Do you want to know how to start dropshipping? What does it entail? And can you make good money with online businesses?
But how do you get inventory without needing lots of capital? Traditional business models require renting space, purchasing stock, and displaying it for customers.
However, dropshipping has changed the game. Now, it's possible to sell products you don't have. The process only requires communication with the suppliers to ensure products reach the intended customers.
Below is more information on dropshipping and how to set up your own online business today.
Table of Contents
What is Dropshipping?
As the world advances, business models change every day. There are different ways that customers can get products they order from a business.
One popular business model you'll encounter today is dropshipping. This is where a particular business sells products it doesn't have in stock.
How? Well, a seller only needs to buy inventory from a supplier who, in this case, is a third party.
Usually, the third party is a wholesaler or distributor of the specific products that customers need. Dropshipping involves reaching out to the distributor or wholesaler to fulfill orders.
So, how is this different from running a typical retail business?
Often, a retail business will have the products in a store or warehouse. However, in dropshipping, you don't need actual products in stock. All you do is facilitate the sale of the inventory, so essentially, this position you as a middleman.
If you choose this type of business, you become a dropshipper. A dropshipper opens an online ecommerce store where the customer views and buys the product from. However, you won't need to incur the cost of storing the products in a shop or warehouse.
It's possible for dropshipper to work on their own or to have a team by their side. It all depends on the type and size of operation they handle.
Employees may help to make sure there's smooth communication between the supplier and customers. Also, they handle invoicing and offer customer support on behalf of the dropshipper.
Being a dropshipper is much easier since you never have to worry about capital constraints. Running a retail store requires having enough capital to rent a store, stock merchandise, and run day-to-day operations.
However, in dropshipping businesses, you can work remotely and not require renting any space. Or, if you do, it's a small setup that won't cost much money to run.
In fact, many entrepreneurs are flocking to dropshipping for the ease of running this business model. You only need a computer, internet, and patience to run a successful dropshipping business.
Still, it's worth noting, like any other business model, dropshipping has its benefits and drawbacks. You can learn more about them later in this article and ensure you understand how the dropshipping business model works.
What is a Dropshipping Business Model?
Any business requires a way of presenting products and services to customers. When it comes to dropshipping, the business model is a little different.
This calls for setting up a storefront online for customers to view and place orders for products. Then, they can use the platform to monitor the products being shipped from the supplier.
Dropshipping differs from a retail store because you don't have to handle the products. Everything about the product getting to the customer isn't your responsibility. The supplier must pack and ship the product in the condition promised.
Who are the Key Players in a Dropshipping Model?
Understanding the key players in a dropshipping model and their roles are vital when mastering how to start dropshipping. So, here are the primary dropshipping business players:
One of the critical people in a dropshipping operation is the manufacturer. They are in charge of making products that customers purchase. Often, wholesalers and retailers purchase these products and store them in brick-and-mortar stores.
However, it's possible to enter into a mutually beneficial dropshipping agreement with the manufacturers. That way, you don't actually have to spend lots of money purchasing stock.
A wholesaler is an essential part of the supply chain. They offer a link to the manufacturer since they can purchase products in bulk.
Wholesalers are essentially middlemen who sell to retailers and are not often consumers of products. So, wholesalers can be a great source if you are looking for a dropshipping supplier.
SOR (Seller of Record)
SOR (Seller of Record) is the person who sells the products to consumers. Customers head to your online storefront and see the products at specific prices.
As a seller of record, you get to record each purchase and state it as revenue. That way, you are responsible for the sales tax of each purchase.
As a dropshipper, you won't be in charge of delivering the products to buyers. But the products still belong to you.
A good example is Amazon's dropshipping policy accessible to Amazon sellers. This is accessible to dropshippers who identify themselves as SOR.
Ways of Creating a Dropshipping Business
An online store and supplier are significant players in the dropshipping model. These are the main focus of a dropshipper who wants to create a successful business.
If you want to create a dropshipping store, there are two ways you can go about it:
One, locate wholesale suppliers who are willing to work with a dropshipper. They can be from the USA or any part of the world. This is possible to do if you locate a reliable database for suppliers. Good examples of such global suppliers include Worldwide Brands and AliExpress.
The second way is by connecting with suppliers using an app. Some dropshippers may not be interested in sifting through big databases to find reliable suppliers. Such apps have numerous suppliers that make accessing products easier for a dropshipper.
For instance, DSers enables business owners to locate products for sale in stores or online. DSers is a good option since it makes things easier for a dropshipper by automating the dropshipping process.
