The term “dropshipping” became popular in 2006. This is when AliExpress dropshipping became popular in the United States with the introduction of Chinese eCommerce stores. During this time, people did not have much idea about dropshipping. But some smart entrepreneurs took the initiative and launched their own dropshipping store to attain profits. They used AliExpress due to their low prices. Soon, more people jumped on the bandwagon and dropshipping business became an immediate hit. These days, dropshipping has become one of the popular eCommerce business models that can be started with zero investment. Some eCommerce giants like Wayfair, Zappos, Fab, and Gilt, have developed their business model around dropshipping. If you too want to start this business and looking for dropshipping business ideas, then here are a few tips to start a dropshipping business.
What is Dropshipping?
Dropshipping is defined as a supply chain model in which a drop shipper can ship one product directly from the warehouse of the wholesaler to the customer’s house without handling management and logistics. This allows drop shippers to focus on the “real” business aspect of their business, i.e. scalability and growth. These drop-shippers earn commission by selling products of suppliers, earning a huge commission.
In short, the drop shippers play the role of intermediaries between suppliers and customers. When they receive an order, they transfer the information regarding the order to the respective supplier and keep the markup amount with themselves as the markup amount. Then, the supplier will dispatch the product from the warehouse to the customers. In most of the cases, the suppliers do not even know that the person purchasing from them is a drop shipper or a real person. So, here are a few things that you must know about dropshipping:
- A dropshipping store works as same as an eCommerce store. You place an order and receive the product.
- However, behind the scenes, the drop shipper receives the payment and then places an order with a third party. Third-party can be anyone like DOBA, AliExpress, or can be even a wholesaler from Salehoo and several other platforms.
- Once the wholesaler gets the order, they ship the product to the customer directly
- Dropshippers do not handle the product directly. However, they can even track the order
Benefits of Dropshipping
These are some of the major benefits of the dropshipping business model.
Dropshipping is easy and simple to start. For starting a dropshipping store, you do not have to be a business guru. In fact, you do not even need business experience. If you manage some time in learning the basics, you can start fast and learn the rest as you move along.
Dropshipping business is simple as it demands little from you. For a drop shipping business, you do not even need to spend a huge amount of money on your store. It is surprisingly hands-off, mainly once you start the business. All this means that you can start your business any day you want. You can start assembling everything and start the business within a few hours.
Dropshipping business expands easily. As you grow, your business model does not have to change at all. You will have to put more work in sales and marketing as you expand, but your day-to-day will remain the same.
One of the major benefits of dropshipping is that the expenses do not skyrocket when you scale up. Due to this, it is quite easy to keep it expanding at a fast rate. You can do almost everything yourself unless you want to assemble a small team in the future.
Dropshipping does not need a lot of money. As starting a dropshipping business needs so little, you can start the business with minimum funds. You can build a whole business right from your laptop, and there is no need to make any kind of high-level investments. Even as your business expands, your costs will be low, mainly when compared to other traditional business costs.
Dropshipping is flexible. It is one of the biggest benefits of shipping businesses. You are your own boss and you can set your own rules and regulations. It is one of the most flexible careers that one can pursue.
Dropshipping business opportunities are immense. You can even work from home. The only thing required is a laptop with a good internet connection. This is perfect for those entrepreneurs who want a business that helps them to earn huge profits. You do not need to bend backward to complete the things, Instead, set your own pace.
The Dropshipping business is flexible. It provides a lot of opportunities to make decisions that work for you. You can list new products whenever you like, and you can adjust the strategies on the fly. For example, if you are going on a vacation, you can automate everything to run even when you are away. The possibilities have no end.
Dropshipping can be managed easily. As the dropshipping business model does not need you to make any commitments, you can handle everything with a bit hassle. Once you have found suppliers and set all the things, you are only responsible for the online storefront.
Tips to Start a Dropshipping Business
Choose a niche
This is one of the vital tips to start a dropshipping business. Make sure the niche you chose is laser-focused and something in which you have an interest. A product range that is not focused will be hard to market. If you are not passionate about the niche you chose, you will be discouraged, as it takes a lot of effort to scale a drop shipping business successfully.
Perform competition research
Keep in mind, you will be competing with other dropshipping suppliers and retail giants like Amazon and Walmart. This is where a lot of potential drop shoppers make the mistake, as they search for a product that does not have much competition. This indicates that there is not much demand for a product. There are several reasons why a product does not have much competition, including supplier and manufacturing problems, high shipping expenses, and poor profit margins. Look for items that have a huge competition, as it is a sign of huge demand and the business model is balanced.
Secure dropshipping suppliers
It is another in the list of tips to start a dropshipping business. Partnering with the wrong supplier can damage your business, so it is essential that you do not complete this step in a hurry. Conduct proper due diligence. Most of the dropshipping suppliers are situated overseas, making communication important, both in terms of response speed and ability to understand each other. If you are not 100 percent confident in the communication abilities of a supplier, move on, and continue the search.
Alibaba is one of the largest online resources to find and communicate with potential suppliers and manufacturers. Ensure to ask a lot of questions and learn if your business expands exponentially. You want to be sure that they have the capability to scale with you.
Try to learn new things from other entrepreneurs who have maintained a drop shipping business model in the past. There are a lot of information sources available, from tech and business blogs to this subreddit regarding dropshipping. It is a popular topic that can assist you to avoid expensive supplier mistakes.