How to start a drop shipping business | Drop shipping Business Guide
The e-commerce market is witnessing an exponential growth these days. This is going to be a full grown sector in the years to come. In this cut-throat online retail market, there are many ways to start your own business. Drop shipping is one of them. It is seen by the eCommerce experts as the most affordable and easiest models to get going with an online store in no time.
However, there are plenty of unanswered questions. A newbie entrepreneur might also get confused with the multiple aspects of the drop-shipping. I am writing this article to cover briefly about each and every aspect one needs to know before jumping into the drop-shipping business sphere.
What is Drop-shipping Business?
Drop-shipping is a business model that allows you to purchase products individually from a wholesaler or third party supplier and ship them directly to your customer. It is a type of fulfillment method. As the third party supplier takes care of the product, the merchant doesn’t need an in-house inventory to fulfill the orders.
Drop-shipping is far away from the traditional retail model. You can open an online store and connect with the suppliers who have products and inventory warehouse. As a merchant, you are more of a middle man and mainly responsible for bringing customers to the drop shippers. Hence, you can easily run your store without holding any inventory of your own.
Many entrepreneurs entice with the idea and look for easy answers to the most fundamental question that arises here- how to start a drop-shipping business? They seek an answer that can help them build a sustainable business aligning with a long term commitment in minimal investment cost. The task of the drop-shipper here is promoting the supplier’s products and earning commission in return from the supplier with the inventory.
In short, a Drop shipping platform is a way to connect the buyers and the suppliers through a technological solution.
One of the examples of the drop-shipping site is Amazon. Out of many models it follows, Amazon also manages the drop-shipping transactions along with its own warehouses and shipping services of its in-house product line. Amazon is doing drop-shipping, when you buy a product on its site and get a message that they are using a third-party vendor.
We’ll get deeper ideas of the drop shipping step by step as we proceed further in this article..
How does the drop-shipping model work?
There are three crucial players in the drop-shipping business model:
● The Manufacturer
● The Retailer
● The Customer.
The Manufacturer: The manufacturer’s role in drop-shipping is equivalent to the supplier. The key role includes starting from carrying inventory to shipping of products to the customers. They sell products at a wholesale rate to the retailer and also manage the defective and restocking products.
The Retailer: The retailers sell the manufacturer’s product on their website by putting their own brand or the manufacturer’s brand. The retailers are responsible for customer service including inquiries and complaints. The key role of a retailer is to market the products, selling them, and managing the customer relationship.. Customers seek the retailer in case of a grievance or query.
The Customer: Customers order the product from an online store owned by the retailer. They contact the retailers directly if any issues arise regarding the product.
Why is starting a drop-shipping business model a good Idea?
Drop-shipping is a popular business model for those entrepreneurs who want to start a new e-commerce business with minimal investment. It is a good idea for Millennial's because of the excessive use of internet marketing skills for business promotion.
This is supposed to be a low-risk business model. It eliminates the cost of creating inventory, cost of employees for packaging and shipping, and cost of storage of the product. To start a business according to your own comfort, drop-shipping provides an endless medium to enter into the world of eCommerce entrepreneurship.
There are many pros and cons to drop shipping though. It’s imperative to look at the advantages and disadvantages before you start a drop shipping business.
Advantages of Drop Shipping:
● You don’t need to be a guide or mentor to get the business started. It is very easy to start without any prior business experience.
● Drop shipping is so easy because it requires a little effort.
● You neither need a warehouse for storage purpose nor a team to worry about the shipping and stocking. No need to pay storage costs as well.
● The products can be shipped to the customers on behalf of the retailer. The drop shipper doesn’t need to hold the boxes of products to houses or warehouses. This can save you a lot of effort and money.
● You can start your business even without spending much amount of money. You can start getting everything done within an hour.
● You just need to find a vendor in drop-shipping and place the item on your website. This makes very convenient for testing new offers with your audience.
● No time is being spent on the packaging and distributing goods as you are not dealing with the inventory and shipping. You can get extra time for promotion and marketing of the product, which gives you the benefit for adding more customers to your e-commerce website.
Technology has two sides, one has its own benefits and another side to bring new and better ways of conducting business. Despite the pros of drop-shipping business, there are many cons also associated with it. Here are a few things that may slow down the pace of your drop shipping business if not handled in advance.
Disadvantages of Drop shipping:
● Longer shipping duration
● Unprofessional behavior of suppliers
● The high cost of some goods
● Customer support and services might get affected
● Refund procedure takes a lot of time
● Low Product quality is a big concern
● Lesser command on quality control by the website owner
However, some drop-shipping stores are growing vigorously in the drop-shipping business because they keep customers first. They provide the service and support as a priority to solve all customer needs. They sell their products with a lower margin and compensate the amount by allowing customer support to stay sustainable in the market. Customer satisfaction will help to fuel your business ambitions into reality. If you can deal with the drawback strategically, drop shipping can be a charm for you.
Where to find a drop-shipping website for sale?
There are many marketplace scripts in the market for people who want to start a fully functioning business. There are also solutions which help the entrepreneur to skip the building phase and start directly with the product upload and marketing. These ready made marketplace solutions also provide API integration with different collection of online stores and drop shipping business platforms.
For example, Shopygen offers marketplace scripts to support multiple business models. Its Node js eCommerce platform Genstore is capable of offering drop shipping integration for a quick start. It offers different packages to purchase web solutions along with the mobile apps for Android and iOS. With varying price ranges and niches, you can choose a suitable solution that fits your budget and requirement.
