drop-shipping

Drop Shipping 101: The Definitive Guide to Building a Drop Shipping Business in 2018

Do you also plan to start an online business? Great! Starting and running an online business is too easy these days than it was earlier. Are you wondering how? Drop Shipping is the answer.

Let’s read on how to start a drop shipping business in 2018

Many people easily give up the idea to have an online store only because of the startup costs and fulfillment hassles.

Now, imagine someone offered to pay your upfront inventory costs and managed all your fulfillment operations. It’s easy to start, and you could operate your business from any corner of the world. Does it sound dreamy? Not a dream, if you know about drop shipping.

Good news: With the growth of top online retailers like Amazon, eBay, Alibaba, Shopify, etc., anyone can start an online business with just $20. Thanks to drop shipping concept!

What is Drop Shipping Business?

Drop shipping is a product fulfillment process in which products are directly delivered from the manufacturer or wholesaler to customers who placed orders on a third-party retailer website. In this retailing method, you don’t need to keep products in stock.

No need for a hefty amount of cash for startup investment or storage space. Just set up your store, list your product and focus on marketing and selling.

How Drop shipping works?

The drop shipping business model enables entrepreneurs to operate without maintaining inventory or having enormous storage spaces. When customers place an order on your website, your supplier, manufacturer or wholesaler will ship the order products to your customers themselves.

Drop shipping works as follows:

Drop-shipping-model

Buyers order products from your store

You can have a small brick-and-mortar store where you keep sample items for display and product catalogs. You can list your products on sites like eBay, Amazon, Flipkart, etc.

The best and most profitable model is having an ecommerce site where your customers can order products.

The customer pays to you for all orders they place in your store.

The order is forwarded to the supplier

Since suppliers are usually manufacturer or wholesaler, so you can earn a good margin on the difference between the retail price and the price you buy it from suppliers.

The supplier charges you for the product and ships the product directly to the customer. Another best part is that the shipment bears your brand logo and not supplier’s. So, the customers will never know the supplier, but only you.

Who is Drop shipping for?

Drop shipping is a low-risk and low-investment way to start your own business. But if you think you can consider this business model over others for profits, it may be disappointing for you. Drop shipping model works best for the following types of entrepreneurs:

Budget Entrepreneur

Drop shipping is a cheap method of selling online because you don’t need to purchase inventory upfront. That’s why this method works well for people with a limited budget or those who prefer to keep their startup costs as low as possible.

Validating Entrepreneur

Drop shipping allows you to test new products or a startup before you make a big investment in inventory. It makes it an ideal model for entrepreneurs who want to validate a business or products before investing.

First Time Entrepreneur

Starting and running an online store is challenging. Driving and converting traffic is even more challenging and time-consuming. Because of low startup costs with drop shipping, new entrepreneurs can learn the basics of running an online business as well as tactics to drive sales before investing in inventory that you may get stuck with.

Walmart Entrepreneur

It is also for people who want to sell multiple products and models. With other business models, you may need to make a big investment to buy, store and sell thousands of different products. That’s why drop shipping makes an appropriate model because you don’t need to purchase inventory upfront.

But if you are a brand-focused, margin-focused or a non-creative marketer, you may think about other business models.

Why start a drop shipping business?

Here are seven good reasons why drop shipping can be an excellent business option for you.

No Upfront Inventory Required

You buy a product only when a customer places an order for it. So, you don’t need upfront costs, which is great if you’re tight on cash.

Minimizes Risk

Since no startup or inventory costs are involved in drop shipping model, it makes a risk-free option for you. All you need to pay a small amount of money to get your website built.

In drop shipping model, your business is less likely to lose revenues as a result of changes in preference and trends since there is no excess inventory stored in warehouses.

Start your Online Store Fast

Once you build your store and find a supplier, it becomes easy and fast. Simply pay the fees, register your business and run with the right link to the drop shipper.

Expandable Product Variety

With the drop shipping business model, you can sell a variety of products on your store. It engages your customers and makes them return to your store to buy more products. Also, you can expand your offerings any time as per your budget. All in all, you can sell a variety of different products and generate more revenue.

Promote your Brand

Drop ship companies put your store’s logo and brand on shipment boxes and the paperwork. For example, if a customer orders a Samsung LED from eBay, it comes packaged in an eBay box with eBay logo, but the product is still a Samsung.

