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Dropshipping is unlikely to be the venture that gives you a mansion and a private jet. However, it can be a good, extra revenue stream if you already have an e-commerce store or a high-traffic website.
That may not be true for everyone. But if you are interested in making dropshipping work, we give you the best advice to get started.
Is It Worth It To Start A Dropshipping Business?
This is a difficult question. You will see many articles on the web that describe how an entrepreneur made big money through dropshipping. But do not be fooled by their claims.
The truth is, dropshipping is unlikely to make you rich. First, profit margins are low as the largest cut goes to the supplier. That means you have to do a lot of business to make up for your expenses before you even start making money.
Thus, the dropshippers who do well are the ones who receive a lot of traffic to their stores and therefore have higher conversions. It’s a hard thing to achieve.
It will definitely take a lot of time to build your brand awareness and traffic from scratch. So dropshipping is certainly not the scheme where one quickly gets rich-fast, it might at first seem to be.
In addition, there is a lot of competition from established dropshipping companies. And because these companies receive a lot of traffic, they can lower their prices to take the competition out.
That means you will have to lower your profit margins even more to try to compete.
However, there are ways to approach dropshipping to make it a worthy undertaking. Dropshipping can be especially useful for established e-commerce businesses. If you have the traffic and the customer base, you can integrate dropshipping into your existing business.
It is a good idea to use dropshipping for strategic purposes. For example, you can test how well a product sells before you acquire the stock yourself.
Or you can use dropshipping to sell some products and traditional e-commerce to others. For example, it may be better to deliver expensive products that require extra security in the warehouse or heavy products that are expensive to ship. In other words, get someone else to do the hard work for you when it comes to this kind of thing.
Finally, if, despite the above advice, you are still eager to start a dropshipping business from scratch, just be aware that it will be hard work to get to a position where your sweat capital is worth it.
The investment is necessary to start a Dropshipping business
The reason dropshipping is so appealing to budding entrepreneurs is that there is very little overhead. You do not need to procure stock, a stock for storing inventory, staff to sort it and so on.
The biggest investment comes in the form of your time and effort. That is, if you start a dropshipping business from scratch. It is relatively easy to integrate dropshipping into an existing business model.
However, there are additional costs to consider. If you are just starting out, you will probably need to set up an online store. Fees vary depending on the platform you use.
Both start-ups and existing companies may want to invest in a dropshipping platform. These offer a catalog of products you can ship and often automate much of the administration for you.
But it is far from a big investment. In fact, if you have a Shopify store, you can start using Oberlo for free. The free plan lets you list up to 500 products and take unlimited monthly orders.
You can go up in level and get a premium plan as your business grows.
The other expenses you need to consider are marketing and advertising. These costs vary enormously depending on your budget, your strategy and the amount of time and effort you can put into yourself.
4 Steps to Starting a Dropshipping Business
It’s easy to get started with dropshipping. It is the growth part that is difficult. Here you will find advice that will help you do both. Put a solid foundation in place that will encourage success and get the word out there to start building a presence for your online store or new products.
1. Choose a profitable niche
If you already have an e-commerce store, then you no doubt have an established niche. So this step is for those who are starting over.
When choosing a niche for your dropshipping business, find a market that is not already saturated. At the same time, there must be enough demand for the products so that you can make money. Find this cute place and you increase your chances of success.
The goal is to become the go-to site for a particular category of products. The more unique the category, the less competition you will face.
Start by considering the industries you have a passion for, or better yet, insider knowledge of. For example, you are an avid jogger or you dig retro games. This will give you an advantage when it comes to choosing the right products for dropship and marketing your goods.
Once you have some ideas, determine their profitability. Consider the following:
Is there a demand for products in this industry? Is there a passionate audience? How hard will it be to compete? Are there already major players dominating the industry? Or are lots of dropshippers trying to sell the same thing? What is the potential profit margin on products in this industry? Will that be enough to cover fees and expenses?
2. Find Dropshipping Suppliers
You need to find reliable dropshipping suppliers as their products and shipping reflect your business. If a customer has a problem with an item, they will contact you (not the supplier) and / or leave a bad review.
If you already have an e-commerce store and use dropshipping as a supplement, you probably have vendors you are already working with. However, not all suppliers provide dropshipping, so you may still need to seek new suppliers.
