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In this blog post, I will be explaining what dropshipping is, and how it is one of the best business models for beginners, which involves a low-risk level with a high potential of income.
Dropshipping is a business partnership but without contracts between parties. In this business, you don’t need to sell your own product, you are basically selling someone’s product. A Dropshipper is not a specific role. Manufacturers, suppliers, and merchants can all technically be dropshippers.
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First, let’s see the huge potential in e-commerce nowadays, and how can you get benefit to make a living out of this field and industry.
New studies projected that worldwide retail e-commerce sales will reach a new high by 2021. Ecommerce businesses should anticipate a 265% growth rate, from $1.3 trillion in 2014 to $4.9 trillion in 2021. This shows a future of steady upward trend with no signs of decline.
What is Dropshipping?
Dropshipping is a type of retail fulfillment method. Instead of a store stocking products, it purchases the products from a third party supplier like (Salehoo). The products are then shipped directly to the consumer. (We will explain the process in a few)
Dropshipping is a great business model for entrepreneurs because it doesn’t demand as much as the traditional retail model. You don’t have to open a brick-and-mortar store, pay overhead, and stock products.
Instead, you open an online storefront and buy wholesale from suppliers who already have products and warehouse space.
You don’t have to store or deliver anything physical at all. You simply make sales and the rest of the process (mainly fulfillment and distribution) is handled by a supplier.
For the store, this is a mostly hands-off process. The merchant doesn’t have to order inventory or fulfill the orders in any way. Instead, the third party supplier (Salehoo) takes care of the product itself.
Check out our full Salehoo review to learn more about this product research tool. (Open in a new tab)
Let’s have a look at what happens behind the scenes, and how does this business model work.
Understanding the supply chain is a key element here, you will see this term a lot.
You, the retailer, are just one piece of the puzzle. A successful dropshipping operation relies on multiple parties all working together in sync. The supply chain is exactly that: the coordination of the manufacturer, supplier, and retailer.
The supply chain can be broken down into 3 basic steps:
1. The manufacturer creates the products and sells them in bulk to suppliers and wholesalers.
Let’s say Manufacturer A makes water bottles. After the bottles roll off the production line, they’re sold in bulk to suppliers and wholesalers, who turn around and resell the bottles to retailers.
2. Suppliers and wholesalers sell the products to retailers.
A retailer like yourself searches out a supplier for a specific type of product. The retailer and supplier then enter into an agreement to work together.
A Quick Note: While you can buy directly from product manufacturers, it’s often much easier to purchase from suppliers instead. Most manufacturers have minimum purchase requirements that can be rather high, and you’d also have to store, stock and ship the products.
So it might seem simpler to buy straight from the manufacturer, but you’ll benefit most from buying from suppliers (and dealing with the slight markup).
Suppliers are also convenient because many of them specialize in a certain niche, so you can easily find the kind of products you need. This also means you can get started selling super quickly.
3. Retailers sell products to consumers.
Suppliers and wholesalers do not sell directly to the public; that’s the retailer’s job. The retailer is the final step between the product and the consumer.
Retailers provide online storefronts from which consumers purchase products. After the product has already gotten marked up by the wholesaler, the retailer marks it up yet again to arrive at the final price.
By ‘mark-up’, we’re referring to setting a price that covers the cost price of the item and brings you a profit.
That’s it! That’s the entire supply chain from start to finish. It’s a straightforward but crucial concept in business. You might have noticed that I didn’t refer to any specific party as a dropshipper. That’s because ‘dropshipper’ is not a specific role.
Dropshipping is simply the action of shipping products for someone else. Manufacturers, suppliers, and merchants can all technically be dropshippers.
Important: The merchant is mainly responsible for gaining customers and processing orders in dropshipping, meaning you’ll effectively be a middleman. Despite this, you’ll reap the lion’s share of the profit by marking up the items you sell. It’s a simple business model and one that can be very rewarding.
