You may be wondering what dropshipping business is all about. Don’t worry in this post I will explain what dropshipping business is and how you can go about it.
There are a lot of online businesses an individual can do, but a lot of people are afraid of starting one due to the start up capital, yes I know because I was also among the category of such people until I came across dropshipping as a business to venture into.
Dropshioping business is a very lucrative online job. The idea of dropshipping is a great idea, only if you know how to run it successfully. Dropshipping is a more cost-effective business to venture into than wholesale.
Before you begin dropshipping, you need to first think of the following
- What type of products you want to sell
- How to deal with suppliers and have your products shipped faster.
- The payment gateway for your customers to easily pay for their products
- And if you’re thinking of dropshipping internationally, then you should be aware whether or not you have to pay tax or register your company.
- Lastly, you need to understand if are you going to pay a customs tax on all the product you want to dropship especially if you’ll be importing them.
What is Dropshipping
According to Wikipedia, Dropshipping is a supply chain management method in which the retailer does not keep goods in stock but instead transfers its customer’s orders and shipment details to either the manufacturer, another retailer, or a wholesaler, who then ships the goods directly to the customer. The retailer is responsible for marketing and selling a product, with little or no control over product quality, storage, or shipping.
In the simplest form dropshipping is selling products without buying or having them.
This is how it works; after you’ve created an online store and added your product to it. When I mean product, I mean pictures and descriptions of the product.
This is because you don’t have to have the product stock in physical.
And after this, once you made your sales, all you have to do is contact your third-party supplier (owner of the product) by sending your customer address and paying the supplier from the initial money paid to you by your customer.
The supplier, in turn, makes the shipment to your customer. While you and your customer returned home happy.
However, if you are going to be using AliExpress to source for products, you don’t need to contact the seller. All you simply need to do is go ahead and pay for the products and fill your customers’ details on AliExpress as the buyer.
Without questions asked the seller on AliExpress will have the product packaged, processed and shipped to your customer without them knowing it’s from AliExpress.
The Difference Between Dropshipping and Wholesale or Classic Retail Model
The difference between dropshipping and wholesale or classic retail is that the seller doesn’t own or stock inventory. Instead, the merchant purchases stock as needed from a third party, usually another wholesaler or manufacturer to meet customer orders. Their customers could also be a consumer, retailer or wholesale merchants.
Dropshipping does not require a considerable cash investment upfront to start the business. All you need is a minor investment together with the payment from your customers to make an order.
How To Start Dropshipping Business
1. Choose the type of product(s) to sell
The first step to this is choosing the product you want to sell. Many people are often tempted to start selling anything they can think of. You should have this at the back of your mind that drop shipping is a business.
And like every other business, you need to do thorough research and a business strategy on how to be profitable in your business. One of the ways you can do this is by looking for winning products to sell.
Another thing you should have in mind while choosing your product is that you can’t just start selling any product you see. Try as much as possible to check the demand over-time for such products, you don’t necessary need to have a lot of products on your website to be successful in dropshipping business.
Before choosing a product, consider the following:
- The customer’s demand for the product you want to sell
- The price of the product
- The longevity of your customers
2. Find a trustworthy supplier
In dropshipping business you will need a trustworthy supplier, having an unreliable supplier can damage your businesss. Therefore, it is important you take your time to get a reliable supplier.
Without a supplier, there is no product to dropship, so you will definitely need one.
You can always get your supplier from platforms like Alibaba, Aliexpress, Amazon. But majorly, people always consider going for Alibaba and Aliexpress due to their cheap products, the major barrier is the delivery time due to their distance.
Before you choose a seller at Aliexpress, ensure you check the seller rating score.
3. Choose your selling platform
You will need a platform to run your dropshipping business.
Chances are high that you won’t be able to handle this step on your own, so you’ll need to hire a good website developer — unless you’re smart enough to figure things out yourself. There are lots of technical details about this step, but I’d rather keep everything simple and short.
While there are many options to choose from, the two best and most straightforward ones available to online store owners are Shopify and WordPress, you can also make use of Wix, Bigcommerce to build your online store.
