“Dropshipping! Drop shipping! Step forward! Find your ultimate freedom as a business owner – sit somewhere on the beach and get your whole business done with minimal effort!” – It would probably be a snake oil dealer if they ever preached dropping transport …However, preaching aside, there is something you need to know before you throw yourself on vacation and build your entire business around you.
In this complete guide, we will cover all the modules and outs of shipping as a business model that you should know if you consider it for you.
Chapter # 1: What is Shipping (definition of dropshipping)? (Overview)
Delivery to the ground sounds simple on the surface. This entails setting up an e-commerce store and reaching out to suppliers who take your orders and ship those orders to their customers. This is slightly different from Doing eCommerce.
In short, it is designed so that you don’t need to place inventory and you don’t need to worry about any transport costs or logistics.
Sounds great, right? Well, not so fast.
This is how it works:
Chapter # 2: pros and cons of dropshipping
The retail side of e-commerce is worth more than $ 220 billion, and 370 is expected to grow to $ 2017 billion. Much of that pie goes to drop shippers.Retail ecommerce marketMarket sizein $0100,000,000,000200,000,000,000300,000,000,000400,000,000,00020142017
|Year||Market size in $|
|Good earning potential, possibly low barrier to entry.||You are transferring a large chunk of your customer satisfaction. Someone else is building and shipping the product. This is just a huge part of the overall customer experience. If something goes wrong with your supplier, the customer will still only blame you. In general, you lose control of quality as you cannot see or use the product until it reaches the customer.|
|Regardless of location (for the most part). For small companies with one person, most of the time you need a laptop and an internet connection.||You are more likely to meet imitators – people trying to do exactly what you do.|
|Less capital required for initial investment. With shipping, you don’t manufacture anything yourself, so you don’t need to invest in inventory, materials, tools, or anything else related to creating a product.||Refunds can be tough. Based on the agreement that you have with your suppliers, customers can request products to be returned to you, and then you must take care of the return / complaint process yourself. During this time, keeping the client happy can be difficult.|
|You only buy from your suppliers after you’ve already made your money.||You lose control over the quality / delivery speed. In a business where you do everything from A to Z, you also control (almost) everything. This includes everything related to delivery. With a drop shipping business, by definition, the shipping portion is out of your control.|
|It’s easier to scale your business. Quite simply, as a shipping business, increased sales are not as strongly associated with higher product / operating costs. You have suppliers doing the hard work in this department … with one exception – more than what is in the relevant cell. “||As you grow, more sales means more customer support. This is an area that you cannot avoid. Even if you do work with your suppliers, customer service is still yours. It’s just math. While selling 100 products and 10 products is not more costly to you, supporting 100 customers and 10 customers.|
|Less overhead. Ibid:no storage required as you don’t carry any food with you,no need to collect anything,no need to track your inventory,no need to hire more staff to deal with more products or sales.|
|Easier to turn or change directions. If your current shipping business model isn’t doing well, it’s easier to change directions and start offering something else. Compare this to the traditional model … where you will need to invest in new tools, materials, processes and more.|
Chapter # 3: Delivery for you?
Did you know that according to E-DSS.org, about 27% of online retailers have switched to shipping as their primary method of order fulfillment.Retailers vs drop shippingAre drop shippingAren’t27%73%
|Are drop shipping||27|
The first honest answer you really need is that shipping is what you should really be, and not much if that’s what you can do. You have to consider all the pros and cons, and investigate if the model fits your vision, purpose, and actual market / niche.
To help you with this, let’s start with the most common misconception in the shipping land … and perhaps also the main reason for the failure of many shipping companies.
What drop shipping is not
Let’s set one straight. Contrary to what this fictional snake oil salesman told you, the drop in shipping is not due to him doing nothing while sitting on the beach. Far from it!
“Drop shipping = easy money” is a very wrong way of thinking.
Think of it this way:Drop shipping is mainly about outsourcing the most inconvenient parts of production and / or selling a product.
In a scenario like this, you let the professionals take care of what you are either not good at, or what you cannot do on your own economically.
To give an example, and it will be a recurring example throughout this tutorial as it is easy to understand – if you want to sell designer tees but don’t know how to sew, you have two options:
- (a) Learn how to sew or hire someone who can.
- (b) Outsourcing the manufacturing process entirely to the person who mastered it and taking care of other aspects of the company.
In other words, the business is still yours — you are in charge of everything else. The only difference is that instead of handling everything internally, you outsource product development/assembly and order fulfilment.
Dropshipping seems like a terrific concept when you look at it, but to truly take advantage of it, you have to find your place in the market and pick a niche that you can serve well.
And it may not be as easy as you might imagine.
Action tip # 2:
What do you think might be your main struggle when it comes to shipping problems? Write down your main problems 5. Having them on paper will help you decide if they are really serious enough for you not to try the load-carrying model in your business.