Either way, you can choose to use a dropshipping platform, e.g. Oberlo, to find relevant products and suppliers. It uses AliExpress so there are millions of items available. All you have to do is search for your relevant keywords in the product section of the dashboard.
When you then find the right item, you can find useful information about both the product and the supplier.
For example, you can see that this Bluetooth gaming mouse comes from a vendor with 97% positive feedback that has been in operation for six years. The supplier also sends the product for 9-18 days:
This is of course the kind of key information you should look for when researching vendors.
Alternatively, you can find dropshipping providers through a wholesale library, such as SaleHoo. Or contact the manufacturers directly to see if they can provide you with a list of genuine wholesalers for their products.
Here’s what to look for when selecting dropshipping providers:
Years of experience Helpful, knowledgeable staff Reasonable booking fees Suitable delivery times Good return policy A solid reputation
It is also a good idea to order and test products yourself. This way you can see if the estimated delivery times are correct. You will also be able to determine the quality of the product, ie. if you suffer from bad reviews, returns and the like due to a dirty product.
3. Select sales channels
If you are starting out, you need to have a place to start selling your chosen products. First, you can choose an established online marketplace, such as eBay or Amazon.
There are pros and cons to using these sales channels. They are already established sites with lots of traffic and therefore lots of potential customers. And setting up a store with these sites is easy.
However, there is also a lot of competition in these marketplaces. Plus, you will be charged fees for every sale you make.
Therefore, Amazon or eBay can be a great starting point to get your first customers. However, given your already low profit margins, it is unlikely that you will pursue these marketplaces in the long run.
The second option is to create your own online store. It is a good idea to have your own piece of online property that you can start building a presence and audience for. As mentioned above you can make your site go-to for all things jogging or all things retro games etc. It will be like a shop for enthusiasts.
There are a number of e-commerce platforms you can use. Our best choice is Shopify, given its wide range of integrations and availability for all skill levels.
Once you have set up your online store, simply integrate dropshipping. The same is true if you already have an e-commerce store.
For example, if you If you have a Shopify website, you can install Oberlo from the Shopify App Store. All you have to do is add products from the Oberlo app to your store, and Oberlo takes care of the rest, that is, forwarding your order to the supplier and so on.
There are similar tools such as Dropified and Wholesale2b that integrate with the other leading e-commerce platforms like WooCommerce, BigCommerce, etc. as well as Shopify.
4. Market your products
If you have an existing online store, you probably already have marketing and customer acquisition strategies in place. From a strategic point of view, it makes sense to market the products you send out the same way you would market other similar products.
You will also be able to make a direct comparison between the products you ship and those you do not, if you use the same marketing techniques and resources. In this way, you gather the insights you need if you e.g. Uses dropshipping as a test run for a new product line.
For beginners out there, you need to develop your strategies from scratch. Certain marketing strategies work particularly well for e-commerce stores:
Email Marketing – Use it to build a loyal customer base. You will develop a following that keeps coming back to your store when they need a new item. Collect email addresses at checkout or via on-site pop-ups. Share product updates, relevant content, abandoned shopping cart reminders, etc. SEO and Content- As we have said, dropshipping is not a quick fast copious venture. Therefore, it makes sense to use a marketing strategy that involves SEO and content to build your traffic over time. SEO is a big topic and there is too much to cover here. Just make sure you stay up to date on any developments from Google and current best practices. Paid ads- Paid ads on Google and social media have a short-term gain. We recommend that you use this strategy for your dropshipping business with caution. The cost of running ads can be reasonable for traditional e-commerce stores, but not necessarily for dropshippers, as ads will cut into your profits. Influencer Marketing – Even the smallest businesses can work with influencers these days. If you chose a unique niche, you could work with micro-influencers with a very targeted following and cost less than working with big names. Social Media – You may want to try incorporating social shopping into your strategy. Customers can buy directly from you via social channels. However, you should also build your following by submitting engaging, relevant content that is not just about selling.
Some argue that dropshipping is a way to earn a passive income, but that is nonsense.
You need to maintain customer satisfaction, explore trends and product ideas, optimize your online store to increase sales and more. This is not a passive income stream. You have to work with it to keep growing. Why would you not want to grow your business?
With that in mind, you can check out our tips for doubling your conversion rates. Here you will find a lot of simple but effective tactics that you can take advantage of right away to increase sales. And discover how to create an e-commerce conversion funnel that will help you increase conversions in the coming months and years.