What Are The Customer Experiences
You’ve bought products online hundreds of times before, but you’ve probably never thought about the experience. It’s second nature for consumers. As a customer, you don’t need to think about it, but as a retailer, you absolutely should.
Retailers can learn a lot by thinking about the ideal customer experience of ordering from a retailer. This may seem obvious, but if there are any snags in the customer experience, it could spell trouble for you as a retailer. It’s important to know what your buyers expect.
For the sake of explanation, let’s pretend you have a business called Fancy Water Bottles, a site called FancyWaterBottles.com, and a wholesaler called Water Bottles Worldwide. Here’s what the ordering process would look like from the customer’s perspective:
- Customer A places an order for a water bottle on FancyWaterBottles.com and immediately receives an email confirmation of the purchase.
- After a few hours to a couple of days, Customer A receives a notification that their order has shipped. The notification includes tracking information so Customer A knows exactly where their package is while en route.
- Customer A receives the water bottle.
It’s the same process you’ve gone through each time you’ve purchased anything online. This seems basic, but there are two important aspects of this experience.
First, it’s simple. All the customer has to do is order the product and pay for it. Everything else, like an order confirmation email and tracking information, is handed to them on a silver platter.
And that brings me to my second point: convenience. The buying experience is extremely convenient in every way. An online purchase takes just minutes to make, and customers can browse any retailer’s site at their leisure.
And if all goes well, the customer won’t even have to interact with anyone. It takes the minimum amount of effort to achieve the desired result of getting a product.
This experience is a lot like buying a water bottle at a big box store and using the self-checkout. It’s a no-fuss process that doesn’t present any problems. This is a big reason why people buy online in the first place, so your storefront has to give your customers that same level of convenience.
Last but not least, the customer should never notice that any other parties besides the retailer are involved. Think about it. When you buy something online, you think, “I bought a water bottle from Fancy Water Bottles.” You don’t consider where the retailer got the product or who might be shipping your order.
To make the process seamless, the customer shouldn’t be aware of all the stops their product makes. The package they receive will have your retail name on it, so as far as the customer is concerned, you fulfilled and shipped the order.
This is how the dropshipping process should ideally look from the customer’s point of view. Now let’s break down what happens on the other end.
What Happens Behind The Scenes
That’s what the customer sees, but what is dropshipping like behind the scenes?. Here’s an overview of the process:
1. Customer A places an order for a water bottle on FancyWaterBottles.com and receives an email confirmation of the process. Let’s say the total came to $14.95.
Fancy Water Bottles receives the same email confirmation as well as Customer A’s payment. This is usually made possible by automated software that sends out the confirmation to both buyer and seller.
2. Fancy Water Bottles sends the order to Water Bottles Worldwide. Typically, a sales representative from Water Bottles Worldwide will receive and process the order. The retailer will then be charged for the purchase.
For this example, let’s say Water Bottles Worldwide charges $12.95 for each water bottle. The retailer will pay that amount, and the difference is the profit the retailer will make. In my example, the retailer will net a profit of $2.00.
3. Water Bottles Worldwide packs up the order.
Although the wholesaler ships the product, the package will be addressed from Fancy Water Bottles, and the Fancy Water Bottles name will appear on the invoice and packing slip. (This is so the customer will recognize the retailer’s name on the package.)
The wholesaler then sends an invoice and tracking information to the retailer.
4. The retailer sends along with the shipping information to the customer. This finalizes the retailer’s role in the order process.
5. The customer receives the package and enjoys the water bottle.
That’s the supply chain in action. You can see how the retailer, wholesaler, and manufacturer all have to work together flawlessly. When done right, it’s a smooth process that results in minimal work for everyone involved.
One point I want to stress is that you, the retailer, are responsible only for two steps: sending orders to the supplier and shipment information to the consumer.
Sometimes, you’ll have to be responsible for other things like customer support, but if everything goes smoothly, those two steps are all you have to do.