Your job is to verify the information so that the products you choose match what the supplier promises consumers. After that, you can place an order, and the product is shipped to your customer.
Which are the Best Dropshipping Products?
Many dropshipping businesses create storefronts online that they promote on social media. For the business to work, they mostly rely on customer impulse buying. However, as a dropshipper, you can reach more people when you pay for ads on platforms like Instagram and Facebook.
If people find the products and like them online, they can place an order. It's good to ensure you properly advertise the products if you want to attract customers. Also, with so many dropshipping companies running after the same customers, ensure your prices remain competitive to attract more customers.
So, which are the best dropshipping business ideas or products to market online? Well, there are numerous items you can have in your online store. However, some of the major types include:
1. Unique Products
Identifying unique products that aren't readily available can be a great business strategy. As a dropshipper, you can capture a good market portion when people know they can find such products in your store. And you won't have too much competition since there aren't many sellers focusing on the same items.
2. Useful Products
Everyday products that people use are great for dropshipping. You can sell items like kitchen towels, key chains, meat thermometers, sugar dishes, salt shakers, etc. They might be common, but people use them daily.
3. Life Improvement Products
Are you in a position to sell life-changing products? Then, you can pick the life improvement category for your customers. An excellent example of such products is portable air purifiers.
When planning to start a dropshipping business, it's good to develop a strategy. A good way is to check the current trends and pick a niche. The three types of products can give you a good beginning when choosing a niche.
Also, when you pick a niche, focus on the trends that surround this pick. When you grow your business, you can have more than one niche and deal with different trends. This is a good strategy when you have employees helping with your dropshipping business.
You can pick a niche and go for its trending products as a beginner. Here are some of the best dropshipping niches today.
Many people buy different types of tools online. This is why you can see platforms like Amazon stocking thousands of tools.
As a dropshipper, you can pick this niche, note the most popular tools, and market them to potential customers. Popular ones include tools for repairing cars or working at home or the office.
Clothes for Women
Ladies and girls love shopping. A dropshipper whose niche is women's clothing has a profitable niche. Here, you can sell different clothes, from blouses to business outfits. Since you can sell many clothes and shoes, ensure you narrow it down to a specific category. And, it's also great to note if these clothes suit particular seasons.
Vehicle Parts and Accessories
There are thousands of vehicle parts and accessories on platforms like Amazon. Every day people search for these items to help with their vehicles. So, it's safe to say that such products will always have a market, and you can profit.
Baby and Toddler Products
Babies and toddlers require lots of items from the day they're born. So, you can pick baby and toddler products as a niche. Start marketing baby blankets, feeders, clothes, and grooming kits.
What are the Benefits of Dropshipping?
Now that you know what dropshipping is and how the operation works, what are the benefits of this business model?
Many people prefer having remote jobs or operations in this era of working from home. As a beginner, you can set up your dropshipping operation in your home comfortably. Flexibility in terms of location is why dropshipping has become quite popular among entrepreneurs.
The goal is to have a setup, like a workstation, for your laptop or computer. After that, ensure you have clear lines of communication with supplies for the timely delivery of products. Keeping good records is crucial for a successful venture.
2. Less Capital Intensive
Are you thinking about starting a business that's not too capital-intensive? Dropshipping is a good idea since you won't need lots of money. Even when you scale up, the capital demands of a dropshipper aren't as high as for physical stores or merchandisers.
With dropshipping, you never have to purchase the product and store it somewhere until you get an order. Instead, your work is to be the middleman of the purchase. This brings down the amount of capital you need since none of the money goes to inventory.
3. Good for One-Person Operation
A dropshipping operation is easy to run at home, and you can do it independently. It's also a profitable business model since you can keep all the profits.
There's no need to hire employees at a store, so you remain the sole person in charge of the operation. And if you ever need help, you can hire a part-time virtual assistant.
4. Simple to Setup
Traditional business models can be pretty gruesome when you want to start. This is because numerous avenues exist, including renting space, purchasing inventory, finding reliable employees, getting licenses, etc.
However, when you opt for dropshipping, you can have an easier start with fewer steps. For starters, it's an online business that only requires reliable internet and a computer. This makes it better for entrepreneurs who want to start a business with little or no experience.
5. Easy to Test Business Model
When you buy merchandise to sell, you aren't 100% that people will buy. Still, traditional business requires you to have inventory at hand before you market to potential customers. This makes it harder to test the business without having a higher risk percentage.
Thankfully, dropshipping is much easier to test. You set up your online store, find suppliers, and market your products.
