Stefan SchulzMany dropshipping guides do not provide enough high-level clarity and resources for beginners. Instead, they become more about “look at what I've done” and are often too focused on a specific product or tactic. In the below article, we hope to change that, so you can…
- Understand the fundamentals of dropshipping
- Discover easy-to-implement and cost-effective tools
- Start building your dropshipping business today to mitigate your financial risk
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What is Dropshipping?
You’ve probably heard a little buzz around the newest money-making trend on the internet, dropshipping. But what is it exactly? Dropshipping is a method of retail that has taken a big chunk of stress out of the equation. The biggest difference between standard retail and dropshipping, is the selling merchant (you) don’t own the inventory. This means you don’t have to worry about getting it all sold. You can sell almost anything, like t-shirts, online without inventory.
You simply work with wholesalers on orders for their products that you market to the public. The wholesaler fulfills those orders for you, all while you take a cut of the profit. I’d call it a really good middleman position.
Steve Chou is the best in the business when it comes to dropshipping.
We've taken and reviewed his course which covers every aspect of running a store you could imagine. If you are serious about launching your own store it's worth a look.
Why Is Dropshipping Popular?
Dropshipping is taking the internet by storm for a lot of reasons, mainly because it’s easy to get started. E-Commerce is on the rise, and that has opened the door for this niche in the market. It doesn’t require a lot of capital, and there is no inventory management, so it requires less work and less risk. This also makes it a lot easier to test and sell different products to the public. If one isn’t doing well, you simply switch to something else. People love the flexibility of the business. You can live just about anywhere in the world and you never have to leave your house to make money.
Potential Downsides To Dropshipping
While dropshipping is a relatively simple and convenient business, not everyone is successful. Problems arise that can cut into your profit such as inventory issues and supplier errors. Since you are the middleman of the transaction your margins are relatively low, so to really make a profit you have to have your business model down-pat. Managing the costs associated with shipping, promoting, and handling setbacks takes more time than you think.
Another hurdle is marketing the products successfully. In order to make your business profitable, marketing requires time-consuming research. Part of marketing is branding and customization, but with drop shipping, it can be difficult to tailor a product to a group of people when you don’t control the manufacturing process. But don’t let this all dissuade you. Below I will lay out how to navigate these potential setbacks.
How Much Does Dropshipping Cost to Start?
So you want to get started. What do you need, and how much money do you need to invest? Well technically, you can start for free if you are savvy with trials, but I would recommend investing about $500 before you start to make a profit. Here’s why:
To start your business the bare minimum things you will need are:
- Domain name (about $1/month)
- Hosting (about $4/month)
- Content Management System (free with WordPress)
- Dropshipping software ($15-$350/month)
- Total estimated cost/month – roughly $150
In addition to the monthly costs, you should budget in online marketing costs. If you think $500 is a lot, you can still go ahead and do free trials! Just remember, a typical investment for a retail shop costs tens of thousands, so I’d say a $500 investment upfront is less of a dent in your wallet for the return you hope to get. Just make sure you're ready to put in the sweat equity and have a hunger for bootstrapping.
Average Dropshipping Return On Investment (ROI)
There is technically no limit to what you can make, so it’s hard to pinpoint what to expect since there are so many variables involved. Shopify.com says after about a year in the business, you can make about $1,000-$2,000 a month, working 10-15 hours a week. With full-time hours you might be able to replace your $50,000 per year job with the income from your dropshipping business. Again, this is all subjective and it really depends on how well you market your product, manage your cash flow, and how much time you put in. For more insight, check out these successful dropshipping case studies: Marc Chapon, Irwin Dominguez and Aloysius Chay and Galvin Bay.
How to Start Dropshipping
- Open an e-commerce store with someone like Shopify, Big Commerce or WooCommerce. You can also set up your own site but this takes more time and potentially more money.
Need help setting up an E-Commerce store? Consider hiring an e-commerce developer on Fiverr.
