We cover realistic tips, along with pros and cons in the process of learning how to make money from dropshipping.
Perhaps one of your co-workers or friends mentioned the dropshipping company in a conversation. You may have seen a case study or a YouTube video about how a guy from country X sold product Y to get Z numbers in a month. How was it done? Dropshipping, of course! There are many myths, frauds and obvious lies about this type of business, so we are here to explain the truths behind how to make money from dropshipping and whether it is worth considering.
What exactly is Dropshipping?
Dropshipping is a form of online retailing, in which the retailer does not have to pay for products before selling them to customers.
Dropshipping serves as a type of third-party service method to keep prices extremely low for retailers, where suppliers or manufacturers are the ones who store, package and ship products, removing this burden from retailers.
In general, selling online and in physical stores usually requires a supplier, a retailer (the store from which customers buy) and a customer.
Online retailers need to find some kind of supplier to manufacture their proprietary products or purchase other items at wholesale cost. The retailer then needs to store, package and ship these products when a sale is made.
Over the years, third party fulfillment has emerged as a more economical way to store, package, and ship. Instead of the retailer paying for a warehouse or storing items in their homes, why not hand the inventory over to a separate company to handle it?
Several third-party shipping models are available. Many people enjoy Amazon’s compliance if they sell on Amazon. Other service brands include ShipBob , Red Deer Greeting and ShipMonk . In general, all offer great rates to fulfill orders.
Dropshipping is another form of third party service. In short, the supplier never sends the products to the retailer to decide whether to store the stock elsewhere. Instead, suppliers maintain inventory and ship orders as soon as they arrive.
How does a Dropshipping system usually work?
Dropshipping is one of the simplest forms of service, since minimal shipping is required, is inexpensive for online retailers, and you don’t have to spend a lot of time worrying about packaging or inventory management.
Dropshipping works like this:
- An online retailer finds a supplier willing to start dropshipping.
- The retailer lists the products available at his e-commerce store, spending most of his time and marketing money.
- When a customer places an order, the supplier receives a notification to fulfill that order.
- The supplier extracts the stock from storage, packages it and sends it directly to the customer.
The main basis of dropshipping is that the stock never reaches the hands of the real online retailer.
You, the retailer, choose products from the supplier’s inventory. You display the products on your website to sell. They take care of the rest.
Most dropshippers handle returns, but some dropshipping providers make things easier by accepting returns at their warehouses.
In general, the retailer does not have to worry about storage, packaging or shipping costs. Not to mention, there is no need to hire people to perform these tasks or spend your own time managing a large operation.
Obviously, there are pros and cons to dropshipping. In addition, as a new embodiment, the Internet is full of scams and fake case studies to get you hopes of making a lot of money.
Dropshipping does work for some companies. It is a fascinating e-commerce business model that reduces many of the costs of doing business. After all, the supplier already has the warehouse and packaging materials, why not send the products too?
The difference between Dropshipping and Affiliate Marketing
You might think that a dropshipping website is the same as affiliate marketing. For both, the products are not being managed by the site owner. Instead, the website owner is acting as an intermediary between the customer and the supplier.
However, there are some distinct differences:
- Dropshipping requires you to partner with a supplier or manufacturer.
- Affiliate marketing can be done by signing up for any retailer’s affiliate program.
Regarding the configuration:
- Dropshipping usually involves the retailer who runs and manages an online store. It works like a real ecommerce store.
- Affiliate marketers only need links to quality products that they can recommend. It is not necessary to have an online store with the functionality of the shopping cart. In fact, many affiliate marketers choose blogs instead of online stores.
Differences in costs:
- While dropshipping is inexpensive, it usually requires a complete online store, heavy marketing and research costs.
- Affiliate marketers don’t have a lot of costs other than starting a website. There is no fee to join an affiliate program. They can spend time with research and marketing, but much of the traffic generated is organic.
Control and processes:
- Dropshippers still have control over some of the processes. They are also taking risks and are seen as an essential part of the sales pipeline.
