Looking to make money with Dropshipping but don’t know where to start? You have heard that making money with dropshipping is very profitable, but is it difficult to do so? Please do not worry. In this article, Makemoneytactic will show you how to start a dropshipping business in 6 steps and low budget.
What is Dropshipping?
Dropship or Dropshipping is a form of sales where you promote a certain order on your store. When someone order it from your store, you go to a supplier, buy the product, pay for it and tell them to ship it to your customer. You focus on promoting products and finding orders for the shop. When there is an order, you buy the product from a third-party supplier and they ship it directly to the customer.
Dropship, or Dropshipping, is a retail fulfillment method that does not keep store-sold items in stock. Instead, if the store sells a specific item, there will be no item in stock, and the item will be purchased from a third party and shipped directly to the customer. As a result, sales representatives do not see or handle the product.
The biggest difference between Dropship and other retail models is that merchants sell with no warehouse or no inventory. Instead, these sellers buy inventory from third parties (usually wholesalers or manufacturers) as needed to fulfill their orders.
The way that Dropshipping model works are:
- Customers buy from your website for $200
- You order from a supplier for $150
- The supplier packs the product with your information and ships it to the customer. You keep a profit of $50.
The whole process is invisible, and the customer only knows you are the only party supplying and selling the product.
The drop shipping sales model has evolved for the following reasons :
- You don’t need too much capital to get started
- No need to rent space
- No inventory risk
However, this is only the most basic shipping model.
✅See also: What is DropShipping Business and How Does It Work?
How to Start a Dropshipping Business: Benefits and Difficulties of Dropshipping
Dropshipping has many benefits and difficulties like:
Is Dropshipping a Good Idea? Benefits of dropshipping
No capital required:
The biggest advantage of dropshipping is that you can start an online business without investing a lot in inventory. If you traditionally do business, you must lose a large inventory investment.
Easy to get started:
Starting an online business is usually easy if you don’t have to deal with physical products.
Moreover, you don’t have to worry about the following in drop shipping,:
- Inventory management or billing
- Packing and shipping orders
- Follow the bookstore
- Continuously order products and manage inventory levels
Don’t worry about inventory:
With the drop-shipping model, you don’t have to buy the product unless you sell it and the customer pays. You can start a successful drop shipping business with little capital and no inventory costs.
Flexible locations:
Dropshipping businesses can go anywhere they have an internet-connected device. You can start and manage your business if you can easily communicate with your suppliers and customers.
Low cost:
Management costs are greatly reduced as there is no need to purchase or manage inventory. Many successful dropshipping businesses have set up home offices on laptops, only spending less than $100 a month. These costs may add up as you grow, but they’re still less than in a traditional business.
Select product type:
You don’t have to spend money on the products you sell to offer your potential customers a wide variety of products. If your supplier hosts a catalog of products, you can list them on your website for free.
Easy to scale:
In the traditional sales business, if you want to triple your sales, you must put in three times as much time and effort as usual. By leveraging a make-to-order carrier, these providers handle most of the additional order processing, allowing you to increase your sales with minimum effort. This increase in sales will enable you to do more. Increasing revenue always brings more work, especially when it comes to customer service, but shipping businesses fall relative to traditional online businesses.
All of the above benefits prove that dropshipping is an attractive business model for both beginners and existing sellers.
However, dropshipping isn’t just about roses and rainbows. This convenience and flexibility come at a price.
How to Start a Dropshipping Business: Difficulties of dropshipping
Low profit:
Low-profit margins are the biggest downside of a highly competitive Dropshipping business environment. Getting started is easy, and with minimal investment and operating costs, many merchants have set up bargain shops to increase sales. They can afford to run with low turnover because they invest very little to start the business.
Yes, merchants often have low-quality websites to serve their customers, but it doesn’t stop customers from comparing the prices of your products and others. This fierce competition quickly destroys the right margin. Fortunately, there are ways to mitigate this problem by choosing the right form for your dropshipping model. This will be explained in more detail in Lesson 4.
Vendor error:
Have you ever blamed yourself for it’s not your fault, but you still have to take responsibility? Even the best discount shipping providers make mistakes when completing orders, which holds them accountable and apologetic. Mediocre and poor-quality suppliers cause endless frustration, including loss, damage, and faulty packaging, which can harm your business.