If no one is interested, you can change the niche and not incur any financial loss. In fact, you can test as many niches as you want until you find one that works.
6. Easy to Process Any Additional Orders
Does a particular customer want more products after you fulfill their order? It's easier to scale your business when you are a dropshipper.
All you need to do is communicate with the supplier about the change in order or to add more products. The supplier will ensure the additional products are processed and reach the customer quickly.
7. Numerous Types of Products
Dropshipping niches are diverse, and you can sell almost anything you want. For example, if you sell clothes, women's fashion alone is enough to create a profitable business.
However, it's crucial to choose a niche and test it. Find out who likes the products and why before you make up your mind.
Are there Drawbacks to Dropshipping?
Like other business models, opening a dropshipping store will have several drawbacks. These include:
1. Unstable Inventory
You aren't in charge of your inventory when you opt for a dropshipping business. This is primarily the job of your suppliers, who receive and process your orders.
It's easier to know what you have and what is out of stock in a physical store. But this can be pretty challenging for a dropshipping business.
2. Errors by Suppliers
Errors are common in all aspects of life. But, if your supplier makes a mistake, they won't be the one to bear the blame.
In dropshipping, you are the one the customers know. So they won't direct issues to anyone else. Supplies issues can include poor packaging, damaged products during shipping, or wrong products shipped to customers.
3. Low-Profit Margins
Dropshipping is quite competitive. It's common to find numerous other online and physical stores selling the same products. Therefore, the profit margins tend to be low.
This business model has minimal overhead costs, making it easy for many people to start. And when many businesses offer the same products, one way to stand out is to lower product prices. This also leads to low-profit margins.
4. Problems with Shipping
Dropshippers have no control over the supply chain, which includes shipping services. This is also affected because you might communicate with multiple suppliers simultaneously. Shipping problems can affect this business, especially when products for one customer come from numerous suppliers.
For that, you must pay different shipping charges, which will affect your profit margin. Since you still want your customer to pay a low price, you must take on the additional cost. So, if possible, find a way to order multiple products from one supplier.
5. Little Product Control
Product quality is as good as the supplier assures you it is. Remember, in dropshipping, you never receive any inventory. Instead, you make sure the supplier gets the order. They are the ones to make sure your customer receives their products.
While this can be positive in dropshipping, it's also a challenge. You won't get to assess the quality and state of the product before it's shipped to your customers. So, if there are any issues, you'll hear about them after the shipment reaches the customer.
Steps to Start Dropshipping
You can set up an online store and sell products in many places. Luckily platforms like Shopify (an eCommerce platform) help make everything easy.
Here are five steps to help you start a profitable dropshipping business store:
1. Pick a Niche
A dropshipper requires a good business strategy from the start. This is why it's essential to choose a niche.
As mentioned earlier, there are different types of niches suitable for dropshipping. A niche helps you stand out from other sellers who stock similar merchandise.
Generally, a niche fulfills unique needs, preferences, or interests. It's a great way to set yourself apart from a competitive marketplace of numerous sellers. Ensure you are set apart from the crowd, even when selling similar commodities.
For instance, you can focus on vegan products when selling food items. This reduces the number of competitors online since you've picked a specific market to target. You can define this need further by selling to a particular demographic like Gen Z.
An excellent way to ensure your business idea is viable is to start small and do some market tests. The response you get can give you a better perspective. This can be a green light to proceed with the dropshipping business as is or make a few changes to define it better.
Two ways to know if you're on the right track is to use Google Trends or Google Keyword Planner. These are two ways to see what people are searching for using this search engine. Once you identify that, you can pick products that align with these searches.
2. Zero in on your Target Audience
What do you know about your target audience? What do they like? Which trends better define them?
Understanding your target audience gives you a better chance to start on the right note. Therefore, it's good to learn more about them.
A good understanding of your market makes it easier to plan your business. And you can decide on the best sales channels and products to sell. This can also show how to market our products to potential customers.
Try and learn who will benefit from the products you plan to sell. In addition, find out what makes your products stand out from those sold by competitors such as online retailers. Also, who will see the products, and where will they see them for sale?
3. Pick Dropshipping Suppliers
The world is full of suppliers, thousands of them selling different products. However, you can not work with all of them. So, another important step is to pick the right dropshipping supplier or suppliers for your business.
For instance, a platform like Shopify has apps that simplify the checkout process through complete automation. As such, dropshippers who work with Shopify dropshipping have an easier time sending order information to suppliers.
These suppliers will then label the orders as fulfilled. They can attach a tracking number to the products, making them easier to identify during shipping.
