eCommerce Dropshipping: How To Start Your Own Business, Cheap“Dropshipping” is one of those terms that most people have heard or seen, but don’t really understand.
It’s a pretty easy concept to grasp, though. Just think about all the people and businesses you see on eBay and Amazon – all selling the exact same products, for two or five or ten bucks apiece.
How does that work? Do they all rent warehouses, buy large quantities of the same goods, and then try to sell them at a profit? Can they even make enough profit on low-ticket items to pay for warehouse space, shipping costs and inventory control?
Of course, they can’t. They’re simply dropshippers, whose role in the process is simply to generate sales.
Dropshippers convince people to buy products online and then hand the orders off to a “dropship supplier” (usually the company that manufactures the products in the first place). The supplier does the rest of the work and incurs all of the fulfillment costs.
When done properly, dropshipping can be a very profitable business. In fact, it’s just about the only product-based business that you can open with no experience and virtually no start-up costs.
Dropshipping, Step-By-StepThe best way to visualize dropshipping is by looking at each step of the typical online sales and fulfillment process.
- Marketing and sales: The dropshipper sells products either through his own website, a large platform like Amazon or eBay, or eCommerce and auction sites like Rakuten, Shopify, eCrater, and iOffer which are dropship-friendly.
- Customer payments: The dropshipper takes payments through an ePayment service and then pays the dropship supplier for the merchandise, either through a line of credit or by prepaying with a credit card or an online payment service.
- Orders: As soon as orders are received, the dropshipper forwards them to the dropship supplier for fulfillment. The supplier packages and delivers the product, in the dropshipper’s name.
Pros and Cons of Becoming a DropshipperThe advantages of this system are obvious.
- All the dropshipper has to do is source quality products and then sell them “by remote control” without ever having to physically store or handle any of the goods. There are no warehousing or personnel costs, no overhead, and no damaged inventory to worry about.
- There’s virtually no risk to the dropshipper, since there’s no financial outlay for an inventory that may or may not sell. Products aren’t purchased from the dropship supplier until an order is received for them.
- No brick and mortar presence is required, so the business can be operated from anywhere. And once a dropshipper has established a successful business, it can easily be scaled up to provide a terrific full-time income if desired – or simply serve as an additional source of part-time income.
- Since there are very few barriers to entry, there’s a lot of competition in dropshipping. That doesn’t mean that a new business can’t succeed, but it’s a lot easier if a dropshipper caters to a specific market segment where competition is lower.
- Profit margins are often small. You’ll have to pay higher-than-normal prices for many products because dropship suppliers have to cover the costs of fulfilling the orders you send them. The bottom line: small profit margins make it necessary to sell higher quantities to earn significant money.
- If you sell multiple product lines to try to boost profits, you’ll probably be using multiple dropship suppliers. That can result in complicated juggling of the “shipping and handling” costs you charge your retail customers, and can eat into your bottom line if you’re not careful.
- Some online payment systems, particularly PayPal, are not dropship friendly and may freeze your funds without notice, for no good reason.
- Finding customers can be challenging. If you plan on selling through your own website, you must have (or must develop) expertise in building and running an online store, and must be able to drive traffic to your site through SEO, social media marketing or paid advertising (which can drastically cut into profits). If you’ll be selling on dropship-friendly web platforms, there’s a learning curve to master since you’ll be competing with other dropshippers on the same platform; you’ll need expertise (or help) in design and copywriting in order to make your offerings more appealing than competitors’.
- Customer service, customer service, customer service. This can be the biggest challenge for dropshippers who have no control over the products being shipped but have to deal with customers who don’t receive their orders in a timely fashion, receive damaged goods, or simply want a refund.Once a dropship business is large enough it’s a good idea to hire an experienced customer service specialist. Until then, it’s imperative to be as upfront and accommodating with customers as possible and to find suppliers who will work with you to satisfy people who have problems with their orders.It can also pay to work through platforms like Amazon, which gives dropshippers the option of participating in their “Fulfilled by Amazon” program. With FBA you have to have your supplier send the products to Amazon in advance (which means making an investment in inventory), but the online giant then handles customer service, shipping and returns for you. FBA also makes your products eligible for Prime shipping, a major advantage when selling products on the platform.
How to Find Dropship SuppliersThe key to building a successful dropshipping business is to find the right suppliers.
If you have a specific market segment or niche you want to serve, you can often contact major manufacturers or wholesalers in that segment and inquire directly about dropshipping possibilities. Many will be more than willing to work with you, and you’re much less likely to be ripped off by shady third-party wholesalers.
There are also a number of reputable companies that specialize in providing products for dropshippers in a wide range of product categories. Many like Salehoo and World Wide Brands have full-featured interfaces, complete with market research tools, which make it easy to find the most appealing products to dropship. Others are built to interface directly with sales platforms or your own website; Oberlo works as an embedded app for Shopify stores selling products supplied by AliBaba and Ali Express, while Sprocket and AliDropShip let you import dropshipped products directly into your online store.
You might be surprised to find that many retailers offer a huge range of quality products and make it easy to dropship their goods. For example, Cmple’s droppshipping program provides access to hundreds of useful cabling and electronic products with no additional drop ship fees and same-day shipping.
The Cmple program shows what can be available to wholesalers and dropshippers who partner with the company. Just some of the benefits and tools: high-resolution product images and full specifications are made available to those approved as dropshippers; these can be used to create complete product pages for websites or stores on sales platforms.
Each day, Cmple provides daily updates on stock that’s available for dropshipping, so there’s no danger of frustrating or angering customers by taking orders for items that are out-of-stock. Those are complemented by inventory spreadsheets, so dropshippers and wholesalers can operate as if the products they sell are their very own and stored in their own warehouses, even though they never see or touch the goods.
Dropshipping won’t create an immediate multi-million dollar income; it requires hard work to build a successful dropship business. But the possibility of creating a long-term, reliable income, with a fraction of the investment normally needed for a product-centric operation, makes it an ideal choice for those who’ve always wanted to own and operate their own business.