What is Dropshipping business?
In Dropshipping model, you are a seller.
You sell the supplier’s products at arbitrary prices and market the product. When a customer makes a purchase, you pay the supplier’s list price to the seller. The supplier records your customer information and passes it on to the customer.
You need to track your order and get COD.
How does Dropshipping work?
The process of the Dropshipping model will include the following:
- Selecting business items
- Marketing about products to reach potential customers
- Closing orders
- Contact supplier
- Discuss pricing and shipping with suppliers
- Order and track orders
- Continue marketing the products you want to sell
Advantages of Dropshipping
The dropshipping model has distinct advantages as follows:
Easy organization:
The operation of the dropship model only encapsulates 3 steps, including Finding suppliers, building a sales channel, and starting related work to sell goods.
Low cost of the sales organization:
In traditional business models, the majority of business costs arise from setting up and running retail operations, including the fees of holding and managing inventory. Dropship eliminates this cost problem. You don’t need to store inventory, handle goods, package, and ship. Accordingly, the main costs are website building and marketing for the store.
Low investment cost:
As mentioned above, you do not need to invest too much capital in an online business. The main cost is to complete the sales and advertising channels to attract consumers.
Low risk:
You won’t lose inventory control costs if your store doesn’t sell products. If you want to stop selling the product, you won’t suffer a capital loss due to the overstock of the product.
Advantages of Dropshipping
Cross-border sales:
You can sell anywhere, anytime, because your online store doesn’t need an office, warehouse, staff, etc.
Sell any product you want:
You can research and sell any item you like. Even on your sales website, you can sell various products in the same category so that consumers have various choices and cover their needs.
Scale your business easily:
In the traditional business model, scaling means an increased investment of time and money in the store. With the dropshipping model, the supplier will handle all activities related to goods and fulfillment of orders. Therefore, you have more time to expand your business by increasing multi-channel sales, building an optimized website for sales, and searching for potential products to develop the product list.
How to Start a DropShipping Business?
You can start your dropshipping business in 7 steps only:
1- Market research
This is one of those things you need to take seriously if you want to scale your business. You will need to do some market research and statistics on market requirements, status, and trends. Besides, you also need to research your competitors to know what they do, how they do it, how good and bad they are, etc.
2- Identify the types of products to sell
You need to define this step early from the start of your Drop Shipping business. You can choose from convenience items, food, fashion, home appliances, pharmaceuticals, cosmetics, etc… You can go for a specific item or semi-aggregate to increase your opportunities.
3- Contact suppliers
Now that you have an idea of the types of products you want to sell, it’s time to go a step further by contacting the vendors of these products. Set up agreement terms if you’re going to work professionally and maximize profits.
4- Create a professional sales website
A website will be the foundation for all your business activities. Unless you are a web designer who knows how to work best, you need to invest in a qualified web design service to have the most effective online store. You may also want to consider a similar model to your competitors or come up with something completely new, giving it a personal touch.
5- Run your business from anywhere
As I said above, the website is the most important platform. In addition, you need to expand the scope of your activities and promote your brand and website to potential customers. Don’t forget that you have many sales channels, such as social networks (Facebook, Instagram, Twitter, etc.) and forums in your niche.
6- Set a good price
The goal is to make a lot of profit, and the supplier can sell many goods. So, negotiate for the best price to easily create a profitable brand. Be careful not to let the cost be too high as customers will visit once and look at a product without daring to come back next time.
7- Marketing for an e-commerce store
One of the ways to have a successful, profitable Drop Shipping business is to market it properly. You can consider some of the following methods to advertise: Run Facebook ads, Zalo ads, SEO (search engine optimization), special banner ads on newspapers, information pages… Don’t forget to mention the types of products you sell and include phone numbers and addresses for people to get more information and contact buyers.
✅See also: How to Promote your ecommerce store and Affiliate Offers
What do sellers and dropshippers get when doing dropshipping business?