- Affiliate merchants are removed completely from the production process. They are referrers. They receive a commission as soon as a referral is made. After that, the current retailer takes over.
Returns and customer support:
- Dropshippers usually handle returns. It is also a good idea to have some kind of customer service through chat, email and even over the phone.
- Affiliate marketing never requires you to accept returns. You do not carry, own or touch products. You are referring customers to another company. There is also no need for customer service. It is quite common that the company to which you refer business does not even know that you exist.
Is dropshipping legal?
Yes. Dropshipping is by no means an obscure business practice. It is simply a new way of thinking about achievement. That’s why we want to teach you how to make money with dropshipping the right way, without anything obscure.
Are there suspicious things going on in the industry? Absolutely. It is similar to some of the repercussions we see with cryptocurrency. As knowledge is not being communicated properly, uninformed people are used.
Some examples of this include expensive training seminars and courses that promise wealth with dropshipping. You can find many YouTube videos and case studies on dropshipping successes. The only problem is that the numbers are usually made up or not entirely true.
So, yes, dropshipping is legal. It is possible to earn decent money if you work hard and find the right products and suppliers. But, as with all new ideas, people are taking advantage of the lack of knowledge in the industry.
My best advice is to avoid spending money on dropshipping courses. And don’t get too excited when a random blog post talks about a person who makes a lot of money from dropshipping.
People often forget that you can usually learn everything you need to know about a topic for free online. It may take a while, but this is good practice for researching products in the future.
Can you make money online with Dropshipping?
Can you make money selling cars or diamonds or books or tables or clothes? Yes for all.
You can make money selling just about anything in this world, it just depends on your dedication and approach.
With dropshipping, margins are low. Indirect costs are low. Shipping, packaging and storage costs are almost nothing. Marketing costs are higher. You may also find it difficult to sell anything if you don’t choose the right product.
This is a silly question, as there are no studies out there that tell us the exact percentage of dropshipping companies that survive or fail. Just as we don’t know the exact percentage of shoe companies that survive or fail.
The same can be said about profitability. Unless your business is public, we have no information on how much money you can make from something. All we know is that if you have a unique enough idea and spend a lot of effort supporting that idea, you may have a chance to earn good money.
Dropshipping is no different than starting any other business. There are opportunities. There are bad ideas. There are great ideas. Luck is also a heavy factor, although every successful entrepreneur tries so hard to affirm otherwise.
What are the costs?
When learning how to make money from dropshipping, it is prudent to find out the costs in advance. Otherwise, you may find that you cannot afford to go into business in the first place.
I’ll start with a general analysis of what the costs look like with dropshipping and look at the specific costs to get a better idea of what to expect.
- Building a website – Similar costs for other online businesses.
- Payment processing – Similar costs for other online businesses.
- Marketing – More expensive than normal.
- Origin – Normal or less expensive than normal.
- storage – Significantly less expensive than normal.
- Packaging – Significantly less expensive than normal.
- Shipping – Significantly less expensive than normal.
- Returns and refunds – Normal when handled correctly. However, returns and chargebacks can easily put a dropshipping operation out of business. The average dropshipper is likely to see higher rates of return as quality control is lower.
- Customer service – Normal.
Obviously, there are other costs for doing business, but those are the main ones.
Next, let’s consider the actual price ranges for our categories.
- Building a website – Sites vary dramatically in price, but a startup should spend about $ 30 a month on an online store. This can come in the form of a Shopify store , BigCommerce, WooCommerce or one of many other platforms. If you are doing a serious business, do not opt for a free website.
- Payment processing – The processing fees will be the same as always for dropshippers. Expect the standard of 2.9% + $ 0.30 per transaction .
- Marketing – Most dropshipping expenses involve marketing. From Facebook Ads to Google Ads, email marketing to loyalty programs, you need to draw attention to sell products. It’s hard to say, but somewhere around $ 100 to several thousand a month seems realistic. You can start with $ 10 or $ 20 a week on Facebook ads, but eventually marketing costs will increase.
