Before starting online sales, one of the first questions you need to answer is where you get the products to sell. This covers everything from outsourcing to inventory and inventory management, which can be a significant challenge for entrepreneurs.
After analyzing these points, it is time to deal with filling and sending orders. And don’t forget about all the other things, like marketing and customer service. After all, you need to have a well-structured strategy to build a successful business.
But … what if you could avoid much of that process? This is where this essential guide on how to start a dropshipping business comes in.
Understanding How Dropshipping Works
Dropshipping is a business model where the online seller partners with suppliers to meet their online demands directly. Instead of maintaining their product inventory, online sellers transfer customer orders and delivery information to the supplier, who sends the goods directly to the customer (and usually handles returns).
Online sellers do not show that there is a supplier who sends the product directly to the buyer. They usually include the name of the company, logo, and contact information on the packaging so that it looks like there is no such thing as a supplier.
Advantages and Disadvantages of Dropshipping
There are many advantages to dropshipping, especially if you are new to ecommerce, for example, the low cost and risk to start. But as your business expands and establishes itself, some disadvantages can arise, causing a little headache for those who run the entire company, for example, the low-profit margin and problems with product delivery (which can impair the customer’s shopping experience).
Here are the benefits and risks you need to consider when it comes to dropshipping in your online store.
Dropshipping is an effective way for you to sell your products online without spending so much. You can use dropshipping to start a business without your stock or use it to expand your business. Different dropshipping strategies are depending on the purpose of your business.
Below is why many people like dropshipping and how you can do it correctly.
1- Low Indirect Cost
Starting an online business involves taking a little financial risk. You need to separate money for packaging, inventory, equipment, and space to reconcile all of this. If sales are not planned, you will lose your initial investment and be left out of stock. So, if you are starting in ecommerce, dropshipping is a way to have a low cost.
Larger companies can benefit from saving money on inventory, equipment, and employees. Dropshipping businesses generally have the benefits of wholesale pricing (or at least close to it).
2- The ability to scale your business quickly
Managing your orders and dispatching them at the Post Office or carrier takes a long time. It may not seem like your business is new, and you only receive a few orders, but it becomes more challenging to manage when the business starts to grow.
If business is booming and you’re having trouble keeping up with demand, dropshipping may be your answer. You have more time to plan and manage your company’s growth. But without leaving aside the responsibilities that are up to you, such as ensuring delivery on time to the buyer.
If you are new to the online world, you need to hurry up to start working with marketing and sales. A dropshipper / dropshipping provider takes care of practical operations while you spend time on growth.
Bonus: with dropshipping, suppliers usually negotiate better shipping rates due to the too high volume of orders they send every day.
3- You can test and validate new products with little risk
Not sure if your products will be sold? Are you interested in expanding into a new market? Try new products with a dropshipping supplier first, instead of stocking the products and hoping your bet is a good one.
Large companies can experiment and expand their product line quickly, while startups can test initial product ideas. 😉
4- Free time to invest in marketing and customer service
Having a dropshipping store means you will no longer spend time managing inventory, printing labels, and ordering. This will allow you to spend more time marketing and promotion to attract more customers to your website. Also, you can focus more on customer service to ensure customer retention.
The benefits are many, but there are some reasons why not everyone uses the dropshipping model. For each benefit, when using dropshipping, there is another one that can make you think better about it.
1- More competitive market
As there are few requirements to sell through dropshipping, competition is high. Some segments are more competitive than others. So research what you are selling and who you want to sell to.
This may not be a problem for large companies, but startups that still develop their brand and their businesses may find it difficult to stand out from the crowd.
2- You are not in control of product quality
You trust another company to own the products and maintain your brand’s reputation, which can be a risk. If your supplier sells low-quality products, it reflects on you. Make sure to test the products and order samples for yourself. The quality must meet your standards.
You also don’t take orders as much as you would like. With ecommerce, any detail makes a difference. You can’t interact face-to-face with your customers, as in a physical store, so every opportunity to impress your customers counts, like an instruction guide or personalized packaging.
