Dropshipping is a popular business because it has low startup costs, no overhead, and a straightforward business model.
You can start a dropshipping business with as little as $100 which will make it a good choice for those wanting to start a new venture on a dropshipping business. And dropshippers are those that sell various products without any need to buy or store inventory.
In this article, you will learn the meaning of dropshipping, who is a dropshipper, and the simple steps on how to start a dropshipping business.
What is Dropshipping?
Dropshipping is a business model wherein a company sells products either with or without maintaining a low inventory of the items.
Simply put, when a customer places an order, the recipient or the company notifies the manufacturer or distributor of the product about the order. Subsequently, the distributor directly ships the product to the customer on behalf of the company that initiated the order.
Furthermore, dropshipping is a retail business with a relatively low capital requirement for startups. Given that there’s no need for stock inventory, warehouse payments, or manufacturing space management, the operating costs are significantly lower compared to companies involved in manufacturing or distributing physical products.
The individual responsible for placing an order and facilitating the shipment on behalf of a third party is referred to as a dropshipper.
Who is a Dropshipper?
A dropshipper serves as the intermediary or retailer between the manufacturer and the consumer. In addition, a dropshipper does not physically handle the products but rather takes the order and forwards the information to the manufacturer.
The manufacturer then manages the products, shipment, and customer location details. Additionally, the beauty of being a dropshipper lies in the opportunity it provides to run an online eCommerce business without the complexities of manufacturing, inventory management, or distribution.
Essentially, a dropshipper operates as the middleman between the customer and the company that sells the products, overseeing the shipping process.
Moreover, the primary role of dropshippers is to impeccably handle customer service by processing orders and providing distributors with the necessary details regarding the shipment’s destination. The merits of being a dropshipper extend beyond these aspects, as elaborated in the following paragraph.
Advantages of Dropshipping
Dropshippers enjoy several advantages over the manufacturers of the products:
- Quick Start: Dropshipping allows you to swiftly connect with the manufacturer or distributor of the products you wish to feature on your site, enabling an immediate start to your business.
- Profitable Pricing: Distributors often charge a flat rate for sales, ensuring a favorable profit margin for dropshippers.
- Risk Mitigation: Dropshipping eliminates the risk associated with investing in unsold stock, offering a safer business approach.
- Diverse Product Range: This business model provides the flexibility to offer a broader range of products, allowing your company to explore various market niches.
- Time Efficiency: Dropshipping focuses on order placement, leaving distributors responsible for labeling, packing, and shipping products. This efficiency allows you to concentrate on other aspects of your business.
To establish a successful online business as a dropshipper, it is essential to follow the steps outlined in the subsequent section.
10 Simple Steps on How to Become a Dropshipper
Dropshipping can be handled without keeping any inventory record and has a low-cost budget for new business owners to sell products without a lot of overhead.
Here are 10 simple steps for you to have a successful dropshipping business.
1. Research Target Audience
When planning to become a dropshipper, one of the first tasks you need to do is market research. There is a lot of market research you need to do and one of them is to develop a plan for your dropshipping business.
Have your target audience, that who you think will benefit from the products you drop ship and why will it benefit them. You need to focus on your target audience either B2B or B2C for you to be among the best online stores.
Also, research competitors, what other companies like you are selling, what they sell, and how they have been having traffic on their website.
2. Choose a Business Concept
When we are talking about a business concept, it describes what you are selling and whom you are selling to. When we are talking about dropshipping, there are so many options you can use to sell your products to a specific demographic.
The foundation for your business concept is the products you sell, your web designs, and your marketing strategies. If you develop a business concept on clothes, maybe T-shirts or trousers, this will have a particular design that will appeal to the demographics, quality, and style that stakeholders can wear.
3. Source Your Products
When you are sourcing products, take a very careful look at which products to specify because your business concept does not guarantee that you will be able to serve the demographic you have chosen.
Take the time to look for multiple distributors or manufacturers that sell the same products and find out the best wholesale price for your products.