- Find your niche! Finding a corner of the e-commerce world is perhaps the most important part. If you pick a category that you are passionate about, it is more likely you will tailor your business and marketing tactics to your audience much more effectively.
- Find your supplier. Sites like Dropship Direct, Alibaba, or AliExpress are very helpful.
- Spend time on marketing. This includes market research, competitor analysis, and building a strong marketing plan.
Dropshipping Tips
It takes a lot more than a few google searches to become successful in this business. You will have to get into the nitty-gritty of what it really takes to propel your e-commerce store above the rest.
Find Your Niche
Arguably the most important part of this business is finding your niche. Identify brands and topics you are passionate about. This makes you a better marketer for your customers! From here you can determine what products are evergreen and what products may just be trending. Sticking with something evergreen will make it easier on you in the long run. Sites like Oberlo, Trend Hunter and Google Trends have data that helps with this kind of market research.
Bonus Tip: Finding a dropshipping niche can be time-consuming. Hire Fiverr freelancers to help you find a profitable dropshipping niche!
Utilize Research Tools
Don’t waste a whole week on research when you can pay a few freelancers on Fiverr to do the job. Freelancers can often deliver more in-depth information, and in a quarter of the time, especially if you hire a few of them! Researchers bring a lot to the table and can help you keep your momentum in the beginning when you are just getting started. Market research is something that takes time and a lot of thought. It helps to have unbiased perspectives. It's important to pick a niche that you're passionate about, but there also should be a strong business case behind entering that market.
If not for anything else, bringing on researchers is worth it just for the pure legwork. Remember, your time is money. Depending on your situation, hiring a few freelancers for about $150 could go a long way. Fiverr freelancers like these experts offer support that you can’t get yourself without years of experience.
Marketing
So you didn’t go to school for marketing? You’re not an expert? No problem. As long as you’re willing to put the work in. I would recommend starting by identifying where your niche (or potential customer pool) hangs out on the internet and join them. Social media pages and community sites are great avenues to promote yourself when you're just getting started. As sales start to roll in, consider ramping up your efforts by running targeted ads on these platforms to drive prodcut engagement and traffic to your site.
Another simple way to market yourself is by showcasing positive customer reviews on your site. When starting out, it helps to make sure you ask your customers to leave a review if they had a good experience. Another good way to get the review train rolling is to reach out directly to friends and family and share your products with them. Allow your existing connections to help you build your brand!
There are more marketing tactics that will boost your business, but they might require some outside help. Investing in video ads for your site and social media, using retargeting techniques to get potential customers back to your site, and investing in digital PR can all be extremely helpful. Again, you can hire real freelance professionals to help you with this. You can find video experts, blog writers, and virtual assistants who can take your dropshipping website to the next level.
Bonus Tip: 60% of marketers say that inbound (SEO, blog content, etc) is their highest quality source of leads. Get blog content from Fiverr to get started!
Dropshipping Mistakes to Avoid
Sometimes what you don’t do is just as important as what you actually do. There are a few things that can set you back, like relying on your vendors too much. This can sink your profits if and when they fail, so make sure you have a backup and diversify your supply chain.
It’s also important not to complicate the shipping process for your customers. Create a simple and clear means to an end for them. This includes simplifying the ordering process on your site. Don't make order info too difficult to access. It should be clear for all potential customers to see.
Conclusion
If this all seems overwhelming, take a deep breath. It’s normal to feel a bit of pressure at the get-go. To become successful in this business, it does take a lot of work! But don’t worry. Putting in a good amount of effort at the start could really go a long way for you and your business. Utilizing drop shipping resources and freelancers will prop you up and set you up for endless possibilities.
Steve Chou is the best in the business when it comes to dropshipping.
We've taken and reviewed his course which covers every aspect of running a store you could imagine. If you are serious about launching your own store it's worth a look.
Geoff Cudd
