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The Lowdown on Dropshipping: A Legit Way to Make Money?
Want to start an e-commerce venture, but not sure what to sell - or how you’ll invest in your inventory?
Dropshipping may be the solution you’re looking for.
By partnering directly with wholesalers and warehouses, you can launch a business with a custom product in no time flat.
Here’s how to get started.
Your Crash Course in Dropshipping: How It Works
If you know you can target a specific market with the right kind of product - but you don’t have money to manufacture your own products - partner with a wholesaler instead.
This wholesaler packages, fulfills, and ships an existing product from their warehouse for you. That means you only have to worry about what you’re good at: marketing and sales. All the other stuff? Inventory, manufacturing, and fulfillment? That’s up to your partner.
What’s more, you only pay your wholesaler when you sell a product - which means you don’t have to risk inventory costs up front.
This process, called dropshipping, is revolutionizing e-commerce businesses and changing the retail landscape.
According to the Wall Street Journal, that’s because dropshipping also caters to online shoppers who want plenty of options.
“Some analysts predict dropshipping will hit the mainstream this year, as consumers spend more online and less in stores,” reports Jennifer Smith.
“Home goods seller Pier 1 Imports and footwear chain Shoe Carnival are among the retailers that in recent months said they would begin using dropshipping to expand their online offerings,” Smith added.
Typically, expanding the inventory of a business would require plenty of money upfront to manufacture and test new products.
By partnering directly with a wholesaler or manufacturer, an e-commerce business can expand their inventory quickly - with fewer costs and risks. If a product doesn’t sell, you can always stop carrying it - but you won’t be out inventory costs.
The Take-away: Dropshipping helps new entrepreneurs lower start-up costs and barriers to entry - all while offering customers a wide variety of products.
Find Your Niche: Picking Your Product
Just because you’re selling wholesale products doesn’t mean you can sleep on marketing your product to a specific audience.
In fact, according to the great minds at e-commerce platform Shopify, many of the most successful dropshipping businesses feature niche products tailored to high-end audiences.
“You don't want to just sell backpacks,” the company advises in its Ultimate Guide to Dropshipping. “You want to sell backpacks designed for around-the-world travelers obsessed with lightweight gear. You don't want to just sell security camera equipment. You want to focus on security systems for gas stations.”
You get the idea.
For e-commerce expert Tom Ewer, niching your business also requires adding value to your customer by providing additional services.
“You absolutely must think about the price tag in relation to the kind of pre-sales service you have to offer,” Ewer writes at the Woo Commerce blog. “For instance, if you’re planning on selling a high-ticket item, you’ll have to be able to afford a high level of service, including direct phone contact.”
If you want your customers to make a serious investment in your dropshipping product - and any additional insights you have to offer - then provide a premium experience that helps them solve the problem that drove them to your site in the first place.
Need more help deciding on a dropshipping product? Check out this post from Anton Kraly, the CEO of Drop Ship Lifestyle, then unpack the research methods you’ll need to identify and market the right product at WooCommerce.
The Take-away: Identify a niche market where you can add value - and provide excellent customer service.
Scaling Up: How to Handle Dropshipping Challenges
While a dropshipping business is easy to launch, the profit margins are low.
That’s why it’s so important to do market research on your niche, products, and fulfillment services. You want all of your marketing efforts to drive sales - and to ensure your customers are happy with the product they receive from the warehouse.
According to Shopify, this can be difficult if a customer orders three separate items that each come from a different warehouse.
“You'll incur three separate shipping charges for sending each item to the customer, but it's probably not wise to pass this charge along to the customer, as they'll think you're grossly overcharging for shipping!” the company advises in its dropshipping guide. “And even if you did want to pass these charges along, automating these calculations can be difficult.”
Be ready to handle logistics, intervene in challenging scenarios to provide customers with a positive experience, and market the heck out of your products in order to make money.
“Google Ads and search engine optimization (SEO) are great for building rapport with an audience that’s already interested in your business’ products, but to find new customers, use visually-driven social media channels like Instagram and Pinterest to create leads,” suggests Nathan Resnick at Entrepreneur. “Also, Facebook’s Custom Audiences offers highly targeted ads and excellent conversion rates.”
Justin Wong, an online entrepreneur specializing in women’s fashion, made $12,000 in two weeks simply by focusing on influencer marketing campaigns - even though it took a lot of effort to convince those influencers to come on board.
“I decided to reach out to...influencers myself, so I used Iconosquare (Instagram Statistics Tool) to identify the most popular accounts,” Wong told Huffington Post. “I sent them a discount code and said that they would get a 30% affiliate fee from every sale they made.”
While you don’t necessarily need to follow Wong’s example and launch a fancy influencer campaign right away, you should put a solid marketing plan in place that drives traffic to your site - along with a killer customer service model that can handle your steadily-increasing volume of sales.
The Take-away: With fewer fulfillment and shipping costs to handle, devote your resources to marketing, sales, and customer service.
Partner Up: Find the Right Supplier
While there are plenty of logistics services - like Oberlo and Alibaba - that can help you connect with manufacturers and suppliers, you still need to identify the wholesalers you feel comfortable working with. (And, yes - you’ll need more than one!)
According to Jonathan Long, founder of Market Domination Media, the right dropshipping supplier can make or break your new business.
“Most dropshipping suppliers are located overseas, making communication extremely important, both in terms of response speed and the ability to understand each other,” explains Long at Entrepreneur. “If you are not 100 percent confident in the communication abilities of a potential supplier, move on and continue your search.”
You can alleviate stress around fulfillment, packaging, or logistics by testing the services of your new suppliers, says Tracey Wallace, a content strategist for the e-commerce platform BigCommerce.
“When you get the order, examine it closely, considering the packaging, shipment time and so on, and make sure that everything is top-quality,” writes Wallace at HubSpot.
“It’s a good idea to continue placing test orders on a somewhat regular basis. Fulfillment is critically important to any online business, and you want to catch any slips in quality before they become an issue,” she adds.
Ready to jump in? Here are 5 sites where you can start your research:
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