These four dropshipping tips can help in deciding if dropshipping is the right business for you. As with any business, it is important to analyze all of the facts and risks before making a decision. This article offers considerations that we hope are helpful and should not be interpreted as advice or a recommendation.
The chances are pretty high that you have either seen an advertisement or have heard about people who are making regular income via dropshipping. The very obvious next questions are:
- What is dropshipping?
- Is dropshipping right for me?
If you are looking for a business that doesn’t require using physical space, is entirely internet-based, and has the ability to be just as profitable, if not more, than a traditional store then dropshipping could be an option for you.
Below are some pros and cons as well as four dropshipping tips to consider.
What is dropshipping?
In basic terms, it is a retail fulfillment option where (you) the store doesn’t hold any of the products in stock. Instead, when someone purchases something from your dropship website, the dropship site purchases the item from a third party supplier, and it gets shipped directly to the customer.
The shop owner does not generally see or handle the products.
You don’t own or stock any items, meaning you don’t have to invest money in space or products - great news for people looking at a less expensive way to run a business from home.
Dropshipping Pros
- It can be easier to start than a traditional store because setting up a website is typically less complex than setting up a physical store front. There is also the option to sell products on a Facebook page.
- Dropshipping can be very flexible, it is not location dependent meaning that it can be done from anywhere
- The overhead costs are typically lower because you aren’t paying for storage or products. The most likely fees you will pay are the ones for the dropshipping website and all its features.
- It has the potential to scale. The business doesn’t own the products so can expand and experiment with offerings freely.
- You can sell a wide variety of products in almost any niche you choose.
Dropshipping Cons
- While setting up a website is relatively easy, a dropshipping business does require the owner to find suppliers which could take more time due to the research, contact and testing involved.
- The early days can see very small margins. The business has a somewhat low barrier to entry which tends to increase competition which tends to lead to smaller margins. However, there are ways to increase margins such as choosing a less competitive niche and building a loyal customer base.
- Shipping costs can be complex and can erode profit. Dropshipping can require working with a lot of different suppliers. Shipping expenses must be properly calculated and it is important to understand how they impact profit margins. Shipping costs from suppliers are passed on to the business owner who must either raise prices or eat the costs themselves.
- When sourcing products, it can be difficult to know when they have gone out of stock because you are not in charge of the inventory. The good news is that there is technology to help with this, but the suppliers must support the function.
Is Dropshipping Right For Me?
4 Dropshipping Tips to Consider
1. Products and Website
The first drop shipping tip is to spend some time considering what your drophshipping business would sell. It can help to research which products traditionally do well on dropshipping sites and make a list of what could potentially work. This step can be difficult as there is a lot of competition. It could help to understand your personal strengths and focus on products that you already have knowledge about. Lots of people opt to read books about product research such as this one.
Similarly, when building the website it is important to become familiar with the backend and to continually test the user experience from the customer’s point of view. Fortunately, popular e-commerce companies like Shopify offer resources for beginners.
Both of these elements might require a bit of a learning curve, but luckily there are a lot of resources available for people that are willing to put in the time and effort.
2. Suppliers
Using multiple suppliers can decreases the chances of running out of inventory. As with any business, it is wise to try a range of suppliers because the quality of the products, speed of delivery and communication may differ.
That is why it helps to test a few out. Over time you will become more familiar with what you prefer and want to see in your suppliers and can streamline your selection process.
This article on how to find suppliers can be a good place to start.
3. Teamwork
While dropshipping companies start small, over time, they will need just as many hands on deck as a standard business. So, when the time comes it can help to have people and systems in place to help operate the business. In general, these are the tasks that will need to be taken care of such as customer support (support tickets and general questions) and brand management (social media and website updates).
Always view outsourcing and hiring people as an investment. When they are taking care of their job, you are free to focus on the growth and quality of your business.
In other words, the ultimate goal is to work ON it, rather than IN it.
4. Marketing
In the early days, you will most likely be your own marketing machine. That is not necessarily a bad thing. It will mean that you have cultivated your own followers and community. The analytics you have access to will then aid you in laser focusing your efforts and obtaining more sales.
This is all about getting your products and your brand out there. Most dropshipping packages come with all the features you will need to have a highly efficient social media output.
The key to great marketing is consistently creating content, using search engine optimization (SEO) for maximum impact, and building your email marketing list.
Customer retention is going to depend heavily on your email marketing list. So it can be helpful to make sure that your email list opt-in is highly visible and that you use tools to help you capitalize on those hot leads.
The Most Important Dropshipping Tip
Yes, a dropshipping business can be less complex to set up than a traditional store. No, you can’t then just leave it to ‘run.’ Dropshipping, like any other business, takes time and learning to get it off the ground. But, once you have mastered the basics, it is possible to branch out, expand, and potentially make a pretty nice profit. It might be helpful to choose a dropshipping company that integrates social media, mobile ready, full hosting, and accepts a range of payment options if possible.
The most important tip is to be prepared to treat dropshipping like a business and it will act like one.
