Dropshipping business is an extremely popular business model for new entrepreneurs, especially Gen Zers and Millennials, due to internet marketing skills far outweighing financial capacity. Since you don’t need to stock or handle the items you are selling, it’s possible to start a drop shipping business with limited funds.
The growth of Amazon, eBay, Etsy, Shopify, and other online marketplaces and platforms means that anyone can start an online store for as little as $20. With a dropshipping store you will be able to sell products to customers, set your own product prices and market your very own brand. You don’t even need to pay for inventory until it’s sold to an actual customer.
But with the barrier to entry being so low, dropshipping has exploded in popularity over the past decade, meaning that many markets are highly competitive.
If you are ready to start a business that can compete with retail giants, and do so on a limited budget, then follow the six steps below. While it doesn’t take a lot of startup funds to launch a drop shipping business, it will require an immense amount of hard work.
There are thousands of people around the world who make five-, six-, and seven-figure incomes from dropshipping and there’s no reason why you can’t do the same.
First lets understand the dropshipping business model in depth.
What Is a Dropshipping Business?
Dropshipping is a business model which you can use to run your store without ever holding any inventory. Once you’ve made a sale your supplier will ship your products from their warehouse, straight to your customer’s doorstep. You’ll never need to worry about storing, packaging, or shipping your products.
You can also take a look at this info-graphics if you don’t want to watch the whole video.
How Does the Dropshipping Business Model Work?
There are three key players in the dropshipping business model: the manufacturer, the retailer (you) and the customer.
The manufacturer’s role in a dropshipping business model includes creating products, carrying inventory, shipping products to customers on behalf of the retailer, replacing defective products, and restocking products. They sell products to the retailer at wholesale prices assuming the risk of unsold inventory.
In the dropshipping business model, the retailer, you, sell the manufacturer’s products on your website under your own brand. You’ll be responsible for choosing and marketing those products. Plus, you’ll also be responsible for managing customer inquiries and complaints.
Lastly, in the dropshipping business model, the customer buys the products directly from you the retailer. If questions or issues arise, they contact the retailer they bought the product from.
How to Start a Dropshipping Business: The 4 Step Dropshipping Business Plan
Step 1: Choosing a Dropshipping Business niche
Truth is, what you sell matters. You should take some time to find the best dropshipping business ideas. Most people tell you to pick a niche you’re passionate about. But that’s only a half truth. It’s about a combination of profit and passion, skewed towards profit. The reality is the best dropshipping business ideas are usually the profitable ones. It’s a lot easier to be passionate when you’re actually making money.
The niche you select needs to be laser-focused and something you are genuinely interested in. A product range that isn’t focused will be difficult to market.
Consider these factors when choosing your Niche
- Seek attractive profits. When you are running a drop shipping business model, your focus is on marketing and customer acquisition, so the amount of work required to sell a $50 item is essentially the same as it would be to sell a $2,000 item. Select a niche with higher-priced products. Fitness, fashion, jewelry, beauty, tech, purses,and backpacks are some of the evergreen niches that we keep seeing top online stores enter and succeed in.
- Make sure people are actively searching for your product.
Use Google’s Keyword Planner and Trends to check some common search terms related to your potential niche. If nobody is searching for what you are planning on selling, you are dead in the water before you even begin. Please l advise you to take your time with google keyword planner and google trend because they will let you know if your product has any future.
2. Secure a supplier
Partnering with the wrong supplier can ruin your business, so it’s important that you don’t rush this step. Conduct proper due diligence. Most drop shipping suppliers are located overseas, making communication extremely important, both in terms of response speed and the ability to understand each other. If you are not 100 percent confident in the communication abilities of a potential supplier, move on and continue your search.
Alibaba has become one of the largest online resources to identify and communicate with potential manufacturers and suppliers. Make sure to ask a lot of questions and learn what their production capabilities are in the event that your business grows exponentially. You want to be certain they have the ability to scale with you.
What to Look for in a Dropship Supplier
A good dropship supplier should:
- Actually be a dropshipper: Not all product suppliers offer dropshipping as a service. Some are simply wholesalers or manufacturers. Before you make contact, make sure the supplier is a dropshipper.
- Have experience (+ helpful staff): You want a supplier that has years of experience with dropshipping. Suppliers take on a lot of responsibility with dropshipping so you want to be sure that you can count on them at all times. A good sign is if the sales rep you’re in contact with seems helpful and well-informed. If you suspect they’re not experienced, go elsewhere.
- Not charge huge order fees: It’s quite normal for dropship suppliers to charge a small fee for their services. After all, they’re holding onto stock and organizing packaging and shipping for you. These fees should only a few dollars ($2 to $5 usually). If a supplier charges you more than that, you should let them go.