- Origin – Sometimes you don’t have to pay anything to find a high quality dropshipper. Some of the major platforms charge monthly, from $ 30 to $ 100 a month.
- storage – Technically, you should spend $ 0 in this category, but the returns can ruin that.
- Packaging – The packaging is also expected to fluctuate around $ 0.
- Shipping – You will still have to pay for shipping, but many dropshipping platforms negotiate great rates.
- Returns and chargebacks – A return is difficult in a dropshipping operation. You end up returning the money and then the product usually goes back to your home, not to the supplier. So, you must either eat that cost or use the item to ship in the future. In addition, a credit card chargeback costs about $ 30 per chargeback, making it very important to avoid them.
- Customer service – I cannot estimate a cost for your customer service. However, don’t skimp on customer service offerings, as you really want to avoid chargebacks . You can recover from a returned item, but chargebacks will kill any dropshipping business.
Is dropshipping worth it?
Learning how to make money from dropshipping is one thing. But that will not make your business successful overnight.
Dropshipping’s online content is full of misinformation. Dropshipping tool offerings are often too expensive and product margins are absolutely terrible.
However, dropshipping has potential for some companies. It is possible to create a quality dropshipping store from scratch. Sometimes, it is also a better idea for existing companies to switch some of their products to the dropshipping model.
It is impossible to assume the exact recipe of a successful and unsuccessful dropshipping store, but we can at least gather some key elements.
The elements of a successful Dropshipping store
- A successful dropshipping store keeps costs extremely low, especially in the beginning. That means learning about the business and not spending money on expensive classes. Don’t spend too much on outsourcing, find economical e-commerce platforms and use it as customer support.
- Still, you don’t want to be cheap. The site must be beautiful. It is very easy for people to identify a dropshipping site when a professional did not create it. Also, don’t just go to AliExpress and find products with the cheapest costs. They are usually bad products and are likely to be returned. In addition, AliExpress is not so good for most dropshippers.
- Product descriptions and website content must be redefined and professionally written.
- A quality dropshipper researches the market regularly. Sign up to receive notifications about the best retail products. Make friends in e-commerce. Learn about the trends that are making money from other stores. Is there a new product that can sell well on your website?
- A successful dropshipping store partners with a fast and efficient supplier. That means a maximum of five days of shipping. You normally need a supplier in your country to make this happen.
- Products cannot be priced much higher than the competition.
- Big dropshippers usually talk to their suppliers to put their own store brand on or in the packaging.
- You must have several marketing tools set up, from social media to email marketing and rewards to an affiliate program.
- The best dropshippers have incredible customer support. They hire professionals.
- All top-tier dropshippers spend some money on samples to understand what they are selling.
The Elements of a Bad Dropshipping Store
- It looks like the site was made by an amateur, potentially straight from a Shopify theme without any customization. Tip: Free Shopify themes are generally unwanted when not customized by a professional developer.
- The product pages are filled with bad photos, descriptions and product names taken from the supplier. You must find someone to rewrite all copies of the manufacturer.
- Do not ask for samples. This is a quick way for poor product photos and poor quality control. Who knows what you are selling to people?
- You don’t have a heavy marketing budget. The best way to make money from dropshipping is to learn how to correctly target Google and Facebook ads. A lot of money is wasted by people who don’t know how to optimize online ads.
- Bad customer support. If you are a nice and patient person, you may be able to manage your own customer support. Unfortunately, if you are moody, indifferent or petty, it will only lead to returns and chargebacks, destroying your dropshipping business.
- Offer slow shipping. No one wants to wait more than a week to purchase your product, even if it is cheap.
- Going straight to AliExpress. AliExpress’s dropshipping model has its place, but most companies outside of China will find that the products are not good, shipping can take up to a month to deliver and quality control is the worst of the business. Oh yes, and you better know Chinese to speak to your supplier.
- You sell products that can be easily compared and found at a lower price on Google. Some products are easy to find for cheaper. Since your margins are already low with dropshipping, it is better to find a niche and unique products that are less “comparable”, such as decorations or art.