Dropshipping is one of the online profit-making methods that has become a real gold mine for earning money in our current time. E-commerce has flourished significantly in recent years, and new online stores are popping up every day. So why not seize this opportunity and enter the field by creating your own dropshipping store? All you need to do is choose the perfect products to market and sell through it.
If you're interested in e-commerce, you've probably heard of dropshipping. It's a very common term. Of course, you need to understand how dropshipping websites work before starting your business in this field. So, we will provide an overview of dropshipping, how anyone can start a business in it, and how to generate profits from it.
What is dropshipping?
Dropshipping is a form of online selling where you have an e-commerce store but don't hold any inventory. It relies on the concept that customer orders placed on your website are forwarded to your supplier, who is responsible for delivering the product to the buyer.
In simple terms, a dropshipping website is essentially a service provider that markets products, and its sole task is to sell the supplier's products and generate profit from the price difference between the sale and purchase prices.
By creating a dropshipping store, you free yourself from the storage costs associated with traditional stores and eliminate the burden of shipping and delivery management, which is entirely delegated to the suppliers you work with.
To make a profit from dropshipping, you need to understand how it works step by step:
There are three parties involved in the dropshipping process:
1. The supplier: who provides a range of products to sellers.
2. The marketer: who showcases the supplier's products on their e-commerce platform.
3. The customer: who purchases the products from the seller's website and receives them directly from the supplier.
The difference between dropshipping and traditional e-commerce
Now that we understand what dropshipping is, we can ask ourselves the next question: What is the difference between dropshipping and traditional e-commerce?
Dropshipping is actually a form of e-commerce. However, the advantage you'll have by launching a dropshipping store is that you can focus on your core business: online sales. You won't have to worry about logistics, inventory, or shipping at any time.
For the customer, there is no difference between a dropshipping website and any other traditional online sales website. In most cases, the customer doesn't even know they're dealing with a dropshipping store. Therefore, the main difference between dropshipping and traditional e-commerce lies in the steps leading to the delivery of the product to the customer.
In the case of ordering from a traditional online store: The customer places their order on the company's website, and then the company prepares and ships the order from its warehouses, tracking the shipment until the customer receives their order.
In the case of a purchase from a dropshipping store: The customer places their order on the website. The company receives the order and sends it to its supplier, who prepares and ships it.
Benifits of Dropshipping
Dropshipping is ideal if you're like most people starting a small business and don't have a lot of extra money. The last thing you want to do is tie up your funds in inventory that you may or may not be able to sell.
One of the key benefits of dropshipping is that when an order is placed on your website, it is automatically sent (without any intervention from you) to your supplier. So, there's no need to worry about anything. Dropshipping is a highly enjoyable way to generate a steady income, as long as you know how to do it.
You can essentially run your store from anywhere you have an internet connection.
You can offer a wide range of products to customers. Since you're not required to invest in building your own inventory, it's advisable to stay updated on popular products if you find your customers demanding a particular item and quickly add new products to your website. You can also switch up your offerings quickly without needing to first order new items or clear out previous inventory.
In fact, many successful dropshipping companies are run from home. You may not even need to quit your job to start your own store, as you can often balance managing your online store with your job.
Terms used in dropshipping
When starting a dropshipping website, you often come across many terms that need to be defined. Here are some key terms in dropshipping:
Supplier: The company that manufactures or stocks the product you sell. When you receive an order on your website, you send it to your supplier, who prepares and ships it. The supplier is the cornerstone of your dropshipping store. If the supplier fails to deliver on time or provides low-quality products, it can harm your store's reputation. Therefore, it is essential to choose the best suppliers for your dropshipping store (Dropshipping is heavily supported by Chinese wholesalers and suppliers).
CMS: Content Management System, the tool that allows you to create your website. The most popular CMS in the world is undoubtedly WordPress. However, in the dropshipping world, there are specialized CMS platforms for e-commerce that are highly efficient and allow you to create an account to start your business, such as Shopify.
How to Profit from Dropshipping in 5 Steps
To learn how to build a dropshipping store and profit from it easily without the need for programming languages, we will provide you with a beginner's guide to dropshipping in just 5 steps.
1. Choose your business sector
Take some time to research different types of products that you may want to sell. The products you choose should be in demand but not widely available online. Look into the competing companies in this sector and what offers they provide.
When starting dropshipping, you need to decide what type of product or products you will sell. The winning product concept is finding a product that captures the interest of internet users and earns you good profit. It's also essential to ensure that the competition is not too strong for this product. Think carefully about what is marketable, what is easy to ship, and what is difficult for people to find locally.
