Starting a Dropshipping Business
What Is Drop Shipping?
Dropshipping is a retail fulfillment method where a store doesn’t keep the products it sells in stock.
Instead, when a store sells a product, it purchases the item from a third party and has it shipped directly to the customer. As a result, the dropshipper (you) never sees or handles the product.
The biggest difference between dropshipping and the standard retail model is that the selling merchant doesn’t stock or own inventory. Instead, the merchant purchases inventory as needed from a third party – usually a wholesaler or manufacturer – to fulfill orders.
This unique model has a number of benefits and drawbacks:
Less Capital Is Required – Probably the biggest advantage to dropshipping is that it’s possible to launch an ecommerce store without having to invest thousands in stock up front. By their very nature, retailers have had to tie up huge amounts of capital purchasing stock in order to sell it in their store.
With the dropshipping system, you don’t have to purchase a product until you have made the sale and very importantly, have been paid by the customer. This model enables you to start a successful dropshipping business with very little up front money.
- No premises required
- No managing or paying for a warehouse and staff
- No packing and shipping your orders
- No stock control required
- No handling returns and inbound shipments
- No major financial support required
Low Overhead – Because you don’t have to deal with purchasing or managing stock, your overhead expenses are minimised. In fact, many successful dropshipping businesses are run from a home office with a laptop for very little. Maybe if your venture is successful you may need to increase staff for orders, but that is a good thing. This method is massively cheaper compared to those of traditional brick-and-mortar businesses.
Flexible – All you need is an internet connection. A dropshipping business can be run from just about anywhere as long as you can communicate with suppliers and customers easily, you can run and manage your business.
Limitless Product Selection – You can offer a wide variety of products to your potential customers. if your suppliers stock them as you do not have to buy or store anything, so you can list if for sale on your website at no additional cost.
Easy to Scale – With a traditional business, if you receive three times as much business you’ll usually need to do three times as much work. By leveraging dropshipping suppliers, most of the work to process additional orders will be borne by the suppliers, allowing you to expand with fewer growing pains and less incremental work. Sales growth will always bring additional work – especially related to customer service – but business that utilize dropshipping scale particularly well relative to traditional ecommerce businesses.
All these benefits make dropshipping a very attractive model to both beginning and established merchants. Unfortunately, dropshipping isn’t all roses and rainbows.
However, all this convenience and flexibility comes at a price.
Low Margins – Low margins are the biggest disadvantage to operating in a highly competitive dropshipping niche. Because it’s so easy to get started – and the overhead costs are so minimal – many merchants will set up shop and sell items at rock-bottom prices in an attempt to grow revenue. They’ve invested so little in getting the business started so they can afford to operate on minuscule margins.
True, these merchants often have low-quality websites and poor (if any) customer service. But that won’t stop customers from comparing their prices to yours. This increase in cutthroat competition will quickly destroy the profit margin in a niche. Fortunately, you can do a lot to mitigate this problem by selecting a niche that’s well suited for dropshipping.
Stock Issues – If you stock all your own items, it’s relatively simple to keep track of which items are in and out of stock. But when you’re sourcing from multiple warehouses, which are also fulfilling orders for other merchants, inventory changes on a daily basis. While there are ways you can better sync your store’s inventory with your suppliers’, these solutions don’t always work seamlessly, and suppliers don’t always support the technology required.
Shipping Complexities – If you work with multiple suppliers – as most drop shippers do – the products on your website will be sourced through a number of different drop shippers. This complicates your shipping costs and needs to be carefully managed financially.
Let’s say a customer places an order for three items, all of which are available only from separate suppliers. You’ll incur three separate shipping charges for sending each item to the customer, but it’s probably not wise to pass this charge along to the customer, as they’ll think you’re grossly overcharging for shipping! And even if it was feasible to pass these charges along, automating these calculations can be difficult.
Supplier Errors – Have you ever been blamed for something that wasn’t your fault, but you had to accept responsibility for the mistake anyway?
Even the best dropshipping suppliers make mistakes fulfilling orders – mistakes for which you have to take responsibility and apologize. And mediocre and low-quality suppliers will cause endless frustration with missing items, botched shipments and low-quality packing, which can damage your business’s reputation.
Dropshipping Scams – There are a lot of companies out there who sadly are not genuine. The tie you up on a contract, they charge large fees to join and maintain your supply. They overcharge as they are often just middlemen or they fail to supply the goods. Beware of these companies of which there are many.
Choosing The Right Supplier
Your success or failure depends totally on choosing the right suppliers. As just mentioned there are many dangers
- Where do you find them?
- Who can you trust?
- Are the genuine?
- Are their products genuine?
Just a few of the may questions you need to ask.
We have discovered a couple of very genuine directories to whom you pay a subscription who have done all the hard work for you and answer the above questions
Finding a niche market is one of the key ingredients to really making it in online selling. Did you know that beginner sellers are much more successful when they appeal to a very small market, rather than trying to appeal to everyone?
Finding a niche isn’t always easy – it takes time and persistence to find the right product to sell. To get you thinking, and to give you a few inspiring ideas, we have researched 5 product niche ideas to share with you. While some niche ideas might seem abstract to newbie sellers that is exactly what a great niche is – very precise and seemingly difficult to source.
My personal secret for finding ideas on what to sell, or finding out what item will compete on eBay, is the SaleHoo Research and Analaysis Lab:
SaleHoo collect data from all of the eBay auctions and they accurately predict the success (or otherwise!) of items at auction – so it makes my business foul-proof.
Niche Item 1: Heart Rate Monitors
These are used by athletes and gym bunnies or by people who need to keep an eye on their heart rate.
Why they are an exciting niche item:
They have a 75% success rate on eBay (75% of all monitors listed on eBay in the last three months sold!)
They are lightweight and easy to ship and store
One size fits all
Niche Item 2: Plus Size Shoes
While these are commonly made by popular shoe makers, stores often order only a handful of pairs in larger sizes, which means that more and more, our big-footed friends must turn to buying online to get what they need.
They have a high success rate on eBay (women’s size 11 sell at 61.9% and men’s size 14 at 75%)
Both men and women alike can require plus size shoes (Hot tip: women’s size 11+ high heels could make a great little niche)
Niche Item 3: Plus Size Maternity Wear
Maternity and baby gear always works because people are always going to have babies, so you’ll never run out of customers!
Clothing items are easy to ship as they light and not fragile.
Niche Item 4: Military Insignia
Collectibles always make great niches and you can dig really deep to find the best ones. They are also perfect for people who are interested in them – you’ll find it much easier and much more rewarding when you sell something you enjoy. To really niche it up, go for US military insignia from the Vietnam War which is big on eBay.
Why military insignia makes an excellent niche:
It rarely dates or goes out of fashion
There are so many sub-niches to discover like Russian war medals and World War 2 helmets.
Niche Item 5: Antique Clocks
You’ll appeal to both collectors and home decorators
They have an eBay success rate of over 67%
You can often pick these up very cheaply from flea markets and yard sales, then sell them on to make a profit
Niche items really are the way to go for newbie sellers and there are so many out there to keep you interested and best of all, make you money!
As I mentioned at the start of this email, SaleHoo is how I figure out which niche markets are profitable. But did you know that it also has 8,000+ legitimate wholesale suppliers?
Go there NOW to get instant access to over 8,000 of the best and most trusted product suppliers on the web.