All of this sounds like a complicated puzzle, but once you learn how to dropship, it’s a smooth process for everyone involved. You, the dropshipping merchant, can do everything remotely and never even touch a single product!
Let me reiterate that you don’t need any business experience to open a dropshipping storefront. It certainly helps, but it’s not necessary. Many budding entrepreneurs don’t ever chase their dreams because they believe they need an MBA or years’ worth of experience.
This is totally not the case. One of the benefits of dropshipping is that you can learn how to dropship as you go along.
Better yet, there are numerous resources that make dropshipping easier than ever before. For example, if you continue scrolling down, a free useful course will pop up somewhere on your screen to provide you with some great advice on getting started.
You can have absolutely zero business experience and still easily make a profit. You’ll need to learn the ropes along the way, and it will be challenging at times, but I believe it’s more than worth it.
Like I mentioned earlier, you don’t need a lot of resources to start dropshipping. Now that you understand what dropshipping is, read on to find out what you need to get started.
Benefits Of Dropshipping
Dropshipping is easy to start. You don’t need to be a business guru to get started. In fact, you don’t even need any prior business experience! If you take some time to learn the basics, you can get started quickly and learn the rest as you go along.
Dropshipping is so easy because it requires very little from you. You don’t need a warehouse to store products or a team to help you out. You don’t have to worry about stocking or shipping either.
You don’t even have to spend a certain amount of time every day at your store. It’s surprisingly hands-off, especially once you get going.
All of this means that you can start your business today. You don’t need to spend months getting everything ready. You can start getting everything up and running within a matter of hours.
You will need some foundational knowledge with the right tools and resources, and that’s why we created the free guide. By the time you’ve finished it, you’ll be equipped with the knowledge you need to jumpstart your own dropshipping business.
Dropshipping is easy to grow. As you scale up, your business model doesn’t have to change very much at all. You’ll have to put more work into sales and marketing as you grow, but your day-to-day will stay more or less the same.
One of the benefits of dropshipping is that the costs don’t skyrocket when you scale. Because of this, it’s easy to keep growing at a pretty fast rate. You don’t have to hire a huge team either. Unless you want to assemble a small team at some point, you can do almost everything all by yourself.
Dropshipping doesn’t demand a lot of capital. Because starting a dropshipping business requires so little, you can get started with minimal funds. You can build an entire business right from your laptop, and you don’t need to make any high-level investments. Even as your business grows, your costs will be fairly low – especially when compared to traditional business expenses.
Dropshipping is flexible. This is one of its biggest benefits. You get to be your own boss and set your own rules. It’s by far one of the most flexible careers that anyone can pursue.
You can work from home with little more than a laptop, and you can work at the times that are most convenient for you. This is ideal for entrepreneurs who want a business that works for them. You won’t have to bend over backward to get things done. Instead, you set your own pace.
Dropshipping is also flexible in that it gives you a lot of room to make decisions that work for you. You can easily list new products whenever you want, and you can adjust your strategies on the fly. If you’re going on vacation, you can automate everything to run while you’re away. You get the idea – the possibilities are limitless.
Dropshipping is easy to manage. Since it doesn’t require you to make too many commitments, you can manage everything with little hassle. As I said, you can do everything all by yourself if you want to. Once you’ve found suppliers and gotten everything set up, you’re mostly responsible just for your online storefront.
Is Dropshipping For You?
As mentioned before, there are both pros and cons of dropshipping, meaning it isn’t for everyone. This is especially the case for people who are looking for a get-rich-quick scheme. Dropshipping won’t do that for you, and if you’re approaching it that way, it’s probably not the best choice for you.
With that being said, nearly anyone can build a dropshipping business.
Still, you might have one of these fears:
- “I don’t know if I have enough time to start a business.”
- “I don’t want to risk getting fired from my day job.”
- “I don’t want to work so hard on dropshipping that I underperform at my 9-to-5.”
The good news is that you can put as much or as little into dropshipping as you want to. Here are two common approaches.