2. Creating an online store and brand
You need to design your own online store so that customers can find you and place orders for the products they choose on your website.
You can create your online store on various specialized e-commerce platforms that provide integrated solutions for building e-commerce stores. One popular global platform is Shopify, which is known as one of the most popular e-commerce platforms.
3. Marketing your store online
Marketing is the crucial factor that determines your success in dropshipping, and online advertising is often the primary method for acquiring customers. Running advertising campaigns on social media platforms such as Google Ads or Facebook Ads is essential for starting and growing your online business.
4. Contracting with dropshipping suppliers
Here comes the most important question: how to choose a dropshipping supplier. You should carefully select the optimal supplier based on the nature of the product you are marketing, the country where you intend to market your products, and also the prices offered by the suppliers. Here is a list of the best dropshipping suppliers:
AliExpress: The Chinese giant belonging to the Alibaba Group. It is one of the largest wholesale e-commerce websites and is now one of the top 50 most visited sites in the world. It hosts a vast array of suppliers in various fields for all kinds of products who operate through dropshipping. It also allows you to verify and rate suppliers based on customer feedback to ensure increased reliability.
Amazon: The world's most famous e-commerce site, owning one of the largest databases of products sold online. When looking to open an online store without inventory, you can utilize Amazon's dropshipping program to sell products on your own website. Once a sale is made, your supplier (Amazon) takes care of shipping the product without any complex procedures.
eBay: One of the most renowned and largest online selling platforms. Similar to other e-commerce marketplaces like Amazon and AliExpress, eBay has consistently grown its user base over the years. In the first quarter of 2019, the platform had 1.81 million users. This large user base attracted online sellers looking for buyers for their products. Hence, you can use eBay dropshipping to professionally manage your business and generate income.
Oberlo: One of the most popular dropshipping apps developed by the e-commerce platform Shopify. It stands out for its user-friendly interface and offers a vast selection of diverse products. With Oberlo, you can import products directly from the AliExpress marketplace in seconds.
Nova Engel: It is an online supplier that offers products focused on the perfume and cosmetics industry. The company is one of the leading players in the beauty sector in Europe, connecting you with external service providers. Dropshipping suppliers are directly integrated into the Nova Engel platform, which then manages your logistics services.
SaleHoo: This website stands out for providing lists of the best and most reputable dropshipping traders around the world, with over 8,000 suppliers and more than 2.5 million products. It allows you to confidently start building your own dropshipping venture.
Worldwide Brands: It is one of the largest platforms that has been providing reliable wholesale and dropshipping services for 20 years! With over 16 million certified products, it grants you direct access to all wholesalers without intermediaries taking a share of your profits.
Once you sign up, the website will immediately show you the Worldwide Brands directory of certified wholesalers, who are the real agents for selling and shipping the products you want to sell online!
5. Determining the payment method for customers and suppliers
When starting a dropshipping business, it is important to determine the policies and financial payment methods for both customers and suppliers. Therefore, make sure to conduct your financial transactions through well-known and trusted payment gateways such as PayPal.
How to choose a dropshipping supplier
The success of your supply chain depends on exercising due diligence during the selection process.
In general, it is beneficial to establish direct arrangements for fast shipping with the manufacturers of the products you intend to sell. The fewer intermediaries you have to go through, the higher your profits will be. Any additional fees charged by your supply chain partners will impact your net profits, so whenever possible, it is best to work directly with the manufacturer.
Some important questions to ask potential suppliers
How much does shipping cost? Evaluate the offered price before choosing a shipping partner. If the wholesale price doesn't allow for a decent profit margin on the products, look elsewhere.
Are there any additional fees? If so, assess how they will impact your profit margin. Again, every fee and intermediary affects your final profits, so you want to minimize intermediaries as much as possible.
How are the products shipped? You want a partner that ships items through a service that provides tracking capabilities. This way, if your customers inquire about the status of their orders, you can provide them with accurate and up-to-date information. And with shipping comes returns. Learn about the return and warranty policies. If returns are not accepted or the products are not guaranteed, steer clear.
How does Dropshipping work?
1. You "display" the products on your website or online store.
2. The customer places an order for any product on your online store.
3. You receive a notification. You then forward this order to the supplier, either manually or automatically.
4. You alert the shipping partner - either the manufacturer or wholesaler - who packs and ships the product to the customer.
5. The shipping partner charges you or the retailer a fee for the service, and you charge the customer.
6. The supplier fulfills the order and ships it directly to the customer under your online store's name.
In general, the fewer intermediaries you have to go through, the higher your profits will be because there are fewer parties taking a cut. A short supply chain is a chain where you deal directly with the manufacturer.
