Did you know that 23% of the online sales were made on the dropshipping business model in the year 2017? Nearly 33% of the online stores are operating on the dropshipping model. With such a high popularity of the dropshipping business model, your question about how to start a dropshipping business is logical. Let’s start with a complete guide regarding the dropshipping business model, starting with what it is and how can you set it up along with the discussion of the ways through which you can earn huge profits without making any investment.
What is a dropshipping business?
Dropshipping business is a unique sort of business model, which allows you to sell goods without having them in your inventory. You can simply sell the goods owned by others to your customers and earn a profit through this transaction. Another benefit that you can associate with the dropshipping business model is that you don’t have to be an expert in the backend of the supply chain. A simple understanding of the customer support and maintenance of good customer relationship would be enough for you to generate the desired outcome.
How is a dropshipping business model different from the normal retail model?
Here is the difference between retail business and dropshipping business:
In a normal retail business, you are the owner of goods whether you have manufactured them on your own or purchased it from your suppliers. So, the transfer of ownership is from you or your business to the customer. In such a business model, you need to keep things in stock, manage the issues of inventory damage and expiry, ship the items to the customers and deal with the customer complaints, marketing, and other such elements as well.
In dropshipping business, you are in control of the front end only, i.e., dealing with the customers and attracting them to buy the product. The backend processes are managed by the suppliers. You’ll have to get in touch with a supplier, settle terms, and just sell the products. It is definitely simpler than conducting a retail business online.
How to start a dropshipping business?
If the concept of dropshipping business model has attracted you and brought you to a stage where you are actively searching for how to start a dropshipping business, then you must be looking for a complete guide to this model and the process that would be required to initiate this business this very moment. This is why we have set up a complete guide to help you in starting your e-commerce business on the dropshipping business model. Here is what you need to do to start a dropshipping business.
A. Selection of a profitable niche:
Like all other online ventures, the concept of dropshipping is highly dependent on the popularity of the concept and the selection of the right field to enter. Secondly, your passion to follow a particular niche and to make it your business is important as well. So, the first thing that you are expected to do is to find the right niche to enter while keeping your own interests and passion under consideration.
1. Niche Selection:
Selection of niche based on the sales trend is one of the easiest ways to find the right domain to enter. One of the tips that we can provide here is that choose a micro niche to establish yourself in the market. Targeting a small group of customers with specific needs can generate better results for you if you are just entering the e-commerce business. Once you’ll establish a good reputation in the market, you can move to a broader domain.
The reason for generating better results through niche marketing is that you can use specific keywords in your product descriptions and get the target audience for transactions. Even in this case, you’ll need to fine-tune the products that you’ll be using in your business depending upon the sales. But make sure keeping your e-commerce store highly focused would generate higher benefits for you as a startup.
How to search for the right niche:
You can use the free tools provided by Google, i.e., Google Trends and Google Keyword Planner to find the right niche for you. By putting a specific category in the search bars of these two forums, you’ll get the search volume and the current level of the trendiness of this niche. If the search volume of the keyword is high enough along with the increasing trend shown on the Google Trends, then you can easily choose that niche and expect it to generate results for you.
2. Follow your Passion:
Although, selecting a specific niche rather digging a niche to the micro level is important for the initial business success but at the same time considering the product that you are passionate about is important too. In case, you’ll follow the sales trend only, you’ll end up feeling exhausted and demotivated while selling the products on the store. This is why we recommend that the selection of niche should be in line with your own interests and passion. This will help you in putting all your efforts for establishing the store and continuing working on it in the long run.
3. Solve the problems for the customers:
Another important thing that you should keep in mind while selecting a particular niche for your business is that what are the problems of this niche that the customers face and how is your entry into this niche going to help your customers in solving the problem. The answer to these questions would also provide you with the competitive advantage that you can use to stand out from the competitors and get good financial returns from your dropshipping store.
B. Competition Research:
You might not feel the importance of research your competition, but as soon you’ll practically enter the industry, you’ll believe that this is one of the most important steps. You can look for the keywords, see the ranking and sales trend, and then compare your store with the competition. This can help you in removing all the gaps and weakness in an easier manner.
1. Choose a profitable product:
Once you have selected a particular niche, there would be a number of products available in that particular category. You can’t choose each of the products, and you don’t even have to do it because you need to work efficiently and earn most by using the least inputs. All you need to do is to search for the right product for your e-commerce store. But there are certain factors that you’ll have to consider while choosing the right product. These factors have been discussed below:
a. Popularity of the product:
You’ll have to see the sales trend and popularity of the items that you wish to sell at your marketplace. There would be high competition involved with these products. But at the same time, there would be a higher audience looking for the product.