Excellent Work-From-Home Opportunity

With a laptop, internet connection, a basic business license, and determination to succeed, you can start your drop shipping business from your kitchen table with less than $1000 in many cases.

Create a Large Online Marketplace

You can expand your business as much as you want with drop shipping. Delve deep into your niche and go wide with several niches over time, depending on the laws in your jurisdiction.

Steps to Start a Drop Shipping Business

Are you now ready to setup your online business hat brings you huge profits on a limited budget? Then follow the steps listed below. Important! While launching a drop shipping business may not require startup funds, it requires an immense amount of dedication and hard work.

Step 1: Choose Your Business Niche

Your drop shipping business will not only compete with other drop shipping businesses but also with large, well-established businesses such as Office Depot and Walmart. Since these retailers sell almost all types of products, they can’t be experts in a particular niche. That’s the advantage of drop shipping!

What is niche?

In drop shipping, niche refers to a group of products. Let’s understand it with examples. Walmart sells all types of products. They don’t have a niche. Office Depot sells all types of furniture. Though they sell office furniture only, their product range is very, very broad. So, if you want to start a drop shipping business in office furniture, a good niche would focus on “Leather executive chairs” instead of “office chairs.”

Tip: Choose a laser-focused niche that you’re interested in. Without interest and focus, you may not b able to carry out effective marketing.

Things That Make a Great Niche

If you’re not sure what makes a great niche, look at the following things and assure your chosen niche has all these traits:

Product Price Range should be $200 to $1,000

In drop shipping, selling a $10 item takes as much effort as a $1,000 item does. Selling $10 earns you a margin of $2, and an item worth $1,000 earns you $200 per sale. With this in mind, keep your product price between $200 and $1,000. It prevents from doing lots of hard work for a little profit.

Target Internet Savvy Customer with Disposable Income

Choose a niche that resonates with customers who have money to spend but don’t demand extra attention. Choose upper-middle-class people who are comfortable buying online.

Sell products with limited local retailers

Good product group for drop shippers is those for which local retailers have limited options. When a customer finds limited options for the desired product, they immediately go online to find more options and better price deals.

Light and Durable Products than Heavy and Fragile

While manufacture will handle the shipping, you’re responsible for customer services. Save you the hassle by avoiding products that are heavy and expensive to ship or too fragile to ship safely.

Make Sure Your Product has huge Existing Search Traffic

Good search traffic means people are searching for your products that you’re planning to choose as your business niche. To check search traffic:

  • Sign in Google AdWords (or sign up for free)
  • Go to ‘Tools’ tab
  • Select ‘keyword Planner’
  • Type your niche into the search bar. Let’s search “executive office chair”

keyword-ideas keyword-ideas-2

As you see, the search volume is very high for ‘executive office chair” than that of ‘standing desk’ as shown below:

It suggests that ‘Executive Office Chair’ makes a better niche than ‘Standing Desk’. You can also use Google Trends to check the interest of customers in a particular niche.

Step 2: Competition Research

Your niches should have competitors. Having no competition is a sign of ‘no profits’ in your chosen niche. Maybe there’re no customers, or no good supplier, or maybe poor margins. Don’t waste your precious time on such a bad niche that has no competitors.

To find your drop shipper competitors

  • Enter your niche in Google search bar and click on ‘Shopping’ tab.
  • Click on the product to check the seller sites. If they have a single location and their Google map streets present them as a small office complex or a UPS store, they’re a drop shipper. But, if they have multiple locations, showrooms and a storefront on Google Map, they’re a traditional retailer.

Step 3: Identify Top Tier Suppliers

A reliable drop shipping supplier comes with a real-time inventory, comprehensive online product catalog, generous return policies; online searchable order history, customizable data feeds and anything that’ll help you streamline and keep your customers happy.

There are four ways to find a reliable supplier or wholesaler for your drop shipping business:

Research your competitors

Identify the top-performing products and brands at your competitor’s store and find their suppliers. Contact with those suppliers.

Subscribe to a directory

There are lots of drop shipping directors only, but not all are legitimate. So, carefully choose a good-quality and legitimate directory that offers access to a searchable database of thousands of genuine drop shipping suppliers. Try popular drop shipping directories like Worldwide Brands, SaleHoo, DropshipDesign and Dropship XL.

