Are you new to online businesses? Are you seeking to take part in e-commerce; Dropshipping to be particular? The term could seem a bit intimidating to newbies. For these set of persons, information is paramount and identifying reliable sources aren’t that simple. This post will expound dropshipping and give you more insight into it.
Drop shipping is an e-commerce strategy used by an online shopping agency or agencies to sell products to customers, but the transit of the products is from the wholesaler to the end users without going through the retailer.
Who can drop ship and how does dropshipping Work?
A distributor, supplier or a producer can drop ship. In other words, on the retailers’ online store, the client orders a product. The order and customer details are automatically forwarded to the dropship supplier. The product is then packaged and moved to the client at the leave of the retailer.
From this description, it is a simple business strategy which significantly needs retailers to work in close relation with their distributor or suppliers to maintain a continuous and smooth supply chain.
This type of collaboration existing among distributors and the retailers is what makes drop shipping differ from the rest of the business strategy. You do not need to produce anything; you do not have to purchase your commodities in advance, make payment nor offer a fee to have them stacked in a store.
All you need to do is to set up an online shopping platform; one that will enhance sales and see to it that you succeed in what you have started.
The Benefits inherent in drop shipping
There are several benefits one derives from drop shipping. A few of the benefits are scheduled below:
- It is simple to set up: Setting up a drop shipping business isn’t that difficult. It is a process of just three steps including locating a supplier, designing a commanding website, describing your product and selling. If you are new to e-commerce business, it is as simple as described.
- Its startup cost is relatively low: Unlike other conventional businesses that have a high initial startup cost with considerable running expenditure, the drop shipping business involves a comparatively less costly initial startup capital with little operating expenditure. Products are not purchased for inventory. So the cost of inventory, store, and other overhead expenses are eliminated. Website hosting, app and site maintenance fees are the only associated fees
- No overhead Cost: As earlier mentioned, drop shipping does not warrant stocks or inventory holding hence; you do not need to rent a warehouse or storage space neither would you pay electricity, phones, and other administrative charges. The concern is only about maintaining your website.
- Business risk is low: Unlike other business that has everything at stake, dropshipping does not. What do I mean? In traditional businesses, where there are no sales, the owner has so much to lose. He has to cover the cost and bills incurred. This means, there is an increased pressure to make sales to allow for the continued existence of the business. There is no inventory in drop shipping, and so the risk of business failure and subsequent negative pressure is eliminated.
- The business can be operated from any location: The commitment and considerations for office space are eliminated. One can work from any location including the beach, bedroom, inside a vehicle, etc and still make money. Your internet connectivity and laptop are the only input you need.
- Product Varieties and options to choose: Drop shippers exist for any product you could ever think of. You have the option to sell a product, run several products or combine the products in whichever manner you deem fit. Simply identify a niche, and a supplier will definitely be handy.
- Scaling is easy: Unlike the traditional retail business which more profit is dependent upon expansion, increase resources (time, human and funds), hence scaling is difficult; it is different in drop shipping. To increase profit, effect more orders to you drop shipper. They will take care of every other thing while you earn
- Little or no Losses and damages to products: The products are shipped directly to the customer. Product handling that goes on in the supply chain of traditional businesses eliminated. With less physical contact with products, the likelihood of damages is reduced.
The Demerits of Dropshipping
As with every other business, there is always a flip side to it. The drop shipping business also comes with its demerits. Here below are a few demerits to consider of the dropship business model:
- Low-profit margins: Some factors including your supplier, location, and your niche may cause your profit margin to be small. Long distances imply higher charges, different niches and suppliers also have different fees. This might impact your gross revenue at the end of the day.
- Huge Loss when things go wrong: Irrespective the situation or fault. Whether it is from you or the supplier, you lose virtually everything where an error ensues. The client makes the order on the retailers’ site. Should the supplier make a mistake by supplying the wrong specification, the retailer is held accountable since he interfaces with the clients. So, be sure of who you hire as your supplier.
