Fact versus fiction.. Busting the Myths About A Drop Shipping Business.
The normal trend to write about any business opportunity or a means to make money online is to make it sound really good to the reader. 99% of the articles are written in this manner. Every opportunity you read about wants to make you believe that this is what you should be doing.
The websites have a reason for doing this. They want to engage the reader, get them to spend time on a page. How many will read a page if it says, right at the beginning:
“What we are about to tell you is not smooth sailing. It might not be your best option making money online and you will need to work really hard to make this work.”?? We hope that you will because that is exactly what we are telling you about drop shipping.
All genuine work opportunities will require you to work hard and invest time and this is how we intend to write all of our work at home articles, with a harsh honesty. We try to keep it as real as possible and we hope that you find value in that.
Pros And Cons Of A Drop Shipping Business
Let's start with a reality check. Who is this opportunity for? It is for someone who will spend the next 3 to 4 months setting up an online business. If working part time 2 to 3 hours a day, consider taking about 12 months before you start making a profit of about $1000 per month. The good news is that once that happens, the growth from that point onwards can be rapid.
The biggest hurdle for most people will be the learning curve if they are doing this for the first time. You will have to learn many things about running an e-commerce business including promoting and advertising online.
Bootstrapping and doing it yourself is recommended rather than handing over money to other people to do stuff. Conserve your fund till you know what you are doing.
So the pros of a drop shipping business are:
1) An easy way to start an e-commerce business. 2) Very little start-up expenses. 3) Can be started part time. 4) Has the potential for high income. 5) A good outlet for the entrepreneurial streak in you.
Cons : 1) Only for the business minded. 2)Takes time and effort. 3)You need to learn to do many functions online like writing product descriptions, handling promotions et cetera. 4) Advisable to start with a corpus of about $1000. 5) 6- 12 months before you start seeing substantial profit. 6) Needs you to fulfil all the legal requirements in your state for starting an online business.
Legal requirements of a drop shipping business
The wholesalers will not deal with you unless you are properly inducted business. It's okay to make a few general queries but to discuss business matters and start a business relationship you will need to be a properly established business entity will all the legal requirements completed. There are three kinds of illegal business entities: sole proprietor ship, limited liability company and C corporation.
Sole proprietorship it is the simplest to start and in most states doesn't even require you to register yourself. You can simply start reporting your business income on your personal income tax filing. The biggest disadvantage of this kind of business is that it does not protect you from personal liability.
Limited liability Corporation (LLC) safeguards your personal assets somewhat against business incurred losses and claims that may arise. You need to register a limited liability corporation which, again, is pretty straightforward process in most states and can be done purely online.
C Corporation needs to have directors and shareholders and you will most likely not go this route.
Please consult an attorney or accountant to get the right advice regarding the kind of business identity to opt for.
One of the best and the most comprehensive guidance on drop shipping can be found on Shopify, which also happens to be the Premier platform for starting any kind of an e-commerce business, including drop shipping.
Your first question might be…
What is drop shipping?
Drop shipping is a business where a person sells various goods and products but does not stock them and neither does he ship them. Instead, he uses a vendor, wholesaler or manufacturer who maintains the stock as well as processes the order by packing and shipping it to the customer directly. This vendor or manufacturer is know as the drop-shipper. The only job of the seller is to take the order from the customer, accept the payment and pass along the order information to the drop-shipper.
Here is an easy to understand model of a drop shipping business.
Let's say you are using a drop-shipper. You can sell any item that is available with him on eBay, Amazon, on your own e-commerce store or in any other way you want. On receiving the payment, you will notify the drop-shipper with the name and address of the buyer. He will ship the purchased item directly to the buyer. You will pay the drop shipper his price for the product, of course. The difference between your buying and selling price is your profit.
How To Start A Drop Shipping Business
Step #1 – Find a Product Or A Drop Shipper
You can either start with a product you have in mind or you can start with finding a good drop shipper.
If starting with a product idea, think of a niche you are interested in. Let's say you'd like cats. I know someone who created a cat merchandise drop shipping store. Find the merchandise with a drop shipping vendor.
If you want to first find a good drop shipper, and then select items from interest with him, you some online as well. For finding a drop shipper we recommend using a wholesale vendor directory. We recommend Salehoo. You can try them risk-free for 60 days.