Inventory issues:
If you have all your items in stock, it’s easy to keep track of items in stock or out of stock, but source from various warehouses and order from multiple other sellers. If you do, it won’t be easy to track where your goods are. There are several ways to synchronize your inventory with providers better, but these solutions are not always feasible, and not all vendors support the technology.
Complicated shipping:
If you work with multiple vendors, the visitors may select products from different vendors. This makes shipping more complicated.
If a customer orders 3 products from different suppliers, there will be 3 shipping charges for each product sent to the customer, but the customer will pay your reasonable shipping costs. It can also be difficult to automate these calculations, even if you charge for shipping for each item.
How to Start a Dropshipping Business: How Much Does it Cost to Launch a Dropshipping Store?
You will need some capital to start shipping. Depending on the traditional and modern models, the amount of capital you need to spend is different.
You have to pay for website design, product image design, advertising, staff, hosting, etc.
If you are an individual and follow the traditional drop ship model, the suggested cost for you is:
- Platform: 29$ to own a relatively professional sales website on the Shopify platform, or you can look for a free alternative.
- Visual Design: There are many free and paid options.
- Facebook Ads cost money, so you can try free sharing on social media, Quora, Tumblr, Medium, etc.
- Total: It costs less than 50$ to start shipping. If you can design websites or design images, product packaging is less.
The costs can be many times higher if you are a team or business investing in the latest drop shipping model and looking for fast results. The suggested costs are:
- Product Quality Survey and Confirmation
- Order and ship to the warehouse (or Amazon warehouse): $3000, enough to sell for at least 2-3 months
- Website design, images
- Operator
- Advertisement
- Other expenses
Total: About $1,000 is needed for group shipping or to implement the latest dropship model or Amazon Fulfillment.
The above is the recommended capital. Depending on your size, you can start with a small or large investment. And one thing to keep in mind is that there is no guarantee that the drop shipping will be successful. Instead of quitting your job and devoting all your capital to this model, ensure you have another steady source of income, as you may lose the money invested in this sales model.
✅See also: Is Dropshipping a Good Idea & Who are the Best Dropshipping Suppliers?
How to start a dropshipping business?
To start a dropshipping business, you must prepare many things, including products, inventory, brand, website, activities, etc.
Step 1:
- Choose the product you want to sell.
- Choose a supplier (supplier).
- Negotiate a price.
- Choose a platform to display your products on like Shopify.
- Choose a shipping method according to the cost and delivery time.
This step is very important and determines 80% of successful sales. In particular, you need to negotiate carefully about the discount you will receive for each product sold.
Step 2: Choose a sales channel (post products on eBay, Amazon, or your web store.), search for products, and display them on your store. Then, promote your products on social media, forums, paid ads, etc.
Step 3: Customers come to your store to make a purchase and pay via Paypal, Payoneer, or Paygate, which is accepted at your point of sale. In addition, some customers may ask you to transfer cash upon delivery.
Step 4: Buy goods and send them to customers. You spend the money the customer pays you, buy through the supplier, and ask the supplier to ship the product to your customer. Alternatively, you can ask the supplier to ship COD to the customer (applicable in any country or region).
Step 5: The supplier packs the goods and ships them to the customer. They will send you tracking information. You track your orders and take care of your customers.
Step 6: Summarize sales over time (week, month…) or the number of orders sold (5, 10, 20… products) and receive discounts from suppliers. We will continue to improve our sales strategy and plan.
Regarding the dropshipping market, eBay and Amazon are among the world’s largest and most popular dropshipping service providers. These are also very fertile lands for you to start a business.
✅See also: Is Dropshipping Legal And How to become a dropshipper?
Some notes for How to Start a Dropshipping Business:
Don’t choose products based on feelings: All decisions should be based on clear survey data.
Don’t choose a product just because it’s sold by “all the competitors in the market.” Once in a while, rushing into the “Red Sea” market, you can quickly fall off your horse and feel embarrassed about the market. If you want to know what products are trending, the Google Trends tool is very useful.
Don’t sell fakes. It may be cheap and profitable, but it is illegal in most countries. Stay away from this unethical form of trading.
Types of products you should consider choosing when doing business with the drop-shipping model:
- Notebooks and stationery.
- Phone cases and accessories.
- T-shirt.
- Jewels.
- Sportswear, exercise equipment, travel, and camping gear.
- Healthy food.
- Products for children.
- Cosmetics and skincare products.
- …
I hope this blog post will help you to outline and modify the Dropshipping business model. Good luck.