Some tips about dropshipping
Now that you understand what dropshipping is, I'll share some tips with you before creating an e-commerce website.
When choosing your products from your supplier, read customer reviews to understand the specific pros and cons of each product. You can leverage these insights when highlighting the features of your product.
Target a niche website and avoid creating a very general store. If you sell a wide variety of different products, internet users may perceive it as potentially scammy. In the end, they will likely leave without making any purchases!
When estimating your profits, expect a 10% return on your products.
Disadvantages of dropshipping
There can be some drawbacks and challenges in managing your dropshipping e-commerce business, so it's important to be aware of them and take steps to mitigate them when starting dropshipping:
Low profit margins: As discussed earlier, the longer your supply chain, the lower your profits.
Inventory issues: When you own inventory, it's easy to check stock levels. However, when you source products from multiple suppliers—who may in turn work with other retailers—it becomes challenging to ensure that the products you need are readily available.
Shipping complexities: If you're working with multiple suppliers, your shipping costs can become highly complex. Let's say a customer orders two items, each from different suppliers, with different shipping costs. You'll need to figure out how to charge the customer for shipping in a way that doesn't make them feel overcharged.
Lack of control over the customer experience: By relying on a third-party shipping partner to deliver products to your customers, you're acting in good faith that they will deliver orders on time and in good condition. If they fail to do so, either by not delivering at all, delivering late, delivering the wrong items, or delivering damaged products, it can lead to negative reviews and a loss of customer trust in your store, which can have a negative impact on your company's customer service reputation.
Issues with suppliers: It's essential to have strong relationships built on trust and mutual respect with your suppliers. Suppliers are at the core of your business, so be selective about who you partner with, and it's important to learn how to effectively communicate and work with them to maximize efficient and timely shipping.
Tips for success in dropshipping
Here are a few top tips that should be implemented to ensure the success of your dropshipping business:
Create an enjoyable online shopping experience for your customers: From order to delivery, you want to make the experience as seamless as possible. It starts with having an easy-to-use, visually appealing website that is user-friendly across all devices.
Build a trusted brand: Your reputation is everything, so work on building your credibility online to gain customer trust. This will ensure long-term success. From establishing a strong presence on social media to creating successful email marketing campaigns, forming strong relationships with your customers will help drive success in dropshipping.
Pricing: Price your products appropriately, avoiding overpricing or underpricing that may hinder your desired profit margin.
Marketing: Allocate a sufficient budget in your marketing plan to advertise on social media platforms to keep your store top of mind for customers and elevate its success.
Steps to deal directly with manufacturers without relying on suppliers
Contact the manufacturing company and negotiate for a competitive price.
Start by identifying and selecting a distributor. The best way to find a distributor is simply by asking the product manufacturer to recommend one (a distributor is simply a company that holds a large inventory of another company's products and distributes these products to smaller companies).
Most companies you contact will be happy to speak with you - after all, you'll be selling their products. When you make contact, simply ask to speak with someone about becoming a seller of their products. They will start by answering any questions you have. Here are some questions you can ask:
Start by identifying and selecting a distributor. The best way to find a distributor is simply by asking the product manufacturer to recommend one (a distributor is simply a company that holds a large inventory of another company's products and distributes these products to smaller companies).
Most companies you contact will be happy to speak with you - after all, you'll be selling their products. When you make contact, simply ask to speak with someone about becoming a seller of their products. They will start by answering any questions you have. Here are some questions you can ask:
What wholesale price can they offer you on their products? You'll need to make sure that the wholesale price they offer is low enough for you to achieve a good profit.
Do they charge you shipping fees? If so, ask how much? Most dropshipping companies simply add the cost of UPS or FedEx shipping to your wholesale price, but others may also charge you shipping fees (generally ranging from $1 to $5). This is to cover the cost of transportation, packaging, and order processing on your behalf.
How do they ship their products? Most companies use a major nationwide delivery service such as UPS or FedEx. Ask them to include tracking numbers with the order confirmations they send you. This will provide you with a solution to many potential problems when customers ask, "Where is my order?"
How do they bill you? Most shipping companies will charge your credit card for the wholesale price of the product, plus shipping and delivery, once they receive an order from you. With others, you may be able to set up a monthly billing cycle where you send payment for all orders at the end of each month.
How do they handle product returns? Make sure to know what their return policy is. Most reputable companies offer some form of warranty on their products and will handle returns on your behalf.
This way, if a customer contacts you to return one of the products, you can simply inform them that the manufacturer will be happy to speak with them directly. If the manufacturer does not accept returns, you will be the person responsible for dealing with the company to replace defective goods for your customers.