Categories: Beginner BasicsDropshipping

A Beginners Guide to Dropshipping and How to Begin Your Own Dropshipping Business

Drop shipping is a method of fulfilling orders that customers purchase from your ecommerce store. This method is different from others in that you, as the merchant, never see the product or actually carry it in stock. During this guide we will review the following items:

What, exactly, is dropshipping?
How does dropshipping differ from a regular retail model?
What are the benefits of dropshipping?
The disadvantages to dropshipping.
How to begin your own dropshipping business.
Is a dropshipping business worth your time and energy?

Let’s begin!

What is dropshipping, exactly?

Essentially, dropshipping is when a vendor fulfills orders from third parties and has them shipped directly to the customer. The product comes directly from the supplier, never actually seeing the product or having it physically in stock. Take a look at the infographic below to help you gain a better idea of the dropshipping process.

Instead of focusing on in stock inventory, vendors can focus directly on marketing, selling, and managing their ecommerce site.

How is dropshipping different from the typical retail model?

As we discussed above, dropshipping is when a seller never keeps their merchandise physically in stock. With a “typical” retail model, vendors will purchase a specific amount of inventory and continuously restock as the product sells.

With dropshipping, sellers are skipping the step of maintaining inventory, and instead, heading right to the manufacturer and wholesaler, and paying them to ship the item. The seller and third party shipper work together to maintain the integrity of branding on items that ship to customers.

The buyer will receive the item from a third party, but all labels will be consistent with the seller’s logos and branding.

What are the benefits of dropshipping?

Dropshipping comes with many different benefits, not just for the seller, but for the shipper as well!

Benefits of dropshipping as a merchant:

There is much less money needed to start a business that does not have hundreds of dollars in inventory. With a typical retail store, owners generally utilize a large portion of their capital to purchase their initial inventory.
When you utilize a dropshipping model, you purchase the item only when a customer has already placed an order. This requires very little up front investment on the end of the merchant! As shown in the Infographic from Quora, dropshipping eliminates the need for a warehouse!
Dropshipping makes it easy to start your business! If you choose to utilize dropshipping, you do not have to worry about finding a warehouse for inventory storage, packing and shipping orders, tracking inventory, worrying about returns, or

consistently maintaining your inventory to ensure everything is in stock!

Save on overhead. You can run a dropshipping business from your home by just using your laptop! Your costs will typically include your website hosting, paying your third party for item shipping, and internet costs.
You are not tied to one location! Dropshipping means that your entire business can be run from anywhere that has an internet connection. As long as you have access to work with your clients and suppliers you can keep running your business.
Offer a large variety of product to your customers. Since you are not worried about keeping inventory in stock, or worried about what items will fly off the shelves, you can open your business to a wide variety of different products. This makes you much more competitive in the marketplace, and more attractive to potential buyers!
Your business will scale easily, and with little work on your end. When you work with dropshippers, most of the work falls on them. They are responsible for keeping inventory stocked and ensuring the product is delivered on time. This allows you to expand faster, and with less work!

These are just several benefits that make dropshipping a viable option from sellers running their own ecommerce site.

What to the third parties get from dropshipping?

If the idea of dropshipping sounds too good to be true, let’s consider what the third party suppliers get from this arrangement.

They do not have to deal with the marketing and advertising. Instead, they leave that up to the sellers. Attracting an audience is not their job – it is their goal to keep inventory in stock and ready to ship when a customer purchases an item.
Suppliers will receive a portion of the sale that vendors make. This covers the cost of shipping, and keeping inventory stocked, but allows suppliers to do what they do best – ship and track inventory.
Shippers do not have to worry about customer service. Just like marketing, they let the vendors deal with the customer service side of the business. Suppliers do not have to have any interaction with customers, and only have to work with sellers when questions arise.

Overall, dropshipping is a great solution for both manufacturer and vendor!

What are the downfalls of dropshipping?

With everything we’ve discussed regarding dropshipping, why doesn’t everyone use this method? You can save money, rely on someone else to do your product shipping, deal with returns, etc. All of these are great reasons to use dropshipping, but here are a few reasons that you may consider the traditional method of product selling.