Optimizing the cost of goods sources:
When dropshipping is popular through a comprehensive support platform, sellers can directly access goods from China, domestic sources, and Affiliate sources without intermediaries, reducing the cost of goods. Then, you as a dropshipper business sells products to buyers and enjoy the difference between the dropshipping cost and the actual selling price without having to import the goods.
Low-risk omnichannel selling:
Dropshipping sales model even though you don’t own the goods, you can still sell effectively omnichannel. Inventory data will be available on the supplier’s sales channel. You only need to use this data to set up and update product inventory on the dropshipping channel.
Reduce logistics costs:
The drop shipping sales model minimizes the costs to be paid and eliminates the costs of warehousing, goods management, and warehousing, helping to reduce logistics costs.
In Dropshipping, sellers need a platform that can optimize the following issues:
- Source
- Transport
- Order processing time
- COD Control
- Storage
Currently, many dropshipping platforms improve their features continuously, and new platforms are appearing here and there.
Dropshipping Challenges And How To Overcome
First challenge: Low profitability
One of the top factors, when you choose to enter the business battlefield is to generate income through sales and service provision. Therefore, when problems arise in the business process, you will care only about profit and quality issues, unlike ordinary businesses, which will have a warehouse or always store a certain amount of goods to be able to supply to customers as soon as required.
Those who supply you with this form will give you a discount on each product, but because the quantity is small on each order, your price will be higher than a large quantity.
For online shops, operating costs will be lower than that of traditional stores due to reduced operating, warehousing, and staff costs, but with common discounts and high import prices from suppliers, after deductions. Go the expenses. Your profit amount will be very modest. Which magic wand will help you through this matrix?
Increase the selling price.
Still, one factor that attracts customers to buy online is the lower selling price than some traditional stores, but cheap is not always the optimal solution. Even if you take advantage of Drop Shipping to reduce storage costs, the cost of sourcing goods every time you import goods is still high. Maintaining a low selling price means you will make a low profit.
However, you cannot increase the selling price immediately. Customers will ask questions about the product and the price increase. Increasing the price in this situation is necessary, but it cannot be raised too high or increased little. So how to increase accordingly?
Assuming you’re selling milk and baby supplies for each powdered product, consider an increase of 10,000 VND/product or a moderate increase that won’t shock your customers and profits. If you don’t want to increase the selling price too much, then create additional value that customers get from your product. The price will increase, but it comes with other services that support and make customers forget how you increased the cost.
Increase the number of products
If the profit earned on 1 product is low, increasing the number of sales will be a temporary solution for you. For example, you receive a discount of 15% on each shipment of VND 1,000,000, equivalent to 100 products. But you don’t always reach that limit. What if you only have 30-40 products per month? Make an effort to expand your business, turning 30-40 products into 300-400 products. Then you have a perfect opportunity to negotiate a more appropriate discount with more products.
Second Challenge: High advertising costs
In dropshipping, you need to sell products and attract customers. In the e-commerce environment, there are many ways to attract customers to your shop. That leads to advertising costs, especially click ads (PPC – Pay Per Click) that account for a large part of the financial plan of the shops.
The higher the competition, the more prominent the item, which increases the advertising cost for each related keyword. If your product sells at the same price of 100$, you achieve a profit of 15%. With each product sold, you get 15$. You decide to do click ads for the product with the cost calculated from the profit earned. If you spend half of your profit on advertising, which is 7.5$, will you make a sale?
With this cost, you can sell the product when the displayed keyword has a price ranging from 1$ to 4.5$/click, and you have 1 customer choose to buy after 3-4 clicks. Otherwise, your capital will be lost. You still need advertising and calculations to use this form effectively.
The solution for you is: Optimizing advertising keywords.
You’ve heard, seen, and done search engine optimization – SEO, and now ad keyword optimization. You have a lot of keywords related to products and how to optimize them. Your process will be: optimize, test, optimize and keep testing until you have the most effective advertising campaign. However, you will have to spend considerable money to get to this result, so prepare well before you start.
How do you recognize which keywords are effective and which are not?
