What if you could jump to an online business with no upfront costs, minimal marketing, and the skill to make money while you sleep?
Sounds too good to be true, right? Well, the dropshipping business model allows you to do just that.
If you’re starting, then you must get off on the right foot by learning how to market your dropshipping business effectively and scale it up so you can make as much money as possible as soon as possible!
This critique will show you how to get started with your first dropshipping store and give some tips on scaling your store up quickly.
A dropshipping business model relies on several specific elements to succeed. Learn how they come together so you can decide if starting a dropshipping business is right for you. What exactly is a dropshipping business model?
In very basic terms, dropshipping involves wholesalers and retailers that don’t have their products; instead, when someone orders a product online, it’s dropped off by whoever originally had custody of it (such as the manufacturer).
It involves selling and shipping directly to customers, often without getting your hands on any inventory beforehand.
What Is Dropshipping?
Dropshipping is a commercial model where you do not keep goods in stock but rather sell items on behalf of your suppliers.
You purchase items from them at wholesale prices, sell them on a retail level (at full price), and charge your customers for delivery.
There are no extra costs involved with dropshipping, aside from warehousing; however, if you do want to expand, you may need extra storage space and provide packaging. These services can be outsourced or provided by yourself.
The advantage of using a dropshipping business model is that there are meager startup costs due to a lack of inventory and additional storage or staff.
Advertising or marketing campaigns to drive traffic to your store/website; however, many people find success using social media sites such as Facebook, Twitter, and Instagram, so minimal funds are required here.
By selling products on behalf of your supplier(s), you will receive payment directly from them after each sale.
Most suppliers offer good discounts to registered retailers, meaning that drop shippers can save money on purchasing items for resale and their purchases (depending on their personal preferences).
Although there are some notable downsides when using a dropshipping business model. One major downside is potential security risks, mainly involving personal information that some online shoppers feel uncomfortable giving out, especially when making large purchases.
DropShipping Business Model
The dropshipping model has many forms. Here are three of them • Direct-to-consumer drop shipping • B2B (business to business) drop shipping • Retail drop shipping with arbitrage, In a nutshell, direct-to-consumer or B2C is when a vendor or brand uses a distribution channel to sell directly to customers.
On the one hand, there’s no need for inventory. Managing orders is easy because clients buy from your store, and you pass order information on to your supplier, who handles delivery and customer service issues directly with end customers.
However, you don’t get as much switch over your product listings as if you manage everything in-house. This option works best if you’re looking to create a new e-commerce site or want more control over prices, descriptions, and branding than an online marketplace offers. It can also work well if it’s essential that shoppers feel like they’re interacting with your website rather than a third party’s site.
B2B or business-to-business usually describes any transaction where products move between two companies instead of directly from a manufacturer or wholesaler to a consumer. You might be familiar with selling services rather than goods, but selling goods falls under B2B too.
When you do it via Amazon FBA, though, you have greater visibility into sales since Amazon handles all fulfillment for you once your items are up for sale in their marketplace.
How Does Drop-Shipping Work In Ecommerce
In other words, dropshipping happens when a business receives orders and delivers products on behalf of its customers. The goods can be anything from t-shirts to books or electronics; what’s important is that these products aren’t kept in inventory at all.
The logic behind drop shipping is simple: if you don’t have to maintain extensive inventories and store different product types, your overhead costs will be lower, allowing you to offer better prices than competitors.
Additionally, one of the best things about dropshipping is that once you get started with it, there’s very little need for hard work – orders come in and will continue coming until demand starts dying down.
This implores another question: why would someone want to start a dropshipping business?
Before we go into details about starting a successful dropshipping business model, let’s take a quick look at how entrepreneurs benefit from using Shopify as their e-commerce platform.
With more than 500 new stores added every day, Shopify has become one of the most popular ecommerce platforms today. Its intuitive interface allows beginners to get up and sprint, while advanced features allow more experienced users to customize their online store fully.
Perhaps even more importantly, Shopify makes it easy to integrate various applications, such as payment gateways, shipping carriers, and fraud prevention tools. Since many drop shippers use Fulfillment by Amazon (FBA), they often choose Amazon Webstore over others.
Amazon Webstore integrates well with FBA so that you only pay for storage while products remain unsold; afterward, they are sold on your behalf via Amazon FBA. And since AWS charges only 15% tax compared to the 20% tax charged by eBay sellers, you stand to make quite a bit more profit per sale.
Of course, Amazon isn’t essential – however, knowing that many people like using their services might make it stress-free for you to find your target audience right away. Those are just two examples; the chances are that depending on which niche/industry you plan to operate in, several similar apps will exist too!
For instance, Shopify’s Dropshipping app lets you create a store that operates similarly to Amazon. You can set price rules based on your supplier’s pricing and track sales data through detailed reports. But I digress – back to dropshipping business models!
Remember that while it is possible to make money with dropshipping, it is not without challenges.
First of all, choosing a profitable niche and supplier is crucial for success; neither of them should be selected randomly.
By profitable niche, I mean a market segment that you can quickly fill with great products and services; by a supplier, I mean a manufacturer or distributor who will provide you with excellent products at low wholesale prices.
They should also be in high demand – ideally, they should be in your niche’s top 10. If they’re not, you may run out of customers to sell to.
Finding an ideal supplier is easier said than done: you’ll need to consider at least a dozen factors, including lead time, minimum order quantity (MOQ), shipping fee, and prices.
Most dropshipping suppliers will require you to purchase at least 50-100 units of each item in your store; in other words, they won’t just give you a single T-shirt or book to sell – they’ll sell you 50 or 100 pieces at a time.
