People are often reluctant to start an online store because of all the hassles and costs. But imagine if you find a supplier who will pay you the upfront inventory price of thousands of items and manage other operations. It is dropshipping.
Dropshipping allows you to start a business and run it from anywhere. Sounds too incredible to be true? But it’s true; you just have to learn how to get started. This article will tell you the basics of dropshipping business with tips to help you start your business.
What Is Dropshipping?
Dropshipping is a fulfillment method where an online store or retail outlet doesn’t keep the products it sells in stock. Instead, when the business sells a product, it purchases the item from a third-party supplier (usually a manufacturer or wholesaler) and has it shipped directly to the customer. The merchant never sees or handles the product.
Dropshipping allows businesses to sell products without needing to hold inventory, which can be advantageous for a variety of reasons. Here are a few ways businesses take advantage of dropshipping:
- Low upfront costs – Because you don’t need to purchase inventory upfront, you can start a dropshipping business with little investment.
- Wide range of products – Since you don’t need to hold inventory, you can offer a wide range of products without worrying about storage or shipping logistics.
- Scalability – Dropshipping allows businesses to quickly scale their operations since they don’t need to worry about managing inventory and fulfillment.
- Flexibility – Because you’re not tied down to a physical location or inventory, dropshipping businesses can be run from anywhere with an internet connection.
Since you’re not actually handling the product, there are some potential downsides. You have less control over the quality of the product and there could be issues with shipping and customer service. Additionally, because dropshipping has become so popular, there is a lot of competition in many niches, which can make it difficult to stand out.
Who Can Benefit From Dropshipping?
Everyone from Walmart to Amazon participates in dropshipping. Virtually every business can benefit from dropshipping strategy incorporated into their online presence:
- Manufacturers – Manufacturers can partner with niche e-commerce stores to build a direct-to-consumer (D2C) strategy to reach new buyers for their products.
- Influencers – Influencers that have a significant reach online can capitalize on their influence to sell products directly to that audience, improving the monetization of their presence.
- Ecommerce – Businesses that are already selling online can expand the product listings they offer, passing the orders through to their dropshipping supplier(s).
- Businesses – Any business with a significant reach can offer the direct purchase of dropshipped products to its audience.
The global dropshipping market was valued at $155.6 billion in 2021, and is projected to reach $1670.1 billion by 2031, growing at a CAGR of 27.1% from 2022 to 2031.
Basic Dropshipping Rules
If you want to start a dropshipping business, the information in this article will save you weeks of frustration, research, and wasted time. The dropshipping tips are taken from two basic rules or principles about making this business work efficiently:
- Keep in mind that things can get messy. Dropshipping business’ convenience may come at a cost; having a third party involved in every sale might complicate things for you. From out-of-stock products to botched orders, these minimal issues will be something you might have to deal with. If you accept this beforehand, it will save you from getting frustrated.
- Have a KISS mentality. A Keep It Simple, Stupid! mentality will benefit your dropshipping model in the long run. Given the complexity of dropshipping business, such as multiple suppliers and shipments from other vendors, you might need to track your costs and inventory at all times perfectly. But keeping everything perfect will drive you crazy, causing you to spend thousands on customized developments and ultimately never launching the store. You should focus on the easiest-to-execute solutions, even if they aren’t “perfect.”
Ask any successful dropshipping business owner, and they will agree to keep things simple. With these principles in mind, let’s dive into the beginner’s tips to help you structure your business operationally and make your store grow smoothly.
6 Tips for New Dropshippers
- Find the Right Supplier – Essential to any Dropshipping business’s success are the suppliers that deliver products. Dropshippers have very little influence in packing or supplying products, but working with the right wholesaler will ensure your products are of the best quality, have the desired packaging according to the specifications, and are delivered at the right time. To take your dropshipping business to the next level, it is also important to have a user-friendly and visually appealing website. This is where Shopify development services come into play. By working with a professional Shopify development team, you can ensure that your website not only functions smoothly but also provides an excellent customer experience. Suppliers fulfill orders on your behalf, and your brand’s image and reputation depend on them. If your supplier has low-quality standards or doesn’t adhere to the packaging rules & shipping timelines, you will ultimately lose your credibility, reputation, and trustworthiness. Remember, at the end of the day, you will be liable and answerable to your customers, not your supplier. Negative reviews will affect your brand value. Your suppliers are crucial to your business, so research well before deciding.
- Own Supplier’s Mistakes – Even experienced people make mistakes, and owning a dropshipping business, it is confirmed that you may have to face fulfillment errors. So think about what you will do if your supplier delivers the wrong product or nothing at all. Here’s what you can do:
- Accept your mistake — take the blame. Under no circumstances should you play the blame game and blame the supplier, even if it’s their mistake. It will confuse the customers, and you will end up looking immature. The customer doesn’t know that a third party is involved in the business. Therefore, you need to own the mistake and tell the customer you are working to fix it. It’s your job to make it up to the customer, depending on your mistake level. It could mean anything, from a shipping fee refund to an upgrade if the customer needs another item shipped out.
- You don’t have to pay for your mistake – You may have to take responsibility for the error, but it doesn’t mean your profit margin should be cut. Any honest and respectable supplier will pay you to fix the blunders, including shipping costs. Though the supplier won’t pay for any upgrades or freebies, you offer the customer. Those should be counted as marketing expenses and public relations.
- Hold suppliers accountable – Again, dropshipping suppliers occasionally tend to make mistakes, but be exceptionally aware of suppliers constantly botching your orders. Unless you change the suppliers’ behavior (which is very unlikely), your business will be badly reputed. You should search for a new supplier in such a case.
- Begin with a Low-cost Product – Merchandising dozens of products as a beginner will be fairly overwhelming, and you will lose your focus on what matters — conversion rate, product pictures, copy, descriptions, etc. To learn the process, pick a product under $100. If you are confused about which product to pick, go with the products that actually improve and impact people’s lives, have excellent selling potential, especially during the gifting season, or can go viral on social media.
- Avoid Under-pricing Products – Profit margin is the first thing to consider when you decide on the products you want to sell. Factors affecting it are office staff, supplies, and marketing expenses. Don’t undercut your costs just because of your competitors, no matter how tempting that sounds. Offer fair prices on quality products; keep the cost within the market value, and you will find valuable customers. Hassle-free refunds and returns, swift customer service, customized packaging, and more will add to a fantastic shopping experience, and customers won’t mind paying extra for it. Increasing your margins by skimping quality will get you nowhere in the long run, and you will disappear into oblivion.
- Keep an Eye on Your Competition – Monitoring your competition is more crucial than it seems. You can start by making an excel file with links to your competition sites, social media accounts, and their products. Sign up for their mailing list and buy their products to check their quality. The low-level competition monitoring will give you insight into how your competitors run their stores and help you learn the loopholes in their strategies.
- Stay Active – You must actively work on your dropshipping store regularly, as it is not an automated business model. Also, there isn’t an overnight success; you will probably have to spend proper time setting up your store. Dropshipping stores require hard work each and every day to secure a successful future.
Dropshipping is one of the quickest ways to get your store up and running, but it is not the fast track to residual income. It takes diligent work and outstanding development services to have a successful dropshipping business. Keep the above-mentioned tips in mind, and you will be good to go!
Disclosure: Martech Zone is an affiliate of Shopify and we have updated this article with our affiliate link.