In today’s globalized world, there has been a tremendous shift from mainstream selling to eCommerce. In other words, the eCommerce business is on the rise. There are many eCommerce business models that exist. One of the many others which are economically profitable as well as beneficial is ‘Dropshipping’. In this article let us understand ‘What is Dropshipping?’ and ‘How to start a dropshipping business of your own?’
What is Dropshipping?
Dropshipping is a commission-based cum supply chain business model. In this model, a drop shipper sells and ships products from the warehouse to the customer, without actually owning or stocking the product. Here the drop shipper is a medium through which online selling takes place. His main focus is to tap on the growth of the business along with customer acquisition. He can leave the order fulfillment and logistics management to the supplier/retailer/wholesaler. The drop-shippers earn commission by selling another party’s products.
The Dropshipping model came into force way back in time. However, it gained popularity in the year 2006 when many Chinese eCommerce stores switched online. These eCommerce owners used the dropshipping model on AliExpress in the United States. Slowly and steadily the eCommerce business model proved beneficial, thus increasing profits. It then became a global phenomenon and many entrepreneurs across the globe began using Dropshipping for their eCommerce business.
The Process of Dropshipping
The process of dropshipping follows a 3 step method:
- The dropshipper receives an order
- Forwarded to the supplier/wholesaler/retailer
- The supplier then fulfills the order by shipping it to the customer
In other words, drop shippers are middlemen or intermediaries between the wholesaler’s warehouse and the customer. However, they still run a business. But is dependent on other sources for product stock and supply.
Post an order purchase, the dropshipper ensures that the supplier is informed. The supplier sends the product to the customer via a shipping partner and it is delivered to the customer. The dropshipper keeps track of the shipment and ensures that the product has reached the customer on time.
For instance, if an eCommerce owner who is a supplier is selling a product to the dropshipper for Rs.100. A dropshipper while marketing the product will price the product for Rs.130 or Rs.150. Here the dropshipper earns a profit margin of Rs.30 – Rs. 50 as his commission for generating leads to the supplier.
The dropshipper takes the markup price which is a commission for selling the supplier’s product. The process of dropshipping in most cases confuses the suppliers. At times, they do not know if its the customers or the dropshipper who has placed the order.
Who can Dropship?
The term ‘Dropshipping‘ although it may sound easy, it isn’t anyone business. Now that we have understood what dropshipping is and its process, let’s take a look at who can be a dropshipper.
New Business Entrants
Business owners who have just moved online and are new to the industry. Being a start-up, everything is a starter pack. Since everything is about learning something new, it is easier for them to grasp the concepts. They can also experiment with various eCommerce business models, one of which is dropshipping.
eCommerce Owners Who Work Within Budget
eCommerce entrepreneurs who work within the budget, dropshipping can suit your business. Since everything is about calculation, the process of this business model will help them to be detailed.
eCommerce Business Owners
Ecommerce business owners who have moved online are more glued to the customer’s mindset. Although it may be challenging, the but being professionals and a player in the industry, they know how to target potential prospects, market their products and convert them into customers. Dropshipping can be a game-changer for these owners.
Part-Time Job Holders
Those who aren’t on a permanent job role, the dropshipping eCommerce business model can be their game. Since it is a commission-based sector, one can earn their income via many sources without the brunt of heavy investment costs. A dropshipping store is all that is needed. Upgraded technology and new processes are something that part-time job holders would want to learn and explore, thus being open to this challenge.
How To Start A Dropshipping Business?
Well, if you have found yourself among the top categories, dropshipping is your go-to business model. While the concept of this business model has fairly lasted for a decade, it has revolutionized the eCommerce industry.
A dropship store doesn’t count on heavy investments to begin with. However, dedicated time and effort with immense hard work is required. Stay ahead of retail giants isn’t the motive, but maximizing revenue of the seller with a collaborative rise on your commission can win a deal.
Here are 6 steps on how you can start your own dropshipping business:
Selecting A Niche Of Your Interest
this is the first and the most important step of a dropshipping business. A niche is a segment of a market. With every passing time the emergence of newer products and markets have given rise to whole new batch of opportunities. Targeting a specific product must be under your interest.
