Setting Up Your Own Profitable Dropshipping Business
Posted by Andres Aguerrevere on
If you are an entrepreneur looking for a new business idea to make profit with very low investment margin, then you probably have heard of the dropshipping field, but if you haven’t, then let me show you one business option that will help you make lots of money with low investment.
Understanding dropshipping isn’t that complicated. It is an immensely trendy business structure with which entrepreneurs of all ages are making profit, especially the younger ones due to their innate inclination to e-commerce and digital marketing. The appealing part of this model is that it doesn’t actually require you to handle the items you are selling, thus, the expenses in stocking and staffing are vastly reduced.
Since this model is a fulfillment alternative in which you don't need to keep the stock you offer online in a physical space, buying the item(s) from a third party and shipping it straight to the customer comes after their actual purchase. Therefore, there’s no dealing with the product yourself, your role is being a sort of intermediator.
Is Dropshipping an Intermediator?
In short, the job of dropshippers is to choreograph all sales and deliveries of an item between the maker and the client. The way to achieve this is by associating with suppliers so then you are able to offer their products on your online store.
The edge you have is that a great number of suppliers aren’t necessarily franchise-like businesses, so most of them know that giving you a price reduction is beneficial to their brands in the form of publicity. As a result, online stores tend to get a cut on products and generous percentages since you’re helping them make profit as well.
As a matter of fact, if you get to increase your sales enough on a particular product(s) of any of the suppliers, they might even prefer selling to your store over others, meaning more commissions and/or more discounts for you.
Isn’t it the same as a retail business but online?
As we said before, standard retail and dropshipping differ in that the latter doesn't need to keep and inventory nor to stock products, as we said before, which isn’t the case with retail. Therefore, you never actually own anything, all you do is purchase to your suppliers as people shop from your online store.
All this translates into the ability to conduct a dropshipping business with a very low amount of investment in advance other than paying your third party supplier a portion of the payment received from the customer.
The more you sell, the more you get
Suppose you offer a pair of headphones that cost $140 on your online store, you’ve never handled or seen the product (you don’t have to); a customer purchases one of them and well, it is after you have verified the payment on your paypal account that you proceed and pay your manufacturer whichever total you agreed. Let’s say it’s $90 for the product plus shipping costs, ending in $55 profit (before fees).
This business has its own advantages and disadvantages. At first you will see that profit margins are low, however, as in any other field growth is always progressive. The more you sell, the more money you make.
Anyways, so far dropshipping sounds dream-like right? Yes, it’s low risk business model and requires low investment in relation to immediate revenue. Regardless of that fact, a successful dropshipping brand calls for hard work and dedication just as any type of company.
But, it’s worth it, dropshipping is an extremely promising business model for years to come. The comfort that online shopping gives people makes dropshipping numbers grow exponentially year to year. In fact, the amount of online shoppers is expected to grow from 220 million to 230.5 million by 2021.
Setting up your dropshipping business!
Indeed you can set up your own, but as you can see, it can be a daunting task but there’s always an alternative. For those starting or looking to expand our recommendation is to hire an expert to set up your dropshipping business. However, let’s now jump into the crème de la crème.
In this occasion I want to show you my 6 essential steps you need to understand and apply before you’re able to run a proper dropshipping business. Of course, there’s more to this but for the sake of proper information digestion we’ll begin with the these core characteristics.
For one thing, you must start by choosing the platform for your Ecommerce:
Just like in social media, each platform has its own characteristics. The choice will vary depending on your particular needs or ambitions.
For instance, if you have a big brand then twitter doesn’t do that much for you anymore, however, when starting you need to be present everywhere. The same thing happens with dropshipping, beginners mostly use shopify since it’s a lot simpler, it has great reach, it doesn’t require so much work and it also offers a handful of awesome options for dropshippers with low budgets.
In opposition, other ecommerce channels such as BigCommerce are for more demanding and determined entrepreneurs who are resolute on their online stores.
The niche and product:
Measure your niche to make sure you’re choosing a profitable one. Also, you must be extremely specific in your decision in order to penetrate the market. Choose a product you’re truly passionate about so you are keen to invest more time on getting sales and less time being demotivated. Doing marketing for something you don’t feel anything for is like keeping your old job. It takes determination to become prosperous in this business.
A crucial part of setting up this kind of business is associating with the right supplier. Do your homework and study your options. Actually, most of these suppliers are overseas, thus, making sure that communication channels are 100% reliable can be as important as getting good discounts. You don’t want to have customers excessively waiting for fulfillments and risks ending up with no money and no customers.
Be inquisitive about it and ask as much information and details as you consider coherent. Is the supplier able to satisfy growing demands in case that happens?
Due to competition, offering good quality items through an engaging site is very important in dropshipping. Nonetheless, even with the best web page poorly planed marketing campaigns can stagnate your brand, so applying the specific tools to draw the attention of the audience from external channels is pivotal.
You have many options to engage with users. The most popular place to run an advertising campaign with high ROI for a dropshipping business is Facebook. If the ad campaign is well-placed you will have exposure to thousands of users and most likely you’ll be able to draw customers to your site and generate sales in no time, which at the same time will allow you to rank higher among your competition.
In addition, consider reinforcing Facebook ads with some investment in segmentation, SEO and email marketing campaigns since they can increase your conversion rates a lot! Make a difference by offering something attractive in return to the user’s info, you could go for discounts on memberships for instance, this way you can generate leads right from the get go.
In this case, choosing the right path to take depends on which side of the market is already covered and which isn’t. Analyzing your competitor landscape starts by classifying those businesses you see as your main competition. Then, you can include those brands that can affect your sales indirectly.
After that, study the companies that wish to launch in the same market in short/mid/long-term and after completion, there should be no difficulty in deciding whether or not it is a profitable market to launch in. Ask yourself questions like, what difficulties will I encounter once I face my competition? Focus on both the challenges, the benefits and what it is you can bring on board with your brand to make the right call.
The competitor’s products:
In this last step, you should study and understand in detail the particularities of the products offered by your competition, their buyer personas and why people chooses them. Meaning, which is their approach to marketing and how they apply that to the channels they use to attract shoppers. Plus, investigate about their customer reviews and the brand identity they show on the outside.
Wrapping up, as a matter of fact, dropshipping businesses are now a regular business model chosen by most young startupers, it’s a low risk environment and with the ever-growing online purchasing demand it doesn’t seem to go nowhere far for now. Although you avoid having to deal with a bunch of issues like hiring or handling stock, successfully managing a dropshipping business requires the right guidance and expertise.
Following these 6 core steps is a start, do some research, watch youtube, ask other dropshipping entrepreneurs about their experiences, keep connected and please feel free to contact us at any moment, we’ll gladly help!
- Tags: dropshipping