The following ways take into account while choosing to buy an online store. This includes cost, checking the type of business, website, monetizing procedure, the popularity of niche, and penalization.
● Make sure about all the legal documents including EIN number before contacting the suppliers.
● If you know about which product you are willing to drop ship, then contact the original manufacturer for distribution. Not all distributors willing to drop ship, but take follow up with them and make a list.
● Check details about the budget and price for starting a business. Analyze the cost requirements and negotiate for a better deal for your business.
● Designing the websites by a professional will tend to make a quick sale. The wholesalers are not as good as in SEO. If the store design looks professional, then it will be easy to navigate marketing.
● The suppliers tend to have outdated and old websites with less design and layout. Check with the age of the website that would typically have a better chance of ranking online in SEO than an older one.
● It is very essential to know how to create a drop-shipping business with less money. It is necessary to compare how much money it is making at its peak and how much it is making now. This comparison will give you a brief idea about the business whether it is growing or not.
● A store could work out well when there are trending products and an evergreen niche. The popularity of niche is also important while choosing a better drop shipping business plan.
● Double check with the penalization before buying a website. If a store has been penalized, it will be very difficult to rank it in search engines. Check whether its scam or not.
Dropshipping business Plan:
Every newcomer requires a drop-shipping business plan. The business plan is a road map to success. Here I am going to explain how to set up a drop shipping business plan. The top drop shipping Business Plan includes:
● Choosing a drop-shipping business idea
● Building a drop-shipping business store
● Marketing your drop-shipping business with everything you’ve got
Choosing the drop-shipping business idea:
The niche you select should be much focused. The product specifications and range that is not focused will be difficult for the market. It needs a lot of work to successfully scale a drop shipping business. You should consider the following points while choosing a drop-shipping business idea.
● You need to clearly understand who you are and who you do it for. Identify your audience and the products you’re going to drop ship.
● Research target audiences and potential customers. Try to find about the customers, the location, and their income level.
● Secure your supplier because partnering with a wrong supplier can ruin the business. Conduct careful and persistent effort to find a good supplier.
● There are a few successful companies like Zappos, Wayfair.com, Fab, and Gilt. Group experimented profitability will depend on many factors for your case though.
● Fitness, fashion, jewelry, beauty products, tech products, and backpacks are some of the evergreen niches seeing at top online stores. So it is very essential to choose wisely the categorization of business before starting an online store with drop-shipping.
● Seek attractive profits always. The focus should be essentially on marketing and customer acquisition. Select a niche with higher-priced products.
● Low shipping cost is an important parameter because your supplier will handle the shipping. If the cost is high, then it will act as a customer repellent. It is very important to optimize and analyze how much does it cost to start a drop-shipping business.
● Create your own brand. Sell something that is not available readily in the particular locality. Pick something your customer won’t get on the streets. This is the way you can reach to your potential customer.
Building a drop shipping business store:
There are a few elements to building a drop shipping business the right way. Here are a few:
● Domain Name: A good domain name is necessary to build a long-term brand.
● Sign up: There are several comprehensive e-commerce marketplaces with new features and resources. It is very easy to use and run a business on these ready-made platforms. You can also get services if necessary from the support department. You don’t need a technical background to run it. It has a lot of apps which helps in increasing your sales.
● If you have a good budget to hire a web developer to create a custom solution, then you can move ahead. However, it is much wiser to use plug-in-play options initially with a lower budget. Once you are stabilized in the market, then you can incorporate and explore additional customization accordingly.
● A smarter theme provides the website with a better appearance and navigation. You can also invest in themes for buying a new theme for better store design.
● Oberlo allows you to find products online that you can sell the same day. You’ll be able to find products in a number of popular niches.
Marketing your drop shipping business with everything you’ve got:
After building your store, it is very essential to market the drop-shipping business. These points will help you out for marketing your drop-shipping business.
● Make sure people are searching for your product regularly and actively. Use Google’s keyword planner and Trends to search for terms related to your potential niche. Google Trend helps to know whether a niche is on upward or downward.
● Google keyword planner helps to find the search volume for a keyword. This helps the competitiveness of your niche keywords.
● Use social media for better competitor analysis. Start analyzing the social media pages of top brands about the followers, brand, and engagement. Then start doing things to stand with them.
● Facebook Advertising: You need to keep your budget low before creating an Ad on Facebook. Because you don’t know what will be your best selling product.
● Facebook allows you to generate revenue and sales at a quick scale. It takes your offer directly in front of the targeted audience.
● Create multiple Ads to figure out which product sells best locally or a particular region. When your business grows gradually then you can create separate Ads globally.
● Do list the problems which will be solved by the offer you are presenting in the market. Identify how the products will stimulate the customers in multiple aspects to buy your product.
● SEO and email marketing also help to set up offer discounts and special offers. This is a way to leverage sales and revenue generation.
● With re-targeting an Ad, you can more likely convert the customer into a paying customer.
● Focus on revenue streams like affiliate programs, Google advertisements, Google Shopping Ads, Bing Ads, Social media Ads etc.
Every entrepreneur loves the challenge. Moreover, Drop-shipping is a gradually growing industry, which requires a lower capital investment for the entrepreneurs who are willing to enter the retail space. The entrepreneurs who have expertise over online marketing, sales, and customer support will get an additional advantage.
We have articulated how to start a drop-shipping business from the initial stage to take it to the launch and making your first sale. The whole process was just to get the experience and know to how to set up your own drop-shipping business. We hope you learned something new from the basics, and got some comprehension to explore your business opportunities.