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What is Dropshipping? How To Make Money with Dropshipping in 2020

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You’re interested in making money online and wondering how to do it. You may have seen the term “dropshipping” floating around.

Don’t worry if you’re not familiar with this term. In this blog, we’ll explain exactly what drop shipping is and how to launch and run your own store.

Let’s go!

What is dropshipping?

Drop shipping is a supply chain management method in which the retailer does not keep goods in stock but instead transfers its customer’s orders and shipment details to either the manufacturer, another retailer, or a wholesaler, who then ships the goods directly to the customer.

As in retail business, the majority of retailers make their profit on the difference between the wholesale and retail price, but some retailers earn an agreed percentage of the sales in commission, paid by the wholesaler to the retailer.

Wikipedia

Let’s say you’ve been thinking of opening up your own online business. However, you don’t know where to start, what you should sell and don’t have the money to invest any place to store inventory.

Luckily, that’s what dropshipping can help you.

How dropshipping works?

How-Drop-Shipping-Works

First, you find what you want to sell from a supplier. After that, you list that product on your own website at a price you set.

Next, when someone places an order for that product, your customer pays you the retail price you’ve set. You make a profit.

Then, you’ll place the order with your supplier at their wholesale price and have it shipped directly to the customer.

For example, you’ve found a watch on a supplier’s website for $10. You would then list it on your own website at $30.

When the order comes in through your website, you place your order with your supplier using your customer’s shipping information.

You keep $20 profit and have the product shipped directly to your customer.

You’re thinking why wouldn’t somebody order the watch directly from the supplier’s website but yours?

There is a couple of reasons.

✅ It’s a very big internet and customers may not know about the supplier to buy from them directly.

✅ When people buy things, they’re just buying not only products but also involving in marketing, positioning, trust, brand, and lifestyle those products represent.

With dropshipping, you can focus on marketing your products and saying the right things at the right time.

Furthermore, you can provide real value to the right people because you’re not warehousing any inventory, or dealing with most of the other challenges that come with running an eCommerce business.

Why do people get into dropshipping?

First of all, it’s really fast and easy to get started and make money without capital or very little capital.

You can dropship with incredibly low investment costs. Moreover, you don’t need to have an established business entity when you start.

Dropshipping is a great business model for aspiring entrepreneurs to start with because it’s accessible. With dropshipping, you can quickly test different business ideas with limited downside, which lets you learn a lot about how to choose and market in-demand products. Here are a few other reasons why dropshipping is such a popular model

✅ Less capital is required

Probably the biggest advantage to dropshipping is that it’s possible to launch an e-commerce store without having to invest thousands of dollars in inventory upfront. Traditionally, retailers have had to tie up huge amounts of capital purchasing inventory.

Thanks to the dropshipping model, you don’t have to purchase a product unless you’ve already made the sale and have been paid by the customer. Without significant up-front inventory investments, it’s possible to start sourcing products and launch a successful dropshipping business with very little money. The reason is that you’re not committed to selling-through any inventory purchased upfront, like in a traditional retail business, there’s less risk involved in starting a dropshipping store.

✅ Easy to get started

Running an eCommerce business is much easier when you don’t have to deal with physical products.

With dropshipping, you don’t have to worry about:

  • Managing or paying for a warehouse
  • Packing and shipping your orders
  • Tracking inventory for accounting reasons
  • Handling returns and inbound shipments
  • Continually ordering products and managing stock level

✅ Low overhead

Because you don’t have to deal with purchasing inventory or managing a warehouse, your overhead expenses are quite low. In fact, many successful dropshipping stores are run as home-based businesses, requiring little more than a laptop and a few recurring expenses to operate. As you grow, these costs will likely increase but will still be low compared to those of traditional brick-and-mortar businesses.

✅ Flexible location

A dropshipping business can be run from just about anywhere with an internet connection. As long as you can communicate with suppliers and customers easily, you can run and manage your business.

✅ The wide selection of products to sell

Since you don’t have to pre-purchase the items you sell, you can offer an array of trending products to your potential customers. If suppliers stock an item, you can list it for sale on your online store at no additional cost.

✅ Easier to test

Dropshipping is a useful fulfillment method for both launching a new store and for business owners looking to test the appetite customers have for additional product categories, e.g., accessories or wholly new product lines. The main benefit of dropshipping is, again, the ability to list and potentially sell products before committing to buying a large amount of inventory.

✅ Easier to scale

With a traditional retail business, if you receive three times the number of orders, you’ll usually need to do three times as much work.

By leveraging dropshipping suppliers, most of the work to process additional orders will be borne by the suppliers, allowing you to expand with fewer growing pains and less incremental work.

Sales growth will always bring additional work—especially related to customer support—but businesses that utilize dropshipping scale particularly well relative to traditional ecommerce businesses.

Difficulties when doing dropshipping

1️⃣ Finding Reliable Suppliers

A couple of big challenges that need to be considered with dropshipping is finding credible suppliers with good quality products and making sure you have visibility into your customer’s fulfillment process.

Honestly, you can find suppliers on your own. However, when you’re dropshipping completely on your own, you can end up spending a lot of time researching and negotiating with suppliers to guarantee your customer’s satisfaction.

Some good sources to find reliable suppliers are Amazon, eBay, Aliexpress and so on.

Best-Dropshipping-Companies

You can see this article: How to find reputable suppliers in China to do Dropshipping

2️⃣ Shipping Errors

Though uncommon, it is inevitable that a supplier will mistakenly ship the wrong item to your customer.

Additionally, since many dropshipping suppliers are from China, shipping times are generally longer, turning some consumers off.

ePacket makes it easier, delivering some orders in as little as two weeks. However, if you make your shipping times clear throughout the buying process, many visitors appreciate the clarity.

