What is dropshipping?
There are many different ways to earn a new income stream and reach your financial goals sooner. The dropshipping business model is one method that has exploded in popularity over the last few years. Dropshipping is a form of online retail business. You as the dropshipper can accept orders from customers but do not physically hold any inventory. You can act as a middleman to transfer orders within the supply chain straight to a manufacturer or retailer. This enables another avenue for supplies to promote goods to customers. I have outlined some of the pros and cons of starting your own dropshipping business below.
Pros
- Do not need to maintain a warehouse or shop front
- Low capital and start up costs with only a website required
- No need for employees or storing inventory
- Easily connect with thousands of suppliers with Oberlo
- Import products with AliExpress
- Less risk to test new products
- Learn about in demand products
- You can run the business from home or while travelling
- Easy to scale business
Cons
- You only earn a commission on the sale
- The commission can have low margins
- Goods returned impacts profits
- No control over delivery delays from supplier
- Customers may receive products not as advertised
What are the drawbacks of Dropshipping?
When starting a dropshipping business there are some factors to be aware of before diving straight in. Firstly, the dropshipper only earns a profit on the difference between an items retail price and its wholesale price. Furthermore, you will also need to reduce the profit by any selling and shipping costs incurred. Another consideration is the number of returned goods that can impact the profitability of the business. One advantage of being separated from the manufacturer and supplier is that you can offer Blind shipping and private labelling. This may be useful when wanting to keep anonymity as a dropshipper. Some dropshipper competitors drop their prices low in order to gain a greater share of the revenue.
What products can be sold dropshipping?
Targeting a specific audience through their niche hobbies can be a great strategy when choosing what products you would like to sell. Products such as yoga mats, gym towels, water bottles and massage guns can be aimed at those who exercise regularly. Pens, paper, files, envelopes and other stationery products that can be ordered in bulk can also offer high volume transactions and ongoing sales. Products such as face masks and toothbrushes that require to be replaced regularly throughout the year can be a great sell for reoccurring businesses. By selecting niche products, business partnerships and reoccurring sales you can build a strong market presence and scale your dropshipping business.
Dropshipping business tips
There are some strategies that can enhance the likelihood of success when dropshipping. Firstly, make sure that the price point is right to capture the most sales at the best price. Offering expensive items may require further support for the customer given the larger outlay. This could include one on one phone support or email correspondence to ensure the customer is up to date on the status of their delivery. Seeking items that have a minimum advertised price could ensure that it is not a race to the bottom pricing against your competitors. The other advantage is that it improves your overall profit margin increasing your bottom line.
Promoting your dropshipping business
Promoting your store through published articles, competitions, social media and online forums can be a great way to reach a new audience for minimal outlay. Build a brand presence and discover how easy it is to start your own website. When selling items in your store, consider including accessories to cross sell products and generate higher profit margins than some larger items. This is because customers are more price-sensitive to big purchases. Essential household items such as tools and health products are not as cyclical and therefore do not need to be updated as regularly on your website. Choose smaller sized items to sell can reduce the costs of delivery to the customer. By shipping smaller items you can save on the shipping costs and keep the customer happy.
Where to start dropshipping?
Start by researching your niche to get an idea as to the products that are already on the market. Read the following article to discover how to find an unsaturated dropshipping niche market. Once you have chosen your niche, an effective way to start dropshipping is through websites such as eBay or Amazon. These websites will allow you to deliver products without needing to keep them as inventory. Other providers allow you to set up a drop-shipping store through Square or Aliexpress. If you sign up with the Square Referral Link you will receive free processing for the next $1,000 of card sales. As this is an affiliate link, I would receive a small commission upon sign up. There is both risk and reward to starting your own business. By careful selection of the right products to sell, you can begin to build a brand and scale your business. To learn more about creating a passive income stream have a read of these Side Hustle Ideas to Boost your income.
