send marketing emails. These emails can cover new products, or ‘how-to’ topics relating to your business for the benefit of your clients. It is an excellent platform to launch new products and generate awareness.

READ MORE: The ultimate guide to email marketing

Content marketing

Creating content helps your business rank higher in Google ranking, thereby, directing more traffic to your website. Also, it improves your visibility and it is an excellent tool to make customers aware of your products and services.

READ MORE: Why your business needs content marketing

What makes drop shipping a popular business option?

Dropshipping is the perfect option for a lot of reasons.

As a creative outlet, it allows you to experiment with new ideas in the beginning stages of your business set up.

It's also the perfect side hustle that allows you to earn more alongside your 9-5 job.

Dropshipping allows you to have control over your financial expectations. You set the price deciding how much you want to make.

Also, you can market your product according to your budget and business goals.

However, the dropshipping business model is the biggest advantage in itself for setting up an online business. You're fulfilling orders and products are reaching your customers without incurring storage, inventory or warehousing overheads. Ultimately, with all of this, you're in the controlling position.

Its flexible and inexpensive nature is a huge attracting factor for aspiring entrepreneurs all over the world. Just a few hundred dollars can help you get started in the business. This is a marked shift from large capital investments that were required to set up any business until a couple of decades back.

Wrapping up

Due to low entry barriers, dropshipping business sites have taken over the online business stage. While this may have increased competition, it also means that this business model is profitable enough to attract one and all.

Every business requires hard work and dedication to succeed. Yes, dropshipping can get you started, but how you operate can help you beat competition and carve a niche for yourself. So, there is no time like the present to follow your dreams and get started with a dropshipping business that allows you to explore your creative side.

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