It means that you’ll need to have enough cash on hand to stock your store and enough money to ship all those items as soon as they arrive. Besides choosing a niche and supplier wisely, you will also need to research your competition closely.
One of the preeminent ways to do so is by searching for similar products but already available on Amazon – what’s their rank? How many reviews do they have? Do you see any reviews about shipping delays or other customer problems with those products? Do you see any relevant discussion about them in forum threads or on Reddit?
How competitive is your niche overall? In other words, how many sellers are currently selling similar products on Amazon? The more of them you have to compete with, the higher your chances of getting negative reviews – and that’s never a good thing.
If you can’t compete on quality, it’s best to make sure you’re ahead of everyone else in terms of customer service.
Advantages of Dropshipping
1. There are no inventory or warehousing requirements, hence less risk involved in capital expenditure.
2. No need to hire sales agents since your manufacturer handles that part for you
3. Faster response to market demand
4. Low operating cost, since all of your suppliers are located in one country (at least initially) and you do not have to import any inventory, you also save on taxes that may be involved when your product is shipped into another country (most drop ship products come with a tax-free label attached)
5. No need for minimum orders or set up fees, saving both time and money
6. Customization options are endless
7. Easy to scale (unlimited growth potential)
8. Source products from all over the world without any geographical constraints
9. Improved customer service because your customers do not have to wait until you receive an item from purchasing it (if a customer wants more information about your product before making a purchase, direct them to contact you via email so that you can tell them more about your product)
What Makes A Successful Dropshipping Business?
Dropshipping is genuinely a revolutionary business model that has made online retail possible to small and medium businesses like no other form of e-commerce has before.
Starting a dropshipping business offers many benefits, but only if you choose wisely and stay organized. There are some downsides to being a dropshipper: chances of competition increase because when someone succeeds with a niche, most likely they will sell more products from that niche too!
Yet as mentioned earlier, having competitors in your niche doesn’t mean you will have fewer sales. if your product research is better than theirs, you will still outsell them. + customers trust their favorite brands more than new ones, so we need them to trust us too! (by putting loads of effort into promoting your brand via social media).
Learning how to promote yourself on social media is essential for any business today! Giving back customer value (free videos/ebooks/newsletters etc.), creating community around your brand.
Affiliate marketing isn’t just about selling products anymore. It’s about making money through relationships. And therefore it needs to be fun and relaxed!
Step 1 start with Facebook groups: join Facebook groups related to your niche.
If you want, make one by inviting friends or colleagues who already belongs to a group at that specific niches => now share all kind of helpful information relevant to your forte (no spam!): talk about struggles people face, biggest wishes also mention what kind of problems you’re trying to solve.
Remember not to keep sharing the same thing over & over again.
People start ignoring you after 2-3 posts.
Don’t use a ‘unique’ catchy title every day.
Remember emailing shouldn’t be treated as a promo tool rather relationship building: sometimes good content isn’t enough for me, especially when I’m busy reading tons of emails every day, so make sure you personalize your emails and make it sound natural.
But don’t fall trapped under SPAM accusations. While SPAM messages can get your account suspended, genuine messages might help create long-lasting relationships between you and influencers, plus it helps get traffic later since they would tag your link to their post.
3 ) ask questions, look around groups, see what type of questions get asked frequently and then ask those questions directly too! Answer those right away. You could even go further by replying to comments left behind.
This will help you build your credibility as an industry expert. BUT for FB groups, it’s a different case since you can’t reply to comments publicly.
You must invite them to your private inbox. (Influencer means anyone who has followers/subscribers greater than 10k. If they loved what they saw, they would click your website link, tag in their comment, and visit your site!
Disadvantages Of Dropshipping
There are some disadvantages of dropshipping. The first is about its business model.
In dropshipping, merchants do not own inventory, so they need to rely on manufacturers or wholesalers that fulfill their orders by shipping products directly to customers from warehouses.
When orders are placed, wholesalers ship directly to customers. Still, when you want to increase your profit margin, you will have to buy in bulk from them, resulting in extra money and a higher risk of losing money if something happens with suppliers.
Marketing strategy
Suppose you don’t have enough social media skills. In that case, it’s hard for you to get traffic and subscribers from search engines like Google (for free) unless you are going to pay for ads on top social media websites like Facebook (pay per click advertising), Twitter (pay per click advertising), Google+, etc.
Also, it isn’t easy to do advertising via Social Media platforms if you don’t have a high follower count already. Because companies usually make a video advertisement first and ask their users to share it online via Social Media podiums like Twitter and Facebook to reach out to more people worldwide.
So if you have enough budget to spend every month for paid Social Media advertisements or FB paid advertisements, go ahead!
But remember, those things cost time and money. So if you don’t have enough budget for monthly marketing & promotion fees, I recommend you either use Amazon FBA service or Dropship Wholesale as your eCommerce business idea alternative, which doesn’t require any special Marketing Skills.
Final Verdict
The dropshipping business model has some serious potential but many different ways to build a successful dropshipping store. The primary carry out is to choose your niche carefully and focus on products people will buy and use.
Do that, and you’ll likely have a great time building your business while avoiding many of the pitfalls other entrepreneurs have run into. This can be an extremely lucrative technique to make money, but only if you do your homework beforehand.
Focus on profits from day one and continue to follow customer feedback closely; making those two things your primary objectives as you go about creating your dropshipping storefronts could help ensure your success—and even help you turn profits from day one as well!
Have any questions? Let me know in the comments below; I’d love to answer them.