Contact the manufacturer

If you know a manufacturer to be your supplier, you have to be an authorized distributor of their products. Chances are manufacturers may be willing to drop ship.

Aggregators with integrations

Pay a company to access their suppliers list and integrate your online store with the supplier directly. These companies compile a large list of suppliers and a build in technology for your connect your store to the wholesaler’s products. It comes expensive but is extremely valuable.

Some of these companies include Doba, Modalyst and Inventory Source.

Aggregators without integrations

These companies also provide you with a large list of good-quality suppliers. But rather than offering a technology to connect with the suppliers, they act as a middleman for information exchange. The membership fee is lower, but it requires extra work at your end.

Some of these companies include Dropship Direct and MegaGoods.

Google Search

Wholesale drop shippers are bad at marketing. So, dig deep through 6 to 10 pages of bad listings before you find a legitimate drop shipper.

Step 4: Build Your Online Drop Shipping Store

You don’t need to be a coding pro or have a big budget to get a good website for your drop shipping business. There are lots of e-commerce platforms like Shopify, Magento, Bigcommerce that allow you to build a fully-functioning and beautiful website prepared easily and quickly.

Make sure your website has following features before you contact a supplier:

Sample Product Listings and Brand Pages

Suppliers want to know how their products will look like on your website. If they see their products displayed professionally and prominently in your store, it will convince them quickly. It shows your dedication, seriousness, and readiness for your business. So, get a web page for each of your potential supplier ready.

To make it more appealing, tap into the already-curated reviews of products and brands offered by your potential suppliers.

Third Party Trust & Reviews

Many companies, like Trust Guard and Merchant Safe, come with badges that you can use on your store to present yours as a credible business to your customers. These small add-ons like badges bring big benefits and make customers feel comfortable shopping on your store. If customers are comfortable, suppliers are too.

Clear Shipping and Return Policies

Have an easy to understand and easy to locate shipping and return policy posted on your website. Customers should sense transparency when it comes to your shipping charging and return policy.

Similarly, suppliers prefer to work with drop shippers who have clear shipping and return policies. These policies may vary depending on your niche and the individual supplier. So, gather enough information from your competitors’ sites to jot down passable and standard Shipping and Return Policies page.

Properly Working About Us and Contact Us Page

Every website has an About Us and a Contact Us page. For drop shippers, both these pages are even more essential. These pages are the only way to tell your customers who you’re and how you’re going to treat them. Also, suppliers judge you by your About Us page.

Your About Us page should tell your business story in a brief and engaging manner. It should not sound like a resume. It tells customers and suppliers why this niche motivates you and what unique you’re bringing to the niche.

Similarly, your Contact Us page should be easy to locate on your online store. It should have a working email ID, contact number, hours of operation, online query form, physical store address and an option for instant chat.

Step 5: Plan to Generate Traffic

No matter how great your niche and how beautiful your website is, you still need to make efforts to attract customers to your drop shipping site.

Start with a blueprint! Suppliers may ask you for the blueprint of the marketing strategy for your store.  Here are a few proven and time-tested marketing strategies that will drive traffic to your store and increase your sales.

Run Facebook Ads

Facebook is the best place to enjoy richness of diversity of customers’ data. It’s easy to find your target audience for your ads on Facebook.

This social media platform allows you to customize your ads according to your audience, goals and budget. You can even choose the format and platform where your ads will be displayed as per your preferences.

For better results, invest in video content and target ads to people on your contact list.

Add customer reviews and ratings to build trust

Product reviews and rating helps customers gain satisfaction by looking at previous customers’ experiences about a product. It motivates your potential buyers to complete a purchase at your store. So, if you want to grow your online business, encourage your customers to rate and review your products.

Share Social Videos to Engage People

By 2021, online videos are forecasted to constitute over 81% of all web traffic making it the most valuable forms of marketing. So, you should shift your marketing efforts to using video content to promote your store and amplify your sales.

Although, for small and new businesses, creating great videos can be challenging and expensive, they may share existing viral videos on social media. Make sure your share these videos with a call-to-action to drive traffic to your drop shipping site.

Retarget your potential customers

Nearly 98% people don’t buy on their first visit. In this situation, retargeting marketing strategy helps you target visitors who previous visited your store, but performed no action. Studies purport that 70% of visitors are likely to convert by seeing your ads again on their screens.

