Whether you hope to break into business for the first time or want to try your hand at something new. Drop shipping may be the answer to your entrepreneurial dreams. With this type of internet-based business, you won’t have to deal with the aggravations of manufacturing, warehousing, inventory or even – despite its name – shipping. You’ll be able to offer top brands without having to do the front-end work of developing products or the back-end work of fulfilling orders. It’s not easy, and it may be a little while before you see a reasonable profit. But it’s an option worth considering for those who want to go into business for themselves.
What Is Drop Shipping?
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The dictionary explains drop shipping as a method of direct fulfillment. In which your e-commerce store doesn’t have the physical product in stock. When you make a sale, you then buy the product from the wholesaler who ships it to your customer. You never handle the product yourself. There are several pros and cons to this e-commerce business model that you should weigh before trying it.
Advantages of Drop Shipping Business
The biggest plus to beginning a drop-shipping business is that it doesn’t require a significant investment. You don’t need a physical store, staff or an inventory. Which typically require several thousands of dollars up front. Since you don’t need to buy a product until your customer has paid for it. You don’t have to front the money for purchases either.
It’s a reasonably straightforward process from start-up to store. Your start-up labor is setting up your e-commerce site and selecting products. Part of this process will also involve setting up supply agreements with wholesalers and distributors, which we’ll cover in more detail below.
With a traditional store, even an internet store, you typically would also need to determine how best to handle these functions:
• Rent, stock and manage a warehouse
• Pick, pack and ship products
• Track and maintain inventory levels
• Receive shipments from a manufacturer
• Handle returns and customer service issues
Your expenses are mainly running your e-commerce site and any purchasing any software you need for accounting, as well as internet and communications services. Many people can run a drop-shipping business from home for as little as a low-range each month. Expenses will grow with your company as you make decisions about needing help, hiring an accountant, etc. As you build your business, your suppliers will be doing much of the work to fill and ship orders, allowing you a much lighter workload. You’ll need it as you begin to deal more with the customer service side of your business.
Disadvantages of Drop Shipping Business
You must stay on top of supplier inventory levels to maintain your store. Your supplier is likely working with a great many other drop-shipping businesses and inventory can often change in a single day. The right tracking program can help, but not all suppliers may support the technology.
You may not have to ship the product yourself, but you do have to pay the supplier to send it for you. If your customer places an order for several different products. You may have to pay shipping costs from several suppliers. Are you going to pass all those costs along to your customer? If you do, you’ll need to work out how to automate the accounting in your store. And in the end, your customer may think your shipping costs are too high.
Everyone makes them, but you’ll have to take responsibility for supplier mistakes. As well as the obligation to make things right with the customer. If you deal with substandard suppliers who continue to cause problems with missing products. Shipments to the wrong place or cause returns due to poor packaging, your reputation suffers.
You must be able to operate on low-profit margins as you compete with a variety of other drop-shipping businesses, all in the same marketplace for the same reasons as you are. Finding a niche product or line of products can help.
Choosing Your Niche In A Drop Shipping Business
There are a few things to keep in mind when considering your niche. You should choose something you have an interest in, but do not base your decision solely on that. You may love making paper beads, but do others love buying them? In making a profit, so maybe your market is selling the products to make paper beads or something else entirely. It’s a great idea to sell something you’re passionate about, but your business is not a hobby.
Here are some additional considerations:
Profits: Your focus should be marketing your site. Since you must do the same amount of work no matter how much a product is worth, why not go for a more significant sale with a more substantial profit? Impulse buys: Consider your buying habits. If your first glance at a store shows nothing appealing, will you still browse? Select products with natural appeal to encourage impulse buys before customers move on to another site.
Keywords: Google has some great tools for keyword research that you can plug into your marketing and the store itself. Google’s Trends and Keyword Planner can help you find standard terms and phrases that customers use when searching for items in your niche.
Develop your brand: Look for items or an entire line of products that you can repackage and sell as your own brand to add value and recognition to your store.
Don’t follow the crowd: Find a product that isn’t available from a store down the road. It makes your store more appealing.
Another piece of the puzzle in running a successful drop-shipping business is controlling shipping costs. Heavy, bulky items are more expensive to ship. If you expect to pass that cost on to the buyer, choose a product that doesn’t cost much to send or you’ll lose customers. If shipping is cheap enough, consider offering it free to customers. You can then use free shipping in marketing to help increase sales.
Do Your Research On Your Drop Shipping Business
It may seem contradictory to finding something out of the ordinary. But you must find a balance between offering something new or different and providing something with no competition at all. That may signal a lack of consumer demand for the item.
There are a lot of reasons an item may not have many competitors, including difficulties with the maker or supplier, excessive shipping charges or profit margins that are too small. Look for products with some market competitors, as that means there is a demand.
Find a Supplier For Your Drop Shipping Business
Since who you do business with reflects directly on your company, take the time to screen suppliers well. Excellent communication is a priority as many drop-shipping suppliers are overseas, and you will have to account for different time zones and possible language barriers. You must be confident that you are in clear and constant communication with each other.
Ask potential suppliers about their production capabilities with an eye toward finding those that can grow with you, if that’s your goal. Check out blogs from bloggers in the business and technology fields and subreddit posts, and continue to research the topic as businesses come and go. Work directly with product makers when possible, as bypassing distributors allows you a more significant profit.
Here’s A Video On How to Find a Good Dropshipping Supplier
Building a Website For Your Drop Shipping Business
You don’t need to reinvent the wheel. Use a platform such as Shopify that does all the back-end work and walks you through the setup of your e-commerce store. You can continue to run your website from Shopify, or bring in a website design and development solution later after establishing your store. Shopify also offers several apps to help you increase sales, so it makes sense to start there.
After the setup work comes the most crucial part of building a drop-shipping business, which is attracting customers. You have several options, and starting with a Facebook ad campaign is a great first step in generating sales. The social media platform gets you in front of potential customers with interests in related products, events, and activities. This kind of audience targeting helps you contend with larger retailers.
For long-term marketing, building your customer base is vital. You’ll need to learn about email marketing and search engine optimization to keep your store and products in front of customers. You should always collect email addresses, which allows you to make special offers to previous customers. Since they have already purchased from your store, you know they have an interest in your products. Your new goal is to make them repeat customers.
Analyze Your Business
Use all the data-tracking and analytic tools available for growing your store. Look at Google Analytics traffic if you’re using Adwords or conversion pixel data if you’re using Facebook to find customers. You need to track and understand where your customers are coming from and how well your own website converts a visit to a sale. Tracking helps you focus on what works and get rid of what doesn’t.
Some Final Thoughts About The Drop Shipping Business
Getting into business requires constant attention, not only to your store but also to your marketing. Your ongoing success depends on learning to hone ad campaigns and test new marketing avenues on a continuing basis.