You should analyze the profitability of the product that you are choosing as well. There is a platform fee that has to be accounted for along with the transaction cost that you would have to bear on funds transfer. So, make sure to incorporate these costs while determining the profitability of the product.
c. Shipping cost:
Customers often take shipping cost as an additional cost for the product. Thus, it is necessary that you should do your math and set up the price in a way that would compel your customers to shop from you. As a suggestion, you can either increase the price mentioned on the price listing and offer free shipping or simply set a flat shipping rate to make the calculations of the cost of their product easier,
How to search for the right product:
After choosing the micro niche in which you need to enter, you can visit the e-commerce platforms like Amazon and Shopify to know which product is having a good selling trend. For this purpose, you need to enter your niche in the search bar and you’ll see the various product options in the category. The top search ranks would be acquired by the products that are in demand. So, you can easily choose the right products for your store.
a. Quality of the product:
The quality of the product that you would be selling on your e-commerce store will ultimately impact your rating and reputation in the minds of the customers. In order to choose the right quality of the product, you might want to order it once before getting into contract. This will help you gauge the quality and set the right price for the product.
b. Return policy:
It is one of the important elements in choosing the right product for your store. It is your choice if you are going to allow the return of goods or not. Some marketplaces have their specific rules, so if you are going to agree with the product and marketplace rules, only then you should consider that product for your own store.
C. Look for the right suppliers:
As you are not going to own the goods or even touch them before you’ll send them to your customers, so this makes it important for you to choose the right supplier for the products and goods that you would like to be the part of your store. By incorporating this step into your business, you’ll be able to know how to start and work on your dropshipping business properly.
Ways to find the supplier:
There are two main ways through which you can find your suppliers. These include dropshipping market places and direct source suppliers. The marketplaces provide you with the easiest ways to find a supplier with a lot of other features to facilitate you in the best possible way. However, there are a few limitations that you can associate with this method. Similarly, the other method of procuring through a direct-source supplier can have its own pros and cons. You need to remain vigilant in this process, as it can be an important determinant of the success or failure of your dropshipping venture. For your ease, we are discussing both the ways to look for the supplier in detail.
a. Dropshipping marketplaces:
There are a number of platforms available that provide you with the option of finding the suppliers for your ecommerce platforms. These marketplaces ensure a higher degree of convenience by allowing you to connect your supplier to the e-commerce platform that you are setting up your store on. Your supplier is mere a click away from your store. Moreover, these platforms ensure that the availability of stock is indicated on the platform to save you from the customer service related issues. Moreover, the process of automation of orders to the suppliers and confirmation for the customers can also be managed through the dropshipping marketplaces.
However, there are commissions and fees of the platforms involved that you’ll have to pay, resulting in the reduction of your profit margin. Some platforms are limited to specific platforms only, so there is a possibility that your ecommerce store would not allow the integration, thus creating numerous problems for you. Moreover, you might not be getting anything unique to be part of your store as the same opportunities would be available to your competitors as well. So, you won’t have any point of differentiation to convince your customer to buy a particular product from you.
You can search for the dropshipping marketplaces online to find the right place, considering all its pros and cons in great detail.
b. Direct Source Suppliers:
The second method to find the suppliers for your dropshipping business is to look for the direct source suppliers. This mode of finding the supplier is more difficult but can generate profitable results. You can enter in a contract with the offline sellers who would like to sell their products online. Additionally, there can be certain suppliers who could be looking for more reach of their products and you can create a partnership with them to sell their products and earn profit through it. By making such contracts, you can get a wholesale rate from these suppliers and sell the product in the retail rate, leading to your profit margin.
There are some online platforms available for direct sourced suppliers as well. The main characteristics of such supplier are that they themselves are the manufacturer of the product, thus lower wholesale rate could be attained, again leading to a better profit potential as compared to the condition when the suppliers are attained through the market platforms. However, you’ll have to put in more effort to scrutinize the suppliers in this case. This is why the overall risk associate with the direct source suppliers is higher as compared to the previous option discussed.
Moreover, you can even have a look at the wholesale directory to find a particular supplier all around the world. There are multiple directories available where the suppliers list themselves to be found. But this again involves a lot of your effort and time. Finding a good partner for your business definitely demands your time.
D. Building the dropshipping website:
The next step in the entire process of establishing a dropshipping business to build the website through which you are going to attract the customers and offer them the products. For this purpose, you’ll have to choose an e-commerce platform. There are a number of platforms available online. You’ll need to choose the right one depending on your needs. Here are the few factors that can help you in choosing the right kind of e-commerce platform.
a. Business concept:
You’ll have to specify the nature of your business or the business concept before you can choose a particular platform. You’ll have to decide if you want to keep the approach of your e-commerce store as product oriented or content oriented. Once you’ll decide it, you can have a better overview of each of the platform and choose the one that would align with your business concept.
