Starting a dropshipping business may seem scary to you, but guess what, you’re not alone! The initial cost of starting up can cause this feeling, however, it is all worth it.
It would actually be much easier to get started since you would have someone pay your upfront inventory costs and manage all your shipping and fulfillment operations on thousands of items.
You would be able to run your business from anywhere in the world which may seem impossible, but dropshipping allows you to do so.
In this photo you can get an idea of how dropshipping works visually. As you can see it is a cycle. If you understand this photo, you understand the whole dropshipping process.
How does Dropshipping work?
Let’s dive right into what dropshipping is and the steps you must take in this business. Dropshipping is a retail method in which you don’t keep your own products in stock for when customers order them. Instead you:
- Partner with a wholesale supplier that stocks its own inventory
- Add the products to your store online so that the customer can order them
- Customers pay you for the product plus the shipping
- You then transfer customer orders and shipment details to the supplier
- Supplier ships the order directly to the customer
What are the Benefits of Dropshipping?
You do not have to worry about the issues that come along with fulfillment or inventory issues, such as not having enough inventory in stock to fulfill the customer’s order. This is the biggest benefit.
Also most customers don’t know you’re drop shipping since private label shipping lets you ship from the wholesaler with a return address and invoice customized to your ecommerce store.
Let’s look at a few other benefits of dropshipping. You don’t need a lot of money to start and it is super easy to start selling online. Since you are not the one sending the items directly to the customer, you do not need to invest heavily in inventory and can still offer thousands of different items.
To launch and grow an e–commerce business successfully, it takes a lot of work. Not having to worry about fulfilment is very convenient and frees up your time allowing you to focus more on marketing, customer service, and operations, three mobility with all the physical fulfillment issues handled.
You might be thinking that this model seems a little sketchy, but it’s not. Plenty of online stores and even major retailers use drop shipping as a way to offer a wider variety of products to the customers without having to deal with increased inventory hassles.
How can you find Dropshipping Suppliers?
In Europe many suppliers require you to open a wholesale account to prove that you are a trusted business. You have to be approved before you place your first order.
Similarly in the United States most suppliers will ask you for your business in numbers and a copy of your state sales-tax a resale certificate. Therefore, you may want to consider having your legal documents lined up before contacting suppliers so that you are prepared for what they may ask for.
This isn’t always the case so there’s no reason why you can’t start contacting drop shipping suppliers immediately. Now, if you already know what products you’d like to dropship, the easiest way to find qualified distributors is contacting the original manufacturer.
Not all distributors will be willing to drop ship but it will give you a list to follow up with. The market is unfortunately littered with scams and low-quality information. We recommend the paid directory Worldwide Brands as a reputable source to find drop shipping wholesalers if you do decide to invest in a directory. However it’s still very important to use caution.
Also, you will be connected directly with reputable drop shippers if you’re using Shopify by accessing a variety of apps in our App Store.
Find your Suppliers on Google
Here are a few tips you can use to find a wholesaler through Google:
- Search extensively
- Wholesalers and drop shippers don’t implement SEO and marketing strategy very often, and aren’t usually going to pop up on the first page of Google for a term like “handbag wholesaler”
- Use modifiers and different terms to narrow down search (ex: ‘distributor’, ‘reseller’, ‘bulk’, ‘warehouse’, and ‘supplier’)
- Don’t get scared by outdated looking websites
- Older websites do not necessarily mean low quality supplier and vice-versa
Dropshipping Challenges and Solutions
Despite the given advice to make the dropshipping startup easier, there are some challenges, just like all other e–commerce models. We will quickly go over these possible challenges.
Competition and low profits margins
Competition and weaker margins are most likely to occur. Products that can be dropshipped usually lead to very competitive pricing which can lower your profit margins, making it difficult to grow your business. However, in order to be successful, you should not get involved with the price competition.
Work with different suppliers to avoid inventory issues
Syncing the inventory is difficult and can lead to items out of stock. The best way to decrease the risk of having this problem is working with multiple suppliers whose product lines overlap, so the items will always be in stock. Relying on one supplier is very risky, therefore, having two or more suppliers automatically doubles the likelihood that you’ll have an item in stock and available to be shipped.
Rely on dropshipping automation services
Many knowledgeable suppliers offer a live product feed. You can use services such as Jetti to sync your website easily with the warehouse. It’s a technology that enables drop shipping automation to help drop shippers manage multi vendors, multi wholesalers and multi stores.
Eventually you are able to sell a customer an out of stock item instead of cancelling the order. You may want to offer an upgraded product or discount because you might not make much money on the order, but you will most likely build a loyal brand advocate.
Become familiar with products you can’t physically see
Since you never see the products that you sell, it can be difficult. However, in today’s world, you can easily become an expert in basically everything through information online.
You can become very familiar with the product line without having any physical contact with the item by selling products from manufacturers with detailed websites. You can just contact your manufacturer or supplier if you have a specific question about a product and they will give you the answer!
You can also buy you most popular items to get familiar with them and then resell them as used or refurbished often recouping most of your investment for third-party errors.
Customer satisfaction and third-party logistics
Getting a third party involved can lead to more fulfillment errors and logistical problems.
If your supplier doesn’t pay to fix the problems that occur, you need to spend the money to resolve the issues for your customers.
You should never blame your supplier for you coming across as incompetent and unprofessional. Similarly, if the supplier is not going to cover the cost and you are willing to send a cheap replacement part to a client, you are going to harm your reputation.
Another of the dropshipping costs is the expense of resolving logistical problems. If you accept it as a cost of doing business and remember to put your customer first, it shouldn’t be a long-term issue.
Start Your Dropshipping Business
Is drop shipping the path to overnight ecommerce success? Of course not. You will need to invest over time and create a quality website, marketing, and customer service just like any successful online store.
However, dropshipping does provide an easy way to get started and the ability to leverage other people’s capital without having to invest thousands of your own.
When managed correctly, it can form the foundation of your own successful online store!
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