Start a Niche Blog

The-power-of-blogs

Blogs are the 5th richest and credible source of information on the internet. Blogging is a low-cost marketing strategy to build your audience and generate traffic and sales for your drop shipping business.

The most important benefit of blogging is it promotes your SEO results. It boosts organic and free traffic to your store. The better your blog entries are, the higher your website ranks on search engine result pages. And, better ranking means more visibility and improved sales.

You don’t have to write posts with thousands of words. Even short and informative posts will work.

Utilize Upsell and Cross-Sell Marketing

Implementing product upselling and cross-selling strategies can drastically maximize your transactional value. These techniques allow you to market and sell your relevant product together.

Amazon is an ideal example of the business best using these strategies with its “Frequently Bought Together” marketing.

Step 6: Register your Business

The last step before contacting your suppliers is to register your business with the authorized government agencies. Like other business, drop shipping businesses also have to address issues related to income taxes, sales tax, and tax exemption.

Most suppliers ask for an EIN, Sales Tax Exemption Permit or other documents as per your jurisdiction before approving you as their partner. This is another important reason why you should register your business as soon as possible. Overall, registering your business:

  • Helps limit your personal liabilities
  • Minimizes your tax liability
  • Avoid conflicts with suppliers and manufacturers
  • Improves your brand image

Step 7: Securing Agreements with Suppliers

Supplier won’t knock at your door. You have to reach them by calling and emailing. Suppliers get lots of inquiries on a regular basis, and you have to prove yourself as a profitable and serious business partner to them. It may take time, few calls and regular emails. Just stay positive and have patience.

Important tip: Contact a lot of suppliers because not all companies want to drop ship. Call them or meet them in person to show that you are a real person and want to create a genuine professional relationship.

Have Launch Dates

A launch date set on your site conveys forces the supplier to consider that if they don’t list their product on your site, they may lose an opportunity.

Launching date is like setting a timeline, which is important to prevent decisions from being put off for an indefinite period.  Set timelines for follow up calls, when to send out the contract, etc.

Paying on Terms

Suppliers work with drop shippers in two ways: paid up front and paid on terms. If you choose paying upfront, you pay for the order to the supplier immediately. If you choose paying on terms, you place an order and pay them at a later date as mentioned in your agreement, typically 30 days later.

Advisably, never go for payment terms as it may cause risky businesses credit. Paying upfront avoids the risk of asking credit as a yet unproven business. Without risks, it’s easy for suppliers to approve you as their drop shipping partner.

Step 8: Analyze and optimize

Make sure you track and grow your store’s performance using the best metrics. Use Google Analytics to track your business on Google and Facebook conversion pixel for Facebook.

Tracking data allows you to scale what works and what doesn’t work so you can accordingly manage your marketing strategies.

FAQs

Who will handle return and customer services?

Customer services and returns can be cumbersome, especially if you, your customers and suppliers are all at different places. But satisfactory customer service is the key to the success of every business. You need an automated system to handle returns and customers’ feedback that may require further discussion with your suppliers.

How to deal with product quality issues?

If you see returns of products supplied by a particular supplier, you must communicate the issues to your supplier. It’s better to routinely order a unit to track user experience, including product quality and fulfillment time.

Can international orders be drop shipped?

Every country has different customs and border protection warnings and guidelines for international imports that add to your liabilities and responsibilities. Make sure you review each country’s required guidelines before shipping there.

Top 10 Drop Shipping Tips from Pros You Should Know

By this point, you know what drop shipping is, how and who should start with it and what the process is. Let’s this drop shipping guide with expert tips that every serious entrepreneur should know.

  • Sell products that you’re really interested in
  • Create appealing offers to motivate customers to buy from you
  • Never under-price your products
  • Get rid of bad suppliers immediately
  • Automate your drop shipping business as much as possible.
  • Get a presentable and well-functioning website
  • Offer customer services of the utmost level
  • Choose products worth selling based on figures – reviews and search traffic
  • Foster a good retailer-supplier relationship
  • Monitor your competitors and optimize your store accordingly

So, now you know what goes in to start a drop shipping business. Keep this guide handy throughout the process of starting your new biz. Good luck!

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