Want to learn how to start selling online, anywhere, with the least cost possible? (Open my other article in a new tab)
Dropshipping As A Side Hustle
What is dropshipping’s main appeal? Because it’s flexible and it doesn’t demand much, it’s the ideal side job. Many entrepreneurs choose to do dropshipping on the side while they have a main job that provides a steady income.
You don’t have to sacrifice your day job to pursue your dreams of becoming an entrepreneur.
The number one worry here is that your employer will prevent you from having a side hustle, but believe it or not, many companies are fine with it.
You’ll want to make sure you’re in the clear – ask about your company’s policy on side businesses and review any non-compete agreements you’ve signed. You also definitely want to ensure there’s no conflict of interest. But if everything checks out, then you’re good to go.
You don’t need to dedicate too much time and energy to dropshipping, meaning you’ll likely be able to take it on without a hitch. Worried that your side hustle will make you underperform? You don’t have to be! You can spend only a couple of hours on your business every day and still succeed.
However, it’s important to know your limits. If you regularly work overtime at your day job and struggle to find time for important daily responsibilities, you might not be able to give a dropshipping business the attention it needs.
Dropshipping doesn’t require a lot, but you do need to put serious work into it and carve out time in your day for it.
In most cases, it just takes a little bit of time management and scheduling. Plenty of dropshipping retailers manage their main and side jobs easily. You don’t need to sleep 3 hours a night or skip meals to make it work. You’ll need to figure out a schedule that works for you and stick to it religiously.
Dropshipping As A Full-Time Ecommerce Business
One of the benefits of dropshipping is flexibility. You can make your business as big or as small as you want it to be. Many dropshippers choose to do it on the side, but it’s also a viable career path. If you want to be a full-time dropshipping retailer, you can be!
It’s easy to scale up your business with dropshipping, meaning you can grow your business pretty quickly while keeping costs down. Once you’ve reached customers and gotten enough sales, you can move from dropshipping part-time to full-time. Best of all, you can make this happen at whatever pace you want to.
Obviously, this is going to take more work, but the payoff is well worth it. Once you figure out how to dropship effectively, you won’t have to worry about unsteady revenue. A well-established dropshipping eCommerce business operates like clockwork, and it can even feel like you’re generating passive income.
And since it doesn’t take up a lot of time, you could even take on a side hustle while still being a full-time dropshipping retailer!
The sky’s the limit. Maybe you’re rolling your eyes right now at the thought of becoming a full-time dropshipper, but there are thousands of success stories from entrepreneurs who started out right where you are today.
It doesn’t take a degree in business or millions in capital to make a living from it.
Bonus: If This is a business model you like to be involved into, you need to start reading and investing in yourself, here is one of the best free online courses, how to start a dropshipping business from home, as it will teach you how to launch your own store in a matter of hours. (Will popup somewhere on your screen anytime)
Now that you understand why it’s best to create an eCommerce store with Shopify, let’s talk about the steps you need to take to start dropshipping.
How To Setup A Store
Starting a dropshipping business is incredibly simple. Thanks to platforms like Shopify, you only need a couple of days to set up a store then you can start selling to customers all over the world.
Why You Should Start Dropshipping?
In this smartphone era, we have endless opportunities at our fingertips, because traditional retail is dying and this could be the biggest reason why you should start and take advantage of that. Want proof? Sure we’ve got you covered from a real example from business insider.
Those are just some of the retails stores that closed shops in 2019.
This is even getting worse day by day, and Netflix can be a great example, they make billions a year as a streaming platform, which caused the end of the journey for video stores.
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Dropshipping For Beginners (How It Works)
With dropshipping, you can run a store without stocking a physical inventory, you simply find a supplier and import his products into your store through apps like Oberlo, when you receive an order, this order is automatically sent to the supplier so they can process and fulfill it, and they will handle the packaging, shipping and delivering the item to the customer.
To make it simpler let’s divide them into bullet points:
- First, a visitor lands on your store, orders a product, gives you money.