When using dropshipping, you may experience low profit margins. This is the number one disadvantage to dropshipping. It is a highly competitive business model because of all the advantages we discussed earlier. Many different sellers will drop their prices to the bare minimum they can in order to grow their revenue and popularity. Since starting a dropshipping business costs so little, operating on tiny margins is a perk.
Since it is such a competitive market with dropshipping, you are competing against website vendors that may have a poorly put together website, lack customer service, but this will never stop customers from comparing their prices to yours and going with the cheaper option.
Since you do not stock your own inventory, keeping track of what products which merchants have in stock can be difficult There are ways to overcome this particular hurdle – by syncing your shipper’s inventory with your website, allowing for daily changes easily, while keeping your inventory accurate and up to date.
Working with multiple suppliers can be challenging for the most experience dropshipper. If a customer purchases five different items, and each item comes from a different shipper, you are paying five different shipping fees, and resulting in an even lower profit than what you’ve already calculated.
Another downfall to working with multiple vendors is the errors. Customers will never know that their product has come from a third party. They see your logo and branding on their package, and only connect with you when they have questions or concerns. It is up to you to keep the customers happy, even when your suppliers mess up their orders.

How can you start your own dropshipping business?

As we discussed earlier in this article, dropshipping is an easy business to begin, but there are steps you can take to ensure your success. The infographic shown from Slideshare is a great representation of how to begin your dropship business.

Decide on your niche. With how competitive the dropshipping world is, you must have a niche selected that you can focus on. This nice could be anything from outdoor furniture to computer hardware. The more specific your niche, the better your chances are that people have not already saturated the market.
- When choosing a niche, start with what you are passionate about. It makes it a lot easier to market and advertise for a product you believe in, and have interest in, than one that you are just trying to sell for the sake of a dollar.
- Chances are if you’ve discovered a problem in your everyday life that can be solved by a specific product – other people have the same issue. Focus on a problem that you have, and what would fix that issue for you – then market to the individuals that have the same issues.
- Do your research! Honestly, you have to scope out your competition. Is your niche market oversaturated? Can you honestly look at your competition and know you can beat them? Is it worth putting in effort to try to beat them?
- Make sure your chosen niche will make you money. As we discussed the profit margins are low when it comes to drophipping, but you want to make as much money as possible – make sure your niche products won’t cost you more to ship than what you’ll make on them when a customer places an order!
Decide which platform you want to utilize for your dropshipping business. Websites like Amazon and Ebay are the big ones, but why not consider other options? Ecommerce platforms like Shopify are growing quickly as the need for more competitive pricing for ecommerce stores quickly grows. Take a look at Shopify and don’t forget to take advantage of their 14 day free trial!
Avoid seasonal items when you are first starting out. While a holiday market may seem like a great niche, these products are typically interesting at certain points of the year. Make sure your product appeals to the masses 365 days and add in other products as your audience grows.
Concentrate on selling products within the ecommerce “sweet spot”. This pricing ranges from $15 – $200. Anything below $15, and you won’t make any profit, while any item above $200 typically doesn’t sell in large quantities.
Try to work with products that are lightweight. This keeps shipping costs down and will help you with supplier costs – and it will ensure you aren’t charged an additional shipping fee.

Remember that starting a successful dropshipping business is difficult. You are up against many other sellers, and you must set yourself apart in order to be successful.

Is a dropshipping business worth your time and energy?

This is the ultimate question. Is utilizing dropshipping for your online store worth your time and energy? As we discussed in the article above, it is highly difficult to begin your own dropshipping business and become successful immediately.

However, there are many perks to using dropshipping. You need very little capital to begin your businesses. You can scale your orders to become as competitive as possible, and prices can be adjusted. With dropshipping, you are not locked into selling all of your product before you can order additional pieces that your customers are interested in. Instead, you can stock as much product as your manufacturer produces.

Remember that in order to be successful in the dropshipping world, you must narrow down your nice market. Be passionate about what you are selling and willing to spend time advertising and marketing to your target audience.

Utilize all of the resources at your disposal and set yourself apart from the masses. There are different ways to achieve notoriety within your niche market.
Provide white glove customer service. People will pay extra if they know they are being treated as a five star customer.
Create a website that is easy to navigate and shows your product clearly when your customer hits your home page.
Use promotions and sales to attract buyers.
Provide options to customers that other businesses don’t. Expedited shipping at a lower cost, or even free shipping after a specific dollar amount.
Advertise and start talking about your website on all social media platforms. Post regularly and have friend and family pass along your message as well!

In conclusion, dropshipping is a great option for a small business!

Dropshipping can be an incredibly lucrative and fun business model to utilize, as long as you are comfortable with the hard work needed to succeed. There are workshops available online, and in person, that can provide you with tips and tools to create a successful online business.

We hope you’ve learned the benefits and disadvantages of beginning a dropshipping business. For more information on how to create a lucrative online shopping site, visit Ecom Elites and sign up for their business class today!

You will receive a wealth of information regarding dropshipping for your business, how to advertise, and setting up your social accounts within your website! Don’t miss out, sign up today!

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