Chapter # 4: choosing your niche, market and finding suppliers
Another misconception about cargo delivery is that you can start in just about any niche thought and you can make it profitable regardless of your previous experience.
This is not true.
Keep in mind that no matter which market you join, you will face several competitors – competitors who are much more experienced than you, who may have been in this market for many years, and who probably have a much better understanding of customers and their needs.
Just because your upfront costs are low – because of the shipping pattern – doesn’t mean you can compete effectively with them.
This is why you should choose a niche that you know and understand. This will give you an additional edge over competitors that may not have invested as much research or personal experience.
And don’t get me wrong, you don’t necessarily need a niche seller experience, but the following will help a lot:
- you are a consumer in this niche – you have bought a number of products in this niche, and you understand what is good/bad about them and how to make things better;
- you have professional or academic experience – you have received an education in that specific field, which allows you to approach it from a more professional level;
- you’ve already researched this niche – even if it was just your friends and family, but the point is that you have an immediate understanding of the target audience;
- you have witnessed other businesses in the niche going up and down, you know the mistakes + how to avoid them;
Having some niche understanding will not only help you better compete and serve your customers, but it’s also especially important to deal with your suppliers who ship products directly to your customers.
Without any knowledge of the niche, you won’t be able to pick up anything suspicious about product quality, process, price, or anything related (read: you will fail).
How to find suppliers/release shippers
This applies to most industries, and even more so to shipping: you find that quality suppliers are critical to your success.
Let me say that again … you find that quality suppliers are critical to your success.
How about we step back a little. If you work in the traditional model – where you keep inventory – and you do something, then at least you have the opportunity to fix the situation and do your best for your clients. After all, you are in control of the entire process.
But in the drop-shipping model, if the orders delivered to your customers are lower, then it’s back to the drawing board for you. Since so much depends on your suppliers, you can’t just fix what they did wrong. The only thing you can do is to find new suppliers. However, this is not always convenient on-site, and your brand’s reputation can suffer at the same time.
This is why working with the right suppliers is so important.
So how to find these suppliers:
- Think Local
Thinking locally is my first recommendation because it is the most manageable solution, and in most cases, it makes it easier to contact the supplier.
The specialized drop trading companies found online are great for finding suppliers with more competitive prices or finding niche products that may not exist in your area – and we’ll talk about them in just a minute. Still, they may not be the best choice for your specific market.
Sometimes, or rather often, you can find local vendors willing to reject their customers if you talk to them and offer them a lot.
For example, there is a home bakery in my local area that has transitioned to a drip delivery supplier over the years. They started by baking lovely cakes and selling them in bulk to local cafes, where they were sold in pieces (standard model).
But then, these cafes noticed that customers loved these cakes so much that they started asking how they could get them whole. So, the cafes began to collect orders from customers and send them to the bakery.
In this model, cafes receive an order, receive payment from a customer, then buy a cake from the bakery, and then the bakery delivers that cake to the customer’s doorstep. Classic drop shipping.
This is just one example and may not apply to your particular situation, but I hope you see that the possibilities are truly endless for local businesses.
The easiest way to get started is to think about how you can negotiate with a local supplier who will ultimately allow them to sell their products to a broader audience through your online store.
2.Try online providers
Another place to look out for when you’ve run out of local possibilities is the various online providers.
The good news here is that there are indeed more of them than can be shaken. A global leader, Aliexpress, offers the largest catalogues of Chinese suppliers, while platforms like Salehoo or Oberlo not only connect you with suppliers but also provide added value.
Salehoo has excellent training resources, a supportive forum, and market research tools to help you assess profitability and look for trends. Oberlo, on the other hand, is a Shopify integrated dropshipping platform.
By linking to you can find some of our favourite shipping companies (suppliers and software) that operate online. But don’t treat it like the gospel, take the initiative and do your research. However, this is a good start.
What to look for when choosing suppliers
Regardless of where you look for suppliers, you should also lookout for some red flags that can indicate that the supplier is not that good:
- Browse online reviews and sites like Trustpilot, or even Google. Watch out for any negative reviews or opinions about your suppliers.
- Be careful with current payments. Vendors who charge recurring fees just for being able to work with them may be fraudulent.
- Do your math when dealing with minimum order sizes. This is what you might stumble upon larger suppliers.
Action tip # 3:
Create two lists:
- The first is for local businesses that could potentially give up the ship for you. You don’t need many entries on this list. Even 1-3 is enough.
- The second list is for online senders who have the kinds of products you need. Having 3-5 records would be cool.
Go through each list and plan how you are going to contact these companies.
Okay, with suppliers, it’s time to think about the products you can offer. You probably already have some ideas.. this is where the next stage comes into play. Hold on to your seat:
Chapter # 5: Don’t Think About Products – Think How You Can Add Value
I’m sorry to be the bearer of bad news. Just thinking that you can be a simple average person won’t work.
If you don’t add value, you won’t succeed.