Some links to help you find drop-shipping suppliers are:
Step #2 – How To Sell
This is as important as step number one. Be very clear about how and where you are going to sell your products. There are many 3rd party platforms and websites where you can sell. Ebay, Etsy Amazon and Craigslist are popular mediums. But building your own e-commerce store is not very difficult and is definitely something we recommend you do, even BEFORE you list your first item on eBay. Set up your e-commerce store using Shopify.
Whether you are selling on eBay and Amazon or not, you have to set up your own store if you want to be successful at doing this work. Shopify will set you up with a great looking professional store within an hour, even if you have never done this before.
Add the items to your store. You can use Oberlo. It integrates seamlessly with the Shopify and you can directly import products from other various drop shipping sites online, including product information like descriptions and pictures. You can edit this information of course.
Step #3 – Find customers
Without customers you don't have a business no matter how great your product is. One of the advantages of selling on eBay and Amazon is that they already have a lot of active buyers looking for things to buy. So it might be easier for you to be found.
Another plus for selling on a known marketplace like Amazon is the trust factor. These e-commerce giants have spent years and millions of dollars into building their reliability, not just an an image but as an integral part of the service they provide to their customers.
The flipside is that there will also probably be competing items alongside your listing. However, some competition is not always a bad thing specially if you have the better product.
It's always a good idea to create your own digital market space alongside even if you are selling on eBay and Amazon. Today it doesn't cost much. This is specially helpful if you have unique products. It gives you the opportunity to build a niche website. Your own professional looking e-commerce store might be the edge you need to beat the competitors. It will greatly boost your credibility as a seller.
Once again, we highly recommend Shopify. They set up really good looking e-commerce store with unbelievable ease. And their rates are very reasonable. They will provide you with everything you need to market and sell things without a hitch and hassle. Everything is ready for you to use.
You can start by attracting people through your social media posts. You can spread the word around with your friends and people you know. You can also use promotional posts / advertisements on Facebook, Instagram and Pinterest to reach more people.
Step #4 – Settle terms and conditions with the vendor.
Work out an arrangement with the drop shipper. Will he need an advance? Does he require full payment for the items you want to hold? Will he only sell in bulk? What is the minimum quantity you need to purchase? What is his shipping method and speed? Does he offer expedited shipping? What kind of returns and refund policy will be in place for the buyer?
These are just some of the important terms and conditions you need to settle with the drop shipping vendor, and this is the part of your business where most of your investment capital will be spent.
The heading of this post says you can start this business for less than $100. That is completely true. But you might have to establish a credit limit with the drop-shipper. Wholesale vendors get many queries, not all of which are genuine. So before doing business with you, they will require you to open a wholesale account with them, and set a minimum credit limit which will adjusted against your future sales. Of course, this deposit will be refundable if for any reason you do not want to continue with your wholesale account.
Importance Of Finding A Niche
Getting into a niche market is a good idea for any kind of a business. Finding a niche is about finding something specific that you want to sell, as well as what the buyer wants to buy.
Discovering a niche let's you narrow down on your target product and your target audience. This is a good thing. You do not want to be selling the right product to the wrong people, vice-versa or simply a wrong product.
So finding a niche is about finding a product that interests you, as well as the buyer. The more you research a niche market, the more you get the idea of what the buyers are looking for. You discover where to find them and how to sell to them.
How To Find A Trustworthy Drop Shipper
The first issue with finding drop shippers is that most of them are located in China. At least if you do a quick search online. This affects you in two ways, assuming you are located in the US, Canada or Europe, as most of our readers are.
First, it will most likely have an impact on the shipping time. Shipping from China to the US content can get expensive if you require a fast expedited shipping. So the most likely solution will be shipping through regular post which of course takes longer .
In times of same day delivery from some major online retailers and large e-commerce sites, will your customers still want to buy from you? High shipping charges will also eat into your profit margin, even though the overall cost of a product from China will be less. What about the import fee? That adds to the cost as well. If you have ever tried to order something from overseas, you have experienced this. The import fee is sometimes as much as the product itself, or still a sizeable amount. Unless, it is something you really need and cannot get locally, people do not like high shipping fees.
The other issue is also distance related. What happens when problems like returns and refunds arise. Who is going to bear the cost of shipping back to China. Won't it be easier dealing with someone in your own country. For example if you want to try out a new product to yourself. Corresponding with someone close by might just be easier on all accounts.
However what is a game changer are websites like AliExpress. AliExpress is an online wholesale website. If you have a Shopify e-commerce store, you can add items directly to your store from a free service called Oberlo. Another advantage of using Shopify.