If you are more focused towards a product oriented business concept, then you’ll have to choose Shopify or other such alternatives. However, if you need to go for a content-based approach, then using Word Press would be a good option.
b. Dropship supplier plan:
Using platforms like Amazon, eBay is also amongst the alternatives of Shopify, but these large market places have a strict code of conduct to be followed by the sellers. For example, they have a strict delivery deadline to follow, require best customer service, and have a platform fee too. All these points might be difficult to follow for you as a startup. Thus, it is recommended that as a startup, you must avoid these large platforms and start with the small forums available to you in this regard.
E. Add products to your website:
After you have set up your website, it is time to add products to it. The addition of products on your website would be dependent on the type of platform and the supplier that you have chosen to be part of your business. Some of the platforms and options would allow you to add the products with one click only, whereas for some of the platforms you’ll have to manage the products manually.
Make sure to use the keywords in the title and descriptions so that your audience would be able to get to your product and buy it.
F. Marketing your e-commerce store:
One of the important steps that are mostly ignored by most of the shop owners is marketing. Most of the drop shippers think that listing the products is the only thing that they need to do. But that is wrong. Marketing of your store is dependent on your efforts, not the platform.
We understand and that initially, you won’t have enough funds to go for sponsored advertisements. However, you can definitely go for the free modes of the advertisement so that you can reach a broader audience and make your store successful. Here is how you can manage and start your dropshipping business. Some of the marketing techniques that you can use are:
a. Setting up a Facebook Page:
You can create a Facebook page without any cost. This page can be used to provide customers with a list of the products and other important bits of information about your store along with a link to your e-commerce business. This will encourage the customers to shop from your store.
b. Use Email-Marketing:
You can even use email marketing technique to upsell the related products to your existing customers or create more customers. Sending an email containing information about promotions, new products and new offerings can help you in improving the performance of your store.
c. Employ SEO Techniques:
Every search engine uses certain factors to rank a website or store. If you want to be in the top rankers, then it is important that you must understand these factors and try to focus on them while creating your store. This will help you to be at the top of the search results, thus generating better results for your business.
d. Create a blog:
You can also create a blog about the benefits of the products and the ways through which the products in your store can benefit people. With a detailed overview of the benefits, there would be a higher chance that the potential customers would visit your blog and would redirect to your store.
G. Make Profit:
The last step of the process of establishing a dropshipping business is to make a profit. With the use of marketing techniques, you’ll have your potential customers at your store. By selling the products to more and more customers, you’ll be able to make a profit.
Advantages and Disadvantages of Dropshipping:
After discussing the process of dropshipping, we felt necessary to highlight the advantages and disadvantages of the dropshipping business model as well. This will help you in calculating the risk in this business model. Moreover, you’ll be better able to decide how you want to take it and where and how to start your dropshipping business. Here are the advantages and disadvantages.
Advantages of dropshipping business:
Following are the advantages of dropshipping:
- There is no cost of inventory involved.
- Similarly, tensions associated with inventory management are not part of business
- You can use your own store labels on the products, so you can easily create a brand with this type of business
- Multiple dropshipping platforms with different features and conditions are available to help you establish your store.
Disadvantages of dropshipping:
Following are the disadvantages of dropshipping:
- Profit margin is quite low in this type of business
- The competition level is quite high
Tips for Dropshipping:
Here are some tips that might help you in answering your question about how to start your dropshipping business. By following them, you can easily excel in your dropshipping business:
- Select a micro niche for your business
- Analyze different dropshipping platforms to know which is the best one
- Make sure to include the best pictures of your products
- Try to follow your passion, as it will help in managing the products and your store in a better way.
- Use marketing techniques to promote your ecommerce store
- Choosing light and durable products can be more beneficial in this business model as compared to perishable and non-durable items
- Make sure to make a brand of your e-commerce business as it can help you in attaining more profits
- You must ensure that suppliers are chosen with great care as they can actually determine the reputation of your business
- You can even attend e-commerce events to know more about the best practices
Dropshipping is one of the most trending and simple business models to open a retail business. It requires lesser cost but can help you establish a strong brand in the market. However, the ultimate success or failure of this business model is dependent on you and the efforts that you would put in your dropshipping business model.
If you have some specific question about the dropshipping business model or if you want to share your experience regarding how to start your dropshipping business, kindly mention that in the comments section below.