- You forward his order and his information to the supplier, and you pay for the item’s wholesale price.
- The supplier will handle the heavy lifting, packaging, shipping and can also put your branding on it as if it was shipped from your store.
- This leaves you with a profit margin, (The difference between the sale price and the wholesale price).
Do you have a long term plan? Don’t you have a lot of capital? If your answers are YES, then dropshipping can be a very lucrative business to pursue.
Why Is Shopify Used For Dropshipping?
Shopify is the biggest e-commerce platform in the world, so when it comes to dropshipping, they are the leaders in this industry.
One of the main reasons I recommend Shopify is that they are supportive of dropshipping, they provide a variety of integrations to make the process easier and smoother.
It’s very easy to set up a store through a drag and drop builder, you don’t need to do any coding, they do the hard work for you, you simply edit the storefront, adding products, editing the navigations, buttons, pages and you are good to go.
In addition, Shopify has the capabilities to handle your sales, marketing, and payments.
It’s also important to mention that beyond all of this, Shopify may seem complicated, but it’s actually very easy to use, they provide a range of features and tools, besides several guides on how to make the most of its solution.
Learn how to set up a Shopify store in 7 simple steps, and start selling online, anywhere (Open in a new tab)!
How To Start A Dropshipping Store
After you’ve found your products to sell, it’s easy now to build a Shopify store with these steps I usually take to build a store from scratch:
After you’ve determined the niche of your products, it’s important to pick up a name for your business, because it’s one of the first required things on the platform.
After that, head over to Shopify, and you will be asked to provide some information, like address, email, store name, etc…
When done with this, Shopify will take you to the store’s backend. With that being said, you are done with the first step towards having a successful online store.
Now you need to understand the Shopify admin panel.
There are several clickable tabs as you can see, here’s what they offer:
Home: Where you can see what’s happening on your Shopify store.
Order: The place where your first order shows up (You’ll get in love when you receive your first order)
Product: Here you can manage your items, adding products, collections, setting up a gift card, and more.
Customers: This area will give you access to customer’s information, personal details, their sales volume previous orders and more.
Analytics: Here where the reports of sales performance are made, you can also have a live view for all visitors on your store, by having the ability to know where they are located on the world map.
Apps: This is where you can manage and add apps that can extend the functionality of your store.
Online-store: The place where you can find your store’s settings, including personal info, taxes, checkout setting, and much more.
Simply, you have full access and control over your store, you can manage the billing, taxes, shipping rules, choose the right payment gateway, which is suitable for your country, and way more than just this.
The most important part is that Shopify can be available for you anytime you need their support, they will walk the road with you all along, and do their best to make you succeed, because your success is their success, REMEMBER that!
This is how you add products to your store, here is where I recommend Oberlo to import products. It’s one of the best dropshipping apps, and it makes the process simple. Don’t worry as a beginner, Oberlo is completely for FREE, which makes it affordable for you.
You will only be paying once you start receiving 50 orders a month, at that level, you’ll still be making money, good money actually!
Head over to apps, and search for Oberlo.
Inside Oberlo’s interface, you can search for products and suppliers within your niche.
Once you review a product, importing to your store with a click, it will be added to your Shopify store, but not published until you give the order for that.
So basically, it’s simple, you review the product, select it, import it, edit its description and price on your store, and publish it. Boom!
This is how it looks like after you import it to your store. This gives you the flexibility to add tags to your products, which are used and act as labels, allowing you to categorize your products with ease.
|Tip: Always organize your products into collections. This will make it easier for people to find the product line they’re looking for.|
It’s good now to add relevant tags, and high-quality images, because customers are not getting the chance to touch your products, so through images, you should provide a high experience expectation, and show your product’s visual appeal.
Now, an important topic to dive into, Pricing.
Pricing is a very important component on your store when it comes to pricing, you’ll get these three fields to work with:
Price: This is the price of the product that will appear to customers.
Compare price: This option is when you want to show your customers that an item is on a sale. It will display this field as the previous price before the discount.