Now there are a lot of products listed on AliExpress by various wholesale suppliers. Think of it as an Amazon counterpart for wholesale sellers. Many of these vendors are based out of China as well as other countries. Needless to say, you will find the lowest prices on a wide variety of interesting products from vendors based out of China as well as other countries like Czechoslovakia. But these vendors will take any where from 20 to 40 days to deliver an item to the US. Yes, the shipping will be free or minimal, but this kind of waiting time is not feasible for a drop shipping order.
Faster expedited shipping, if the vendor offers it, will set you back by anything between $30-$50 which does not make any business sense.
The good news is that Ali Express has several suppliers from the US as well and there turnaround time is usually 3 to 5 days for a domestic order. So while adding items to your store you can simply choose to add items from the US-based wholesale suppliers.
But why limit yourself to a single online sites like Ali Express? There are several wholesale wonders you can discover. And you can be sure that they will not be easily found online because that is not the nature of their business. You can find them using a reliable and comprehensive wholesale vendor directly. Once again we recommend Salehoo. It is the popular choice for an online wholesale supplier directory and lists more than 8000 suppliers who have been carefully verified. That is the most important part. Not just finding a wholesale vendor but finding a reliable and trustworthy seller.
Use a Wholesale Suppliers Directory
We recommend using Salehoo. At $61 per year it is a very reasonable service that provides you with wholesale vendors that have been screened and vetted. You also get a no risk trial for the first 60 days which should be enough to find yourself some wholesale suppliers.
The advantage of continuing with the subscription is that you can keep adding new suppliers and products to your store. I think at the time of writing this post there are over 8000 wholesale suppliers listed with Salehoo. They regularly keep adding and updating information on the wholesale suppliers in that direction.
Having a supplier in the same country has its advantages.
- It's easier to try samples of the products.
- It's easier to add new items to your itinerary.
- Faster, cheaper and reliable shipping to your customers, at least the ones that are located in the same country.
Setting Up Your First E-Commerce Store
The easiest way to open an e-commerce store
You might not think it necessary as at first, but you really do need to do this. And if you are discouraged thinking that it will be difficult, I can assure you that it will not be. Head over to Shopify right now and you can start your store within an hour. And a very good looking and professional store at that, with everything like billing, payment processing et cetera taken care of.
How much does it cost? Not nearly as much as you might think. They also have a helpful tutorial section that takes you step by step through the entire process.
Why starting your own e-commerce store is important
Alright, back to why this step is important. You can list your items on Amazon and eBay, sure. But there are several issues that you must be made aware off.
Many retailers feel that these third-party platforms take a sizeable chunk of their profit. Some even claim that more than 50% of their income is reduced by selling on third-party platforms.
Yes, they do have a very large customer base and millions of potential buyers everyday. You do stand a very good chance of being discovered. However, there are also many competing sellers.
I'm definitely not suggesting that you should completely rule out selling on Amazon, eBay and Etsy. They have become huge and trustworthy marketplaces because of people like you who decide to sell their products through them. And people love them because you can find so many great things from all over the country and the world and at great pricing. So nothing wrong with that. EBay even offers the first few listings for free. So that might be a great place to start specially if you are testing the grounds for a new product.
However, when you refer people to your business you want to send them to your own e-commerce store and not Amazon and eBay. You do not want to lose this opportunity to promote your brand and the store. People who shop on eBay remember having bought on eBay. They do not remember the seller.
You can do so much more with a potential customer when they come to your site.
- You can show off more of your products.
- You can sign them up for a newsletter.
- You can send them emails and offers.
- If they become your customers you can send them more suggestions in the future for other things they might be interested in buying as well.
So while you should definitely try out 3rd party platforms you should also have your own E commerce store. Many retailers sell only on Amazon on eBay without having a website of their own. These are mostly people who have a physical brick and mortar business and use these 3rd party platforms as they sole online outlet. And they might in some cases also be wholesalers and distributors themselves.
If you are serious about drop shipping get your own e-commerce store at the first opportunity.
One important tip here when starting your first online e-commerce store. Many people end up making the classic mistake of spending way too much time on making the store look good and not enough time and effort into researching the items they are going to sell.
Yes, having a professional looking store is vital and that's another reason why we recommend Shopify. They have ready-made templates for a great looking store and you do not need a designer or technical know-how to build your first e-commerce store. You save precious time and effort which you should be directing towards vetting your suppliers and products.
How To Add Items To Your Online Store
You need to add items to your store in order to make sales. One option is using Oberlo which is a free tool and allows you to directly import product listings from a few online drop shipping sites. You can of course edit the information such as titles and descriptions as well as the images. Otherwise, you have to create each listing of the product.