“Wait Wait Is not that the whole shipping thing that needs to be connected with the fact that someone else carried out the order after I have collected the payment there is no room to add any more value, right!?!?!” – you ask.
Well, there is a lot of room.
Here are 4 possible approaches:
Method # 1: “Teenage Method”
Among the many things that teens want – for all I know – to either be different from their peers or at least be perceived as different (in a positive way, though).
Translate that to drop shipping … you have to position the specific products you sell in some way from everyone else.
The ultimate goal is the ability to stand out and be unique, even if at some point, a member starts using the same shipper.
If you don’t add values somehow, it won’t be possible.
Let’s take Teespring as an example.
(Some would argue that Teespring is an affiliate business where you promote other people’s products – but the line between affiliate and POS can be very thin, so let’s jump to it for this guide.)
Teespring is where people go when they want to buy cool T-shirts. But what’s interesting is that the market is community-driven. Everyone can come and design their T-shirts and put them up for sale. If someone buys, Teespring takes care of the order.
If you want to sell with them, what you bring to the stage is your unique designs. These unique designs are your added value. This is what makes you unique, and this is what makes one seller different from another, even if they both use Teespring.
The key point here is that your product will be different and / or customizable in some way. Many packaging suppliers allow this sort of thing.
Also, it would help if you thought about profit. In general, the more customizations you put into the product, the more your contribution – the higher your margin will be. You were even sticking to the basic t-shirt. White hooded tees don’t give you a lot of brim space, but tees with original designs can go for 3x-10x the asking price of an empty tee.
Method # 2: “Angle Grinding Method”
Make your suggestions angle-oriented, not bare-driven.
Let me use another example to illustrate what I mean.
And that would be a very dull example: selling auto insurance.
Now, any insurance is technically a virtual product, as the customer doesn’t have a product that they can store. They get a Promise. However, it’s still a product in its own right.
So, if you are selling auto insurance with a simple product, you are probably going to sell your offers like everyone else … “cheap, safe, reliable, no fines, etc.” You are focusing on the product.
Another way is to take this generic product and try to find an angle that you can use when marketing it.
For example, you can research all of the insurance plans, analyze them deeply, and compile a list of those that are best suited for performance-tuned cars and car modification enthusiasts. The plans offered by your business will only cater to that particular customer – a customer who enjoys driving fast and modifying their vehicle.
By giving them tailor-made plans, you fit at an angle in a niche. You sell something that looks like your competition, but you’ve taken your time to find out what suits your target customer.
You can do something like this in most niches.
Method # 3: “Cleanex Method”
The third method is to clear up the confusion and make the product clearer overall.
Many vendors sell products that do not have a clearly defined target or target market. Other products have obscure user manuals or even obscure selling materials, so customers don’t know what to do with them, or even why they should buy.
You can do whatever is clear.
- You can sell a product through your own written descriptions and promotional materials.
- Create a “Getting Started Guide” for the product.
- Create the Best Customization package where you tell the customer what the best way to customize the product (for example, using technology tools, machinery, or even vehicles) is.
- Offer additional support and customer service packages.
Method # 4: “Additional offer.”
This applies to those already in the ecommerce store looking for ways to expand their inventory.
You can treat shipping as an excellent way to complement your current offering.
A good start would be to research the products your customers are most likely to buy and try to find truck suppliers who can provide complementary products (products that suit your needs).
This way, you can add new products to your portfolio and at the same time, not create them yourself.
Example: Selling custom exercise clothing? How about adding fitness gear.
Action Tip # 4:
Which of the above methods seems most likely to you?
Order them is most likely the least likely.
Take note # 1 and discuss specific ideas for how to bring it to life. Where to begin? How do you add value specifically? What will you customize? Etc.
Final thoughts on products
The product is the essential element and differentiator. Without adequate food, you won’t get very far.
But the message I want to leave you with is not expecting you to hit the jackpot first. Any business, including shipping, involves a lot of trial and error.
So when you have an idea for a specific product, go and follow through. Could you put it on a sentence? See how the market is reacting. Then it will improve. Then repeat.
Chapter # 6: creating a mailing website
Okay, so all of the above was still what I would call preparation on your way to starting a shipping business. What is happening now is the technical stuff associated with the site.
First of all, you need a website for this to work. This website will serve you in several ways:
- This is where your customers see the products and can order them.
- This is where you collect payments from customers.
- This is where you manage your orders.
- Here you can set up a conveyor so that you can then send those orders to your suppliers.
- This is where your suppliers can contact you and inform you that the order has been completed.
In the proposal, the website manages the entire shipping business.
Now, before I let you go, building a quality website for this purpose is no longer difficult, especially in 2016.
You don’t need to hire a designer or other “web professional”. You can do most of the work yourself.
Shopify, for example, has a great shipping guide, and they made it clear that they have built a system that caters to those who drop products off the ship. This means you can sign up for Shopify – a site-hosted service – and they will help you build and run your dropshipping site from A to Z with the minimal technical hassle.