You test ads with existing keywords, constantly removing words that are irrelevant or do not get clicked by customers. The remaining keywords with descriptions closest to the customer’s search will be kept. Besides, you can focus on keyword advertising, showing on different channels to diversify sources to reach customers. Google Adword is not the only source of traffic attraction. You have countless other suitable options, such as email, social networks, paid advertising, and word of mouth. If you can’t afford to run Adwords ads, Why not try running ads on Facebook? Or you can build an email list with effective Email Marketing campaigns, publish articles,
Challenge 3: There are many competitors
Drop Shipping is a convenient form of business without much capital. Simple and convenient, you or I can open an online shop when there is a source of goods and a reasonable discount. However, this dominant advantage leads to fierce competition.
Anyone can open a shop. Anyone can sell. Then the market will become overloaded, and competition is inevitable. How to attract customers and sell more than other competitors?
Suppose you are the first to open an online shop for milk and baby products in the form of drop shipping. You have the first-mover advantage and keep it up. If you’re not the first, don’t worry. Focus on what you can do best and push it. Many stores sell the same products as you, but not all of them are the same. Some stores only sell products for babies from birth to 1 year old. In other stores, the product does not have much description. Other places sell many products, but the website is not customer friendly. You have a lot of opportunities to rise, don’t you?
Your competitors are crowded, and there are many tricks to advertise to attract customers. You are mostly advertising on Adwords and Facebook. Another piece of advice for you is to step out of that advertising market and find your horizon. Your customers, mothers, not only search for products on Google and Facebook but also visit forums, Q&A sections, and newspaper pages. That is the “blue ocean” for you to struggle.
Remember, if you are not the first, be the best. If not, boldly go to find a place no one has explored to “establish a career.”
Challenge 4: Low branding opportunities
When you decide to grow the Drop Shipping scale, you can’t control the product like other forms of sales. You cannot interfere with the packaging, labeling, and condition of the goods inside the container. This reduces the chances of branding your store.
How do you build and maintain your online shop image in the minds of customers?
You cannot control and determine the status of your products. Still, you have useful tools and experiences to engage customers, from finding your site, navigating it, deciding to purchase, and Tracking any purchase requisition.
Here are some ways to build your brand:
Have a great product page: Your website or online store is your store. Therefore, provide unique images, descriptions, videos, and blog posts so that customers do not want to leave your site.
- Have a very easy check of order status and contact you as soon as needed.
- Personalize purchase confirmation emails.
- You can also call them to thank them after a customer chooses to buy a product.
- Always maintain appropriate behavior with customers whether the order is successful or not.
In addition to the experiences and utilities on the sales website, you need to make the most of the tools to connect with customers, such as social networks, forums, and live chat, while taking care of customers and maintaining the image of the shop.
Challenge 5: Deal with suppliers
The challenges of customers and competitors are probably not the biggest headache for Drop Shipping businesses, but product suppliers. When the customer chooses the product, you tell them that you have exactly one box of that type of milk in stock, but when you contact the supplier, they’ve been sold out ever since.
In addition to the problem of being out of stock when you have an order, you also have to deal with delivery times from suppliers. Customers shopping in stores want to receive their goods as quickly as possible. For food products, it will be within 30 minutes or half a day. For fashion or home goods, it will be within 1 day. When you receive an order from a customer, you contact the supplier, but it takes 2-3 days for them to ship the item to you. You can wait, but your customers can’t.
These are all cases of delivery problems from the supplier. You can’t intervene with them, which is a disadvantage for the drop-shipping model, but you need to overcome this situation to maintain the business.
The solution for you is to share with customers but not all the truth.
To avoid unfortunate situations, you must agree in writing or email the supplier on delivery time and product status. You are the one in the middle, the delivery time is not your decision, and the customer does not want to wait too long. However, be honest with them about the delivery time after adding a certain fluctuation period, usually 1-2 days from when you receive the item. Customers will not make it difficult for you if you have clear information. Anyway, waiting is a bad feeling, so you need to quickly make the customer forget about this problem with some other trick.
In addition to buying products cheaper than usual, free shipping or low shipping fees will attract and make customers skip your delivery time. Try cutting down on shipping costs for your customers.