Tip: Some suppliers allow you to customize your packaging a little with your brand.
Small businesses may not want to spend money on these extras; it’s more important to get sales and build your store’s reputation. But a large brand can have the resources and the desire to go further with its brand. Which means dropshipping may not be your best bet.
3- You have a lower profit margin
2 transactions can happen in dropshipping:
- The customer pays for your product
- You pay your supplier for the said product
What remains for you is your profit. Therefore, you need to take your supplier’s base price into account when setting your retail prices. You will not leave with a 100% profit. Even if you can start with a wholesale price, your supplier will always have a commission.
You can get a lower profit per sale, but the advantage is that you still save money on overhead and startup costs.
4- Coordinating logistics can be difficult
If you are working with multiple suppliers, you can confuse you to handle each type of policy and type of shipping.
Dropshipping is also susceptible to human error. Sometimes your customers will receive your damaged order or even someone else’s order. Mistakes happen, so be prepared to deal with them and know how to communicate with your customers.
Is Dropshipping Worth It?
Like many aspects of ecommerce, dropshipping is not so simple. Assessing whether dropshipping works for your business depends a lot on your current needs and preferences.
If you are curious about selling in ecommerce but don’t want to take the risk of starting a business, dropshipping is a relatively inexpensive way to do this. And if you are a medium to large entrepreneur already and want to quickly and efficiently leverage your sales, this is an easy way to grow without exhausting your budget.
But if you can handle sales on your own or want to maintain greater control over your products, don’t do it yet.
How to Find the Right Supplier?
The possibilities of what you can sell through dropshipping are almost endless – clothing, jewelry, electronics, food. But do a thorough search first. Some dropshippers are great for art or clothing, others for electronics. Do the proper research to understand which is which.
Does a dropshipping supplier ensure your sales? Do they offer protection against fraud?
First, decide which products you want to sell. Look for suppliers that have these products at a reasonable cost and of good quality. And don’t forget to read the dropshipper’s policies:
- How do they deal with damaged returns or orders?
- How long does it take to fulfill an order?
- Are they reliable?
- Is customer support helpful and responsive?
The main thing you should do: ask for product samples or check the products in person. You need to see what you are selling to defend your brand and test quality before offering it to the public. This avoids future problems.
Below we recommend some dropshipping suppliers that you can contact and analyze if it is feasible or not to form a partnership like this:
- Shopify – https://en.shopify.com/dropshipping
- Alibaba – https://portuguese.alibaba.com/g/alibaba-brasil.html
- Aliexpress – https://en.aliexpress.com/
- Ebay – https://www.ebay.com/
- How do I start a dropshipping business?
Starting a dropshipping business can be intimidating. Here are the recommended steps for deciding which products to sell online with dropshipping:
- Do market research to identify a segment and potential products to sell.
- Find dropshipping suppliers.
- Finalize the products sold in your store
- Integrate your online store with dropshipping suppliers
- Enjoy and sell on multiple channels, such as marketplaces.
- Test new products and marketing initiatives.
- What are some excellent products to sell by doing dropshipping?
There are many types of products that you can do dropshipping. We suggest that you sell items that are the best possible to help distinguish your store. Below are some product ideas to sell:
- T-shirts are based on the latest fashion trend.
- Bags and bags for a specific cause.
- Humorous and themed mugs.
- Bookmarkers with motivational phrases.
- Baby bibs.
- Exclusive watches and jewelry.
- Is dropshipping profitable?
As we have noted above, you can see that, as with any venture, many variables contribute to a dropshipping business’s success and profitability.
Dropshipping is an efficient way to start using ecommerce, and its benefits apply to smaller and larger companies. By understanding how to do dropshipping, you can begin to a store with little financial risk, try new products, and quickly scale your business without wasting time for operations.
Although dropshipping takes care of operations and orders, running your store is not completely free. You will still have to take care of marketing, product development, and sales. Your business will not grow and prosper unless you focus on making it happen, and dropshipping will give you time to do it.