Cost per item: the cost from the supplier.
In this case, you’re selling this item for $300, and it will show people the previous price before the sale, which will create Scarcity, and acting as it’s a good deal.
According to the previous example, if you sell 20 of this item, Shopify will display it as “Out of stock”,
If you have the stock-keeping unit (SKU) available for the product, enter it in the SKU field.
For those who aren’t aware of SKUs, they’re internal identifiers that help you find products faster. I recommend you to insert a standardized SKU for every item right from the beginning.
Save product when done with it, and it should be displayed on your store, in the “product” section.
At that point, Congrats, you’ve just added your first product to your Shopify store.
How To Customize Your Shopify Theme
It’s also good to enhance the appearance of your online store, to make it look inviting. Shopify will give you a free theme which they call (Brooklyn).
Now you got two options, it all depends on your budget, you can either replace this free theme with a more professional one, or you can edit the existing one to reflect your business and it’s goals.
It’s a drag and drop editor, which makes it easier to make quick adjustments.
What If I tell you that you’ve only got 3 seconds to catch the customer’s reaction?
With that being said, you need a very professional, eye-catching theme, because it will be your business’s heart-beat.
Always remember, when it comes to dropshipping, speed is everything, you don’t want a slow theme with bad user experience, and here where a well-optimized and professional theme comes in.
Shopify offers a variety of free themes and layouts, that you can choose from and select the one you like best, but from personal experience in dropshipping, it’s ideal to pick a professional and inviting theme to provide the best experience for customers.
A new look has successfully been given to your store!
Now, you are getting closer to the professionalism that you are looking forward to, and in order to achieve more and more, and capture people’s trust, you need to be having a unique domain.
Shopify domain names originally will have this format by default: your-store-name.myshopify.com/admin.
Now it’s time to set up a domain to make your store official, which means that you convert the above domain into a proper www.mystore.com domain. The domain’s cost is ridiculously cheap, it’s something between $5-$15 a year
After successfully connecting a domain to your Shopify store, you need to have the needed pages that will take responsibility to educate people on what is your business all about.
Here are some pages I recommend for every eCommerce entrepreneur:
– About Us
– Contact Us
– Terms of service
– Returns and Refunds
– Order status
– Order Tracking
To add a new page, simply navigate to the online store button, then pages, add a title, body and hit save.
Once you’ve created the needed pages, now you need to create a path for shoppers to navigate these pages.
You are the one who’s responsible for which ones should go in header and footer, to do so, then follow these steps to create navigation on your website.
Head over to the online store button, then navigation, select the header or the footer.
Click “Add menu item” next.
Give a name to this item, then go to the “Link” field to select it from a list of products, collections, and pages you’ve already created.
Repeat the steps until your header and footer menu gets populated.
Now after you’ve learned how to set up your Shopify in 7 major simple steps, that’s basically it! You have a well-optimized website, filled with products, with all the needed pages, navigations, and a very good looking theme.
It’s time to introduce it to the world by signing up for a paid Shopify plan.
While the free trial lets you use most of Shopify’s features, you can’t sell anything until you become a paid monthly user.
Overall, Shopify will be ideal for you, whatever you want to sell online, and the good news: if this is a business model you’ve liked, but still not convinced, you’ve got a 14-days free trial, that you can take advantage of and learn about this platform.
Start by testing its waters, you don’t need to provide your credit card details for the purpose.
I’d like to thank you for taking it that far, and finally, if this is a business model you like to be involved in, give it a try, because you’re armed with knowledge now. Take action, because you are closer than you think.
Sharing is caring! Don’t hesitate to share your thoughts in the comment box and share this post with your friends to educate them too.
Because you, our readers are precious to us, we’ve come up with this amazing course, that can teach how to launch your own Shopify store without paying big bucks to some guru! Do not forget to grab your seat, It’s FOR FREE!
Everyone can tell you the risk. An entrepreneur can see the reward!
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