One of the most important things is good product pictures. Since you might not be handling all the product yourself your vendor should provide you with high-quality photographs of the product. You cannot be expected to do a photo shoot for the products. Providing good images is one of the responsibilities of the drop seller.
Proving you with product descriptions will be helpful but it's recommended you use your own for the sake of making your e-commerce store SEO friendly. Other sellers might be using the same stock descriptions provided by the seller and that will not do your store any good in terms of search engine ranking.
The work of adding the products, pictures, writing descriptions and attractive titles can get tiresome. But here's a tip. Take one product listing at a time.
Think of the one-time effort of creating the listing as giving dividends multiple number of times. Hopefully, the same listing will sell multiple number of times. So take your time and make the listing search engine friendly by adding all the pertinent details.
Another useful tip. Write the tiles and descriptions in a spread sheet program. As well as price etc. That way if you are listing your items in more than one place, you copy that information and not re-write it every time.
Customer Acquisition – How To Get Buyers To Your Store
Everything is set. We just need those elusive customers to find your product and buy it. Well, the odds are that it is not going to happen on it’s own. You have to find the customer and the customer has to find you. Many people start by listing items on eBay and Amazon. So can you. In fact there are many more websites where you can begin selling your items. We have covered many of these in our post 31 Places to Sell Online.
Some of them are better than others for certain categories of goods. For example, Etsy.com is a great marketplace for anything to do with handicrafts.
EBay is a great place to start with because they allow the first few listings for free and they see millions of users every day . However, I feel, the way things stand right now, eBay has already seen its glory days. Other stores have become more popular, including Amazon. The one thing that eBay has still going for itself is the bidding model, where people can bid for an item. But for a first time seller, this just adds to the already complicated situation.
If you are selling on other platforms, don't forget to launch your own store before you list on other sites. You can include that information in your profile and get some customers from to visit your store. This might also help set you apart from other sellers on that marketplace.
Every step that you have taken so far leads to this point where you need to make your first sale. And this step of customer acquisition is what intimidates and baffles most people . So let us try and break it down into clear simple steps to get you started.
How to get your first customers – In easy steps
Word of mouth
Started telling your friends and family about it. Post on all your social media accounts, and tell your friends and family to do the same. The ones that like you are likely to do just that.
Make your e-commerce store search engine friendly
When adding the items to your site work on the listing to make it search engine friendly. What this means is that you should write descriptive titles and detailed descriptions. If the product allows it, get creative with your listing. Include important keywords in the title as well as the description.
Keywords are the words that you want to show up in search engine results for, when somebody makes a search.
Try to mention as many details and specifics as you can in the description. Remember, your words and images tell the customer about the product. You never know which details about the product might bend the customer's mind towards making the purchase.
Include as many clear and high-quality pictures as you can of the product. Add a video if you can. Everything from clothes to electronics can benefit from a demo video.
Taking the route of paid online advertising
It is a fact that paid advertising is the fastest way to get traffic to your e-commerce store. If you can get it right it can be a very profitable way to do business.
You can spend some money to get customers from various sources. This includes Facebook and Instagram ads, Twitter as well as the most popular option of Google’s ads program Adwords. Sponsored Search listings are possible on Amazon and eBay as well.
It is best to start with paid online advertising with some reserves. Advertising successfully online is a learning curve and you are bound to lose some money before you figure out what works for you. This doesn't just apply to people doing this for the first time.
Even somebody who is experienced with online advertising will use up some funds before he or she can figure out what works for a particular thing they are trying to sell. It always takes a bit of experimenting to create a successful campaign. The difference is that the experienced person will know what to experiment with. They will know all the features like how to target demographics etc. You can learn it as well.
Advertising on Facebook and Adwords is a lengthy topic and I possibly cannot get into all of it here in this post. So I am including a few links where you can find good information to get you started. The idea Is to keep your learning curve short and to become profitable quickly.
Start with these three steps of customer acquisition and they should work well enough for you to get started.
When you have the time consider starting a blog alongside your e-commerce store. It will boost your presence in the search engine results.
Following the above steps you can look forward to your first online sale. Don't give up if things take time. They always do when starting anything new. It is best to go in with some seed capital to keep things moving along till you have figured things out.
Once you get the hang of it, a drop shipping business can be addictive. You have a sea of products available to sell and a sea of customers waiting to be found. All the best and as always, if you have any queries or remarks, do post them in the comments section below. Good luck.