✅See also: How to Start a Dropshipping Business in 6 Simple Steps?
FAQ Questions to know about What is Dropshipping Business:
Is dropshipping passive income?Dropshipping is a great way to make a passive income, especially when your store is popular and getting
organic traffic. You can set up your own store, sell products you create, or buy products from other sellers and earn a commission on the sales.
First, you’ll need to promote your products on other platforms. Then, you will continue getting conversions even without much work.
What is the success rate of dropshipping?
Dropshipping is a very popular eCommerce business model. It involves selling products online without having to carry any inventory. The success rate of dropshipping depends on a few factors, including the product, the business model, and the customer base.
For example, some products, like digital products, can be drop shipped with very low overhead costs. Others, such as physical products, may require more overhead costs.
Is it worth it to dropship on Amazon?
Dropshipping on Amazon can be a great way to start your eCommerce business. The main benefits of dropshipping on Amazon are that it’s cost-effective and scalable.
The main costs of dropshipping on Amazon are the costs of your products and shipping your products.
In other words, the main costs of your products are the costs of the products themselves, the shipping container’s fees, and the shipping costs.
✅See also: Is Dropshipping a Good Idea & Who are the Best Dropshipping Suppliers?
How much profit should I make on dropshipping?
There is no definitive answer to this question since it depends on various factors, including the products you sell, how much effort you put into marketing, and the market conditions. However, you should generally aim to make as much profit as possible from dropshipping.
How much does a drop shipper make a month? How much does a dropshipper make a day?
A drop shipper makes a monthly salary based on how many products they are selling and the marketing conditions. Typically, a dropshipper would make at least $500 a month, which is 15-20$, approximately a day.
Can I drop ship from anywhere?
Yes, you can drop ship from anywhere in the world. However, you should keep in mind a few things when doing so, including:
First, make sure you have the right licenses and permits in place to operate your business.
Second, consider the shipping and customs delays when planning your shipments.
Third, be sure to create a shipping plan and track your shipments online to stay on top of any shipping delays.
Finally, be sure the products are carefully packaged to avoid damage in transit.
At what age can you start dropshipping?
There is no specific age for starting dropshipping. However, it is better to be at least 18 years old so you can sign up and get accepted within all companies and platforms.
Can you become a millionaire from dropshipping?
Yes, you can become a millionaire from drop shipping if you work hard and spend a good budget on ads.
You can certainly try free methods, but they will take a long time to give good results.
Can you do dropshipping by yourself?
Dropshipping depends on many factors like the supplier, shipper, you, etc.
Can I make money dropshipping?
Sure, you can make money dropshipping.
Actually, I make money dopshipping, so why don’t you?
What is the hardest part of dropshipping?
Setting up your website is a technical issue, so it is easy. However, marketing your products and getting sales is the hardest part of dropshipping.
What is the biggest problem in dropshipping?
Dropshipping is a great way to start a business. However, it is also one of the most difficult businesses to succeed in as your business depends on other parties who are the supplier and shipping.
You may lose your customers if the supplier offers how-to-quality products or the shipping services are inaccurate.
Is dropshipping a full-time job?
Dropshipping can be automated so that you can work according to your time.
How many hours a week can you dropship?
It is better to dropship at least 8 hours a day. After all, it is a business and needs time to perform profitably.
Which is better dropshipping or trading?
In trading, you usually buy the products and ship them yourself.
In dropshipping, the supplier cares about everything related to shipping.
I guess dropshipping is better.
Is dropshipping still worth it in 2022?
In 2022, dropshipping records excellent numbers, which means it is still working, and the platforms are improving.
How long does it take to make money dropshipping?
Creating your store can be finished in a week. However, t depends on your marketing strategy and
✅See also: Is Dropshipping Legal And How to become a dropshipper?
Conclusion about What is DropShipping business
Drop Shipping, like other business forms, has certain advantages and disadvantages, but there is always a solution to every puzzle. Hopefully, through this article, Sapo hopes you focus on the things that attract and retain customers to overcome the difficulties in this business.