4. Set Up an Ecommerce Store
Now that you know your market and potential sellers, it's time to set up the online store. Pick the right platform and begin the process of setting up your store. Some of the most popular platforms are Walmart, Shopify, and Amazon.
The best way is to set up an account and follow the set guidelines on the platform. Most require you to set up a domain name before you launch the online store.
It's essential to choose a unique domain name to set you apart from competitors. Customers can also find it easier to remember such store names and patronize your business. When picking a name, follow the following tips for an easier process:
- Short names are better and easier to remember. If you pick something long and complicated, it's hard to remember.
- Be as unique as possible. Remember, this is all about standing out in a crowd. Your domain name can be a great way to make this possible.
- Make sure the name reflects the niche you choose. The closer the relationship between the name and the niche, the better.
- Always ensure the domain name you choose is available. Most platforms will inform you if the domain name you select is available.
See Related: How to Make Money with Merch by Amazon
5. Market Your Store
Now that you have a domain name and have launched the store, it's time to let people know about it. Marketing is one of the best ways to get the word out, and it works in every type of business. So, it's crucial to have a marketing strategy as a dropshipper.
One important point to note when marketing products is to build a brand. It's not uncommon for other dropshipping and online stores to stock the same products.
Therefore, a brand can help you create a unique identity. But make sure the products that you stock are in line with the needs of your target audience.
Social media remains the best place to find your target audience and market your store. Small businesses find Facebook, Instagram, and TikTok quite useful. And it won't cost an arm and a leg to boost posts to reach your potential customers.
Check out the paid ad options on social media and work with them as per your budget. There are limits set according to budgets, so you only spend what you can afford. And it's possible to pinpoint the exact audience you want based on age, location, and other essential variables.
Still, if you want to test the market without using paid ads, try marketing for free. There are numerous options, including posting on your feed and creating reels and groups targeting your audience.
In addition, some online communities and marketplaces can allow adverts. The best thing is to get your brand out there and attract customers.
Besides social media marketing, you can also employ SEO (Search Engine Optimization). This is a great way to ensure your content is suitable and easily accessible to your target audience. Again, this is all about visibility so that you can start receiving product orders.
See Related: How to Become a Virtual Assistant
Is Dropshipping Worth It?
Yes, dropshipping is worth it. However, like any other business, it requires commitment and dedication. As a dropshipper, be prepared to do the work to turn your idea into a successful venture.
The good news is there's less hassle in dropshipping. You won't have to raise an insane amount of capital and find a place to store physical products. This makes it an easier business model to set up, test, and grow.
Is Walmart Dropshipping Worth It?
Walmart dropshipping is quite popular, and it's similar to dropshipping on other marketplaces. One reason many people prefer it is because of the low fees.
Unlike other platforms, Walmart doesn't charge dropshippers fees for access. Instead, you pay a small commission per sale. It's pretty easy to get started at Walmart, and you have access to a large audience.
A winning strategy with Walmart dropshipping is fast shipping of products. For instance, 2 to 3 delivery days can see a conversion increase for dropshippers.
The good news is now you can dropship from Walmart to platforms such as Shopify. There's a Walmart-Shopify integration that makes back-end business operations and synching easier. As a result, you have better management for your dropshipping operations using one dashboard.
Is Amazon Dropshipping Worth It?
Are you interested in dropshipping on Amazon and wondering if it's worth it? Amazon dropshipping is another excellent option; you should consider it as you start.
When you choose Amazon dropshipping, know there are specific rules to follow. For instance, Amazon insists you be the Seller of Records (SOR) and never include information identifying the third party. Instead, you retain your identity on seller packing slips and be ready to accept and process returns.
In terms of fees, expect to pay access fees to Amazon that can range from 10-15%. This means it's better to work with a large inventory on Amazon if you want to make a good profit.
There are also two selling plans on offer that you must choose. These include:
- Individual Plan
It costs $.99 per sale.
- Professional Plan
It costs $39.99 per month.
Is dropshipping the best online business?
Dropshipping is among the best online business ideas. This is because it requires less initial capital, doesn't require a physical shop, and you won't have to handle products physically. Also, it might be quite profitable if done right, especially if you have the right products.
What are the best dropshipping suppliers?
These will depend on your niche or the products you are selling. Some of the popular names here include AliExpress, Alibaba, Doba, and SaleHoo.
What are the top dropshipping products
The products will depend on your target audience. However, some of the fast-moving products include electric kettles, latte mixers, coffee pods, air fryers, portable blenders, etc.