Examples of the distributors you can research prices are AliExpress, Alibaba, etc.
Also, when choosing a product, get the ones that you are excited about and those that have a good margin of profit, and then display them on your website. Most of these distributors provide statistics on popular products, so you can choose the one to pull traffic to your website.
4. Select a Manufacturer or Distributor
When you find out the products you want to offer, then choose your distributor or manufacturer that will be the actual company to do the shipment of the products to your customers.
There are a few things to consider when choosing your distributor.
- Quality: Choose a distributor that will offer you the quality you want your company to represent. This is one of the best business models to charge more for better quality products.
- Profitability: When considering shipping and transaction costs in your calculations, try to make a reasonable profit on a product. Most dropshippers look for 15% or 20% in profit margin.
- Reliability: If you choose a distributor that sends a product in a timely fashion and you know many distributors are overseas, you will have to determine if your customers will wait for a product or not. This is based on whether the distributors will keep the products in stock till the shipment is done.
- Return policy: find a distributor that offers a return policy because many don’t accept any return product. Based on this, you have to build your return policy for your customers.
5. Build an Online Store
Building an online store can be tricky for a new beginner. You may need to build a website to display your product. To build an eCommerce store that will be designed to display your products nicely, you will need these three things.
- Content management systems (CMS) like WordPress hosting, Shopify
- A domain name
- Web hosting platform
The best eCommerce marketplace platforms automate the sale of the product with the order to the manufacturer, so this step is needed to control your order every day Shopify is one of the best websites for building a dropshipping business but you can learn more on eCommerce marketplace platforms.
6. Market strategy and a Professional Website
Dropshipping is just like an eCommerce business model, which means you need an eCommerce website to make it work. Your store must include products with descriptions and high-quality photos that will make customers fall in love with your products and add them to their carts.
If you want your website to gain a lot of traffic, you will need to make use of this,
- Make sure your website is fast-loading.
- Do not clutter the website with unnecessary information rather use drop-down menus to make it easier for customers to navigate.
- Ensure you think about strong engine optimization
- Make sure you update your website regularly.
All this will make you run an effective business website.
7. Register Your Business
When considering dropshipping, you need to set it up as a business, by creating a name for it. It is mostly the domain name you choose and filing an LLC incorporation with your state, or registering your business with the right authorities.
You need to open a bank account and get a tax identification number (sales tax ID or seller’s permit from the state tax office) and make sure the two are linked together for the payment gateway.
This account will be in control of all deposits and the payment of company expenses, web hosting platform maintenance, and the payment for the manufacturer of the products you ordered.
8. Market Your Business
After registering your business, you will have to market it because you can’t set up an online business and expect sales immediately. You will have to go extra by
taking advantage of a wide variety of digital marketing tactics that tell people about the products you sell and services you render.
An example is using eCommerce email marketing to keep in touch with most of your loyal customers. Make use of social media, you can have a social media platform where you market your sales and drive traffic to your website.
9. Provide Excellent Customer Services
After setting your market strategy, you need to meet your expectations by having a strong customer service relationship.
There are a few ways to have good customer service:
- Respond to all customers’ questions as soon as possible
- Do not overwhelm your customers with your product listings
- Provide strong customer service
- Own your dropshipping distributor mistakes
Strong customer service can help you set your dropshipping business apart from your competitors. Also, make sure you review your prices from time to time and keep an eye on your competitors by making your prices competitive within the marketplace.
10. Track Your Key Performance Indicators
Once you start making sales, keep track of your key performance indicators like figuring out on your channels what is working out and what is not working out, and where you need to improve.
Also, look out for the way people are purchasing your products either through desktop computers or mobile phones.
Conclusion
Some people ask why is my dropshipping business taking months to generate a steady cash flow. This is the only solution that can make you thrive on the journey.
Once you have the full knowledge of the dropshipping business model and make use of these 10 simple steps to become a dropshipper, you will have a successful online store. Make sure you put the right eCommerce sales and marketing strategies in place.
It may be slow at first, but if you remain consistent, you’ll get there.