- Provide fast shipping: Most dropship suppliers are located in China so you can’t expect overnight shipping. However, you do want to make sure your customers will get their items as fast as possible. Check their shipping times to the countries you service. One-two weeks is acceptable for dropshipping. Any longer than that could result in negative customer feedback.
- Have quality products (+ product photos): You should always request product samples to test quality prior to committing to a supplier. The supplier should ideally have high quality images that you can use in your product listings.
- Provide referrals on request: A good supplier should willingly connect you with businesses that can verify their service. Ideally, you want word-of-mouth referrals, but failing that you might be able to make your mind up based on customer reviews online (although be aware that online reviews can be manipulated).
Where to Find Reliable Suppliers
There are essentially two ways to find good dropship suppliers. You can either search online manually or use a wholesale directory like SaleHoo.
- Searching for suppliers online: You can simply type your product plus “supplier” into Google and see what comes up. Or you can search for your product on websites like Alibaba.com or Aliexpress.com. A lot of China-based suppliers use these websites to sell their wares.
- Using a wholesale directory: This can save you a lot of time and help you avoid eCommerce fraud. SaleHoo has more than 8000 suppliers that have been vetted and verified. You can contact them in just a couple of clicks and have confidence in their ability to provide good service.
3. Build your e-commerce website
The fastest way to launch a website that supports a drop shipping business model is to use a simple e-commerce platform like Shopify. You don’t need a tech background to get up and running, and it has plenty of apps to help increase sales. Make sure you install the best theme for you dropshipping store because a good theme can help you increase your sales.
4. Implementing a Customer Acquisition Strategy
Now that you have a selling platform for your dropshipping business, you need to attract customers to your store. This is where a customer acquisition strategy comes in.
Customer acquisition is the art of persuasion. You can think of it as advertising and marketing. Sounds expensive, right? But it doesn’t have to be. You can take the fast (paid) path or the slow (free) path to gaining new customers. Let’s take a look at both strategies in more depth.
Fast Results (paid)
Facebook Ads for Dropshipping
Facebook is the world’s largest social media platform. It’s a great place to advertise your products as you can tap into a huge audience. This is how Facebook makes its money, so every customer you acquire through this method comes at a cost. Facebook ads are a good option for the following reasons:
- It’s easy to get started
- You control how much you spend each day
- You can target highly-specific demographics (location, interests, relationship status etc)
- It can yield fast results
- It helps to increase brand awareness
- A good ad or boosted post can go viral
For a comprehensive guide to Facebook ads for beginners, check out this post.
Google Ads for eCommerce
Google is the world’s most popular search engine by far. If you have an online store, you want it to rank on the first page of Google. You can achieve this organically, or you can buy ads for your store to appear at the top of the page for the keywords you want to rank for. Google ads are a good option for the following reasons:
- You can achieve great exposure in search results
- It’s the largest advertising platform in the world (Google search, Youtube, Gmail)
- You can target highly-specific demographics (location, language, device etc)
- Maximise exposure to your ads with high volume keywords related to your niche
Social Media Influencer Marketing
Influencer marketing has become a huge part of customer acquisition for retail brands in recent years. It could play an important part of any customer acquisition strategy in 2019. It can be particularly effective if you are in a trendy niche. For instance, if you’re selling a new style of handbag, you could reach out to an Instagram model and ask if she will share a post of her with the bag, tagging your business. One post can result in a bunch of new fans and customers. The cost of influencer marketing depends on how famous the influencer is. A post from Kim Kardashian might cost $250,000, while a post from a model with 10,000 followers might only cost a few hundred dollars.
Slow Results (free)
This involves finding blogs or forums that are related to your product/niche and actively participating in discussions. By positioning yourself as an authority in your niche and including a link to your website, you can increase traffic and acquire new customers.
This most commonly takes the form of a blog on your store website, a Youtube channel, trendy Instagram posts, or witty posts on Twitter. Content marketing is meant to involve the creation of valuable content that helps to build an audience that you can then convert into customers. It’s not as explicit as advertising and should always be more about serving your audience than your brand. Learn more about content marketing from Brian
Social Media Marketing
It’s getting harder and harder to achieve organic reach on social media due to the ever changing algorithms, but it is still possible. If you can consistently create and share great content on your social media channels you’ll eventually build a following, which you can then convert into customers.
Building an email list is still one of the most effective ways of acquiring customers. You often hear people say the money is in the list and that is true.You need a way of capturing email addresses, such as a request to sign-up at checkout, or an offer or competition that requires an email address. Once you have a decent list of email addresses you have a way of reaching a large group of people regularly, for free.