While Shopify is an all-in-one solution for setting up online stores, WordPress is a versatile open-source software package that can be used to create different types of websites. Opting for Shopify means you won’t have to worry about domain name registration, hosting, and store set-up, as everything has been included in a single package. All you have to do is visit Shopify’s website and start setting up your online store right away.
On the other hand, opting for WordPress means you’ll have to register your domain name and purchase a hosting plan, design your store using a good template, and integrate product pages and payment system using a good e-commerce plugin such as WooCommerce. This option requires more technical know-how than Shopify but can be far cheaper. For Shopify, you pay more for the convenience of having everything in one place.
If you’re still lost as regards the differences, look at it this way. Assume you wish to take some fried plantain. You can either go to the nearest restaurant to buy already prepared fried plantain or go to the market to buy raw plantains and take them home to fry them on your own. Remember that the latter option would require some cooking oil, salt (optional), etc., and you have to source everything yourself. Shopify is like the restaurant option, while WordPress is like the second option, which is you frying the plantain at your home. Hope you understand?
Another important factor you need to consider while at this step is your choice of payment gateway service. You’ll need one to be able to receive payments from customers, who would order from your store using their ATM cards. You can make use of PayPal, Payoneer, Bank Wire, skrill or anyother payment gateway option you wish to make use of.
N.B: You can decide to set up your own e-commerce store or sell on popular e-commerce platforms like Aliexpress
4. Upload your products
If you really want to attract attention to your products online, you need to display high-quality, clear, and beautiful pictures of them. Poor quality pictures will send the wrong signals about any product no matter how awesome that product might be. And good quality pictures, on the other hand, can help sell even the crappiest of products. (I’m not saying you should use quality pictures to deceive people into buying mediocre products; I’m only explaining the effectiveness of good quality pictures).
Therefore, when creating product images to upload to your online store, you shouldn’t use your mobile phone camera lens. I know there are smartphones with great camera lens, but what you’ll get from those can’t be compared to what you’ll get from a photographer who would use a hi-tech digital camera and photo editing tools. Alternatively, you can get some high-quality images of your product from the manufacturer’s website — if they have one.
Once you have the images, upload them to your store, so potential buyers can see what your product really looks like.
And one more thing, don’t forget to describe in details what the products is all about.
5. Launch and market your products
With everything all set and your platform is ready to start getting orders from customers. But remember that no customer will come unless you actively promote your products on online platforms such as Facebook, Instagram, etc that are often used by your target customers.
While you can promote your store on some channels without paying a dime, you’ll need to do Facebook ads, Google ads, twitter ads, Instagram ads etc in order to cover a lot of audience and these will require some amounts of money.
In order to scale your business, you’ll have to spend aggressively on ads and other forms of marketing.
You’d be stuck in an endless loop of customer acquisition. And once you stop, your sales drop too.
6. Get your finances in order.
One common mistake entrepreneurs make when starting a business is not taking financial management seriously. Every money-making business needs to always look out for financial loopholes that can ruin the business and prevent such from happening.
Financial activities such as small business accounting, tax remittance, payroll management and invoicing should be taken seriously from day one. You should also learn to keep your business and personal finances separate as much as possible.
Advantages and Disadvantages of dropshipping business
Advantages of dropshipping business
- With dropshipping, virtually anyone can start an online store.
- You don’t need capital to purchase your items. It is easy to get started with.
- You can list more items on your online store, at zero risk
- No warehousing costs
- No picking and packing activities required
Disadvantages of dropshipping business
- Delivery of product(s) may take time
- You have zero control over fulfillment of product(s).
- Return of product(s) may be problematic.
- There is lower profit margin
- Poor branding
- Customers may lack trust in you if you are just starting and you offer no return policy.
Dropshipping business is an extremely popular business model for new entrepreneurs. Since you don’t need to stock or handle the items you are selling, it’s very easy for new competitions to popup.
The above guide will help you to know the necessary steps you need to launch your own dropshipping business from scratch but to be extremely successful, you need to constantly innovate in your varieties of products, pricing, marketing and methods of delivery.