As a dropshipper, it is difficult to market and sells a product that you have zero knowledge about. You cannot simply make a profit within any market. If you happen to select a segment that has already had a high volume of competition in the market, you might go head over heels to maximize your gains.
Therefore, consider these points while your break down your market focus and select what’s best for you:
- Select a niche that has a distinctive knowledge and interest, brainstorm with not popular rather unique business ideas
- Jump in for a market where profit margins are high as much as 40% and above, while competition is low
- Ensure that the shipping costs for the products sold by the supplier are low and effective
- Understand the customer pain points and solve them, this enhance a collaborative growth thus increasing a considerable amount of sales
- Make certain that the product chosen create an appeal to the customers
- Lastly, check on what’s trending and that the chosen product-market fits the brackets right
Healthy Competition Over No Competition
Once the niche product has been selected, the next step is to perform a competition analysis of that product. While as a dropshipper, you may want to choose a product that has no competition. However, that’s not the way forward.
The product that has zero or low competition maybe has no demand as well. And the reason for no demand includes high shipping costs, high product price, low-profit margins, etc. Additionally, the quality of the product and the packaging by the supplier and manufacture also matter. One thing to keep in mind is as a dropshipper, one is competing with top players on eCommerce platforms like Amazon, eBay, AliExpress, and many others. Hence, a thorough competition analysis goes a long way in choosing the right product for your selling.
Choosing The Right Supplier
A supplier is the first-most important medium of your dropshipping business. In fact, your entire business depends on the supplier’s products. Hence choosing the right supplier is necessary.
Firstly, start with a thorough research. Talk to entrepreneurs who have established a base within this field. Ensure that you aren’t taking hasty decisions in this step.
Suppliers maybe located in different parts of the world. Some within the domestic boundaries, while some across borders. Hence communication plays a major role. And, considering the dropshipping business model, continuous conversations and clear communication is at the topmost concern. If you aren’t able to communicate with your supplier, you are on the wrong path. A wrongly chosen supplier can cause barriers to your business process.
The internet is a plethora of information. There are various sources through which one can identify potential suppliers and manufacturers. Ensure to make a decision only when all the check boxes including communication, production capabilities, shipping policies, reliability, profitability, etc. are ticked right.
Creating an eCommerce Website
The next most important tool on how to start a dropshipping business is creating your very own eCommerce website. your dropshipping store needs a window through which your customers can make an online purchase. With advancements in technology, building your website can be done via just a few clicks. However, you need to keep certain considerations in mind before you step ahead and create.
Advancement in technology and eCommerce website builders like Shopify, WooCommerce, etc. has simplified the process of building a website. An eCommerce website helps to narrow down the communication gap between potential prospects and your dropship store.
Look Out for Ways to Attract Traffic
Once you have created an excellent website and with your products out for display, the next step is to gain customer attention. A sale is only possible when customers are directed and engaged to your website. For this, as a dropshipper, you need to set the right customer acquisition strategy. Here are ways you can apply your strategy:
- Engage with the customers and carry out informal conversations
- Understand the market segment and target the right audience to find potential prospects
- Inform and educate your audience about the product and its features through various creatives, mailers, and personalized messages
- Keep researching and find out ways and methods to increase a database
Customer Acquisition Analysis
Now that your eCommerce Dropshipping store has gained traffic, the last and final step is to track and optimize the data metrics of every activity, customer engagement, and actions taken on your website. This can be done with the help of various tools and software available on the internet. Few of the many include
- Google Analytics
- Facebook conversion pixel data
- SEMrush
- Twitter Analytics
- Google Optimize
These tools will help you to Measure, Report, Analyse, and Optimize your traffic. Furthermore, one can even track each and every conversion, i.e. the source of activity that gained maximum interactions. The kind of activities on your website that needs more attention, while the elimination of those that didn’t quite work well. All of this will eventually maximize your reach, thus help the market better.
These 6 steps mentioned above is your go-to guide to start your very own dropshipping business. While you sell online with zero investment, Dash101‘s channel and carrier integration bring a one-stop solution for all your shipping needs. With this, you are ensured not just shipping rather a business partner deal. Happy Dropshipping!