Regarding ePacket, ePacket is an agreement that the Chinese and HongKong governments have with the US postal service and a ton of other countries including Canada and Australia to ship light eCommerce packages from China, relatively cheaply and within 7-20 days and often much quicker.

3️⃣ Competition

The next challenge is that there’s a higher potential for competition because most people could do it easily.

That’s why you’ll find a niche audience with less competition.

How do we set up an online business?

We’ll go over everything you need to know to build your online business with an eCommerce store checklist.

1️⃣ Finding Right Platforms

By platform, we mean a virtual space for your eCommerce business, like a brick and mortar store.

You’re going to need a virtual location to showcase your products.

There are various eCommerce platforms such as WordPress, Shopify, Magento, Wix and so on.

best-e-commerce-platforms-to-do-dropshipping-in-2020

Read our article comparing WordPress vs Wix

2️⃣ Finding Products

If you’re a complete beginner, you might be wondering what exactly you should sell.

There are literally millions of products to choose from. Therefore, finding the right product for you may seem a little daunting.

Finding Products to dropship

In fact, now knowing what to sell is one of the most common reasons why people don’t follow through with their eCommerce ambitions.

Here are 2 things to think about when it comes to picking a product to sell

What is product trending?

You can check if a product is trending or forecasted to trend by using Google Trends.

Google Trends tracks how often a particular search term is entered relative to the total search-volume across various regions of the world in various languages.

It gives you a sense of how often people are looking for a particular product.

If more and more people are searching for a product every month, we can safely say that the product is trending.

Is the product easy to find elsewhere or available on popular eCommerce sites like Amazon?

When a product is easy to find elsewhere, it might be a generic product, which is widely available.

New drop shippers trying to sell generic products will struggle to compete against bigger eCommerce stores.

The better strategy is to find a niche product or set of products that appeal to a particular audience

Here is the process

  • Start by making a list of product ideas you want to sell in your eCommerce store.
  • Ask yourself what your friends, family, and other like-minded people who may be interested in buying.
  • Then go online and see how easy it is to find the products on your list
  • If there are limited options on those sites, you might have a great product idea.

You can read: Top 10 best products dropshipping 2020

3️⃣ Product Sourcing

Moving on with our checklist to product sourcing.

Product Sourcing to dropshopping

Now you’ve picked your product, it’s time to find a supplier. This is where the dropshipping business model is worth mentioning.

Among entrepreneurs, dropshipping is growing more popular every year.

Why?

It requires less investment upfront and no merchants stock, own inventory. Instead, your supplier will ship the item directly to your customers.

With dropshipping, you never have to handle the merchandise. You can also swap out products in your store in minutes, giving you the flexibility to stay on top of current trends.

There are many trusty sources like Aliexpress, Esty, eBay or Amazon or websites of suppliers.

No matter your source is, when choosing the supplier, you have to consider their performance via index, feedback, and reviews.

4️⃣ Ecommerce Marketing

You’ve set up your store and are ready to take orders. You have a great product and are working with a good supplier.

Now what?

You have to find some customers for your store with a sensible eCommerce marketing strategy.

We can’t emphasize enough how vital it is to focus your energy and time on marketing.

Before you do anything else with your store, you should ensure that you can generate traffic and reach potential customers.

The key to eCommerce marketing is to find the right channel for your products such as Facebook, Instagram, Pinterest, Twitter and so on.

After that, you fine-tune your strategy so that the cost of finding a customer is less than what you earn from the sale.

5️⃣ Customer Service

Research suggests that 45% of US customers will abandon an online transaction if their questions or concerns are not addressed quickly.

Having customer service is critical to your online store’s long term success.

How you can do that well?

  • Create self-service content and a detailed FAQ page. This helps your customers answer their own questions without emailing you.
  • You can offer live chat support if you have enough time. This might be a good thing to do in the beginning, when traffic isn’t quite flooding in. You’ll learn a lot about your market by addressing customers questions directly
  • You can ask your first customers to give product reviews. These reviews go a long way towards answering other customers’ questions about how a product fits or functions.

6️⃣ Conversion Optimization

On average, 69% of your website visitors will leave your site without completing a purchase.

How much more profit would you make if that 69% completed a purchase?

It’s certainly worth investing some time to find a way of capturing your abandoned carts at the checkout.

We’ve seen several tactics work well for dropshippers.

For example, you can create limited-time offers or you can launch a cart abandonment email campaign.

You can even set up a retargeting ads campaign.

Be creative!

7️⃣ Store Optimization

44% of online shoppers will tell their friends about a bad experience online.

store optimize

That’s why you should always keep the performance of your website in mind, and seek to optimize it wherever possible.

  • Improve your website speed
  • Create an intuitive navigation bar
  • Focus on creating a great product page
  • Display related items
  • Optimize your store search
  • Check how your store looks on mobile and tablet devices

8️⃣ Inventory

Best selling products come and go.

Inventory to dropshipping

You should always be curious about new product ideas that visitors to your store.

At the same time, you should always be revisiting your stock of steady-selling products.

It something isn’t selling, you can replace it with an item that’s flying off the virtual shelf.

Plus, you should get into the habit of testing products every day.

9️⃣ Learn by doing

Nobody’s perfect

It’s fine to make mistakes. In fact, this is how we learn best.

eCommerce and dropship change every day, you will experience challenges and gain more lessons.

Mistakes can become learning opportunities. If you can develop resilience along the way, there are plenty of people out there finding a lot of success dropshipping products.

Sum Up

There is no overnight success and get a rich quick scheme.

Dropshipping still requires you to work consistently for your store.

You’ll always need to invest time improving your business.

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