- Low level of control: The satisfaction of the customer is tied to the details and custom packaging of the product so shipped. He pays attention to the delivery notes which arrives with the product as well. While some suppliers allow the retailers a level of control as to the manner the delivery is made, others do not. Seemingly, suppliers who are willing to do so may demand additional charges.
- Complexities issues: while selling multiple products presents itself as a profitable venture, this may yield less result if there are several suppliers for the products. Of course, issues bothering on charges, location, the niche is imminent. The retailer will be tempted to transfer these cost on the client who may be impacted negatively.
- Highly competitive: Owing to the popularity and attractiveness of the dropshipping business, new entrants are coming into the various niches daily. To the new retailers, these could be detrimental to their success.
- Needs pro-activeness in inventory management: Tracking stock and inventory could be tricky. Information not adequately communicated, misrepresentation of products can cause the cancellation and rejection of orders and delivery. With modern technology, these issues can be managed but a cost to the retailer. The overhead cost might likely increase.
What to do before beginning a dropshipping business
Are you ready to commit to dropshipping? It is essential that you do so on budget. Yes, it thus does not require substantial initial capital, but hard work is vital. If you must build a competitive retail brand, then there are other things to consider.
- Niche Selection: Choose a niche that is user-focused and one you are passionate of. It will be so difficult to market a product array that is not market driven. It demands a whole lot of effort, time and resources to drop ship. You may be apt to be discouraged if you aren’t frenzied with your chosen niche. Before you select a niche, consider the following.
- a. Scan for attractive profits. Customer acquisition and marketing are two essential considerations. You sell because there is a demand from which you desire to make a profit. Be sure to balance both. A $10 item and $2000 item requires precisely the same effort to market. So identify a niche which is highly priced.
- b. Low shipping costs are essential: Clients receive high shipping cost negatively. Search for items with low shipping cost. With this, you may absorb the cost as a business expense, offer free shipping to your clients and surge the demand.
- c. Select a product that appeals to the buyer: The goal is to drive traffic and convert them to sales. The products you are selling should be in demand and must appeal to the client with the financial muscle to purchase on the spot. If you are interested in discovering great products that appeals, then consider the following, you can search for popular items:
- Google Trends: For a general run-through of search volume, use the Google trends.
- Reddit: With the Reddit List, you can identify the best functional and operational niche or communities. As one of the most significant meeting place for business, researching and recognizing a great niche is easy and straightforward.
- KW Finder: This is one of the strategies to access demand and interest. The KW Finder is used by people to have an understanding of how frequent your target niches are searched in search engines. Note: If nobody is searching for what you are planning on selling, you are good as never been existed.
- Make your own brand. You will create more value by rebranding your product. Seek a product or line you can brand and pass as your own with custom and personalized packaging.
- Market a product not available locally. Market a product that is not commonly found in your streets. In that manner, you become more attractive to your prospective clients.
- Carry out competition research: You are entering into a competition with other drop shipping agencies including the likes of Amazons and Walmart. Seek product that competes. Never make the mistake of purchasing what is not competitive. High shipping price, low demand, and producer issues could be the reason why a product may be less competitive. When a product is competitive, it is an indication of high demand.
- Secure a credible supplier: If you in partnership with a wrong supplier, your business will go crashing. Seek credibility. Do your research well before you partner with a supplier. Fast response, proper communications are some indices to look out for. If you have even some doubt about his capabilities, please locate another. You must be 100% sure of your supplier — no room for doubt.
- Design an e-commerce website: A website is the face of your business. You can use a simple drop shipping platform like Shopify. They are the fastest method of launching a website. You can play with the little resources and make it better as you grow. It must not be high tech savvy at the beginning.
- Analyze your customers, track and optimize all data available to surge your brand on Facebook conversion pixel data Google Analytics traffic if those are your main client channel. It is vital you track and understand where every conversion comes from. An understanding of this nature allows scaling and eliminates what doesn’t work.
Well that’s it hope this article helped you in deciding whether dropshipping is for you or not, do your research find a good dropshipping supplier.