What is Dropshipping? Dropshipping is a retail technique where the seller doesn’t have the products in stock. Instead, when a store sells a product, the dropshipper buys that product from a third party and has it shipped directly to the customer. This way the owner of the online store doesn’t need to see or touch the product sold. The dropshipper keeps the difference between the price paid by the customer and the costs of buying and shipping the product from the supplier.
This kind of business is very special as it uses all the benefits that the Internet can offer to operate. Among these benefits we can find:
Less capital required to start – This might be the biggest advantage to dropshipping. Starting an e-commerce can cost as little as $30 whilst opening an actual store can add up to a few thousand just to get started! Traditional businesses need to buy a lot of stock before opening the store while dropshipping only requires buying the product after you have been paid for it.
A lot easier to get started – Another big advantage of the e-commerce model is that you don't have to deal with physical products. With dropshipping, you don't have to worry about:
● Managing or paying for a warehouse.
● Packing and shipping your orders.
● Tracking inventory for accounting reasons.
● Paying for the maintenance of a store and the workers in it.
● Insurance to cover all the physical store equipment.
● Handling returns and inbound shipments.
● Managing the stock levels.
Anywhere can be your office -Beyond the low capital requirement, you will just need a laptop and Internet connection. This also allows you to choose where you want to work. You could work from your sofa at home, a cafeteria in town, or a beach in the Maldives - all you need is a laptop and Internet. There is no other limitation.
Anything can be sold! – Your online store is an intermediary. You can choose any niche or sub-niche. Once you have thought of something that might work you have to go to Aliexpress or Alibaba and see if it seems doable. If there is a provider making it, there is probably a dropshipper selling it somewhere. So if it works for them… why not for you?
Easily scalable – Once you have found a good product and a good ad, all you need to do is repeat the process. Let’s say you pay Facebook ads $10 and that converted to $30 in sales; you can try to put $20 next time. If after scaling this a few times you keep getting good results nothing stops you for running a $1000 ad.
Lets not forget that with $100 we would reach approximately 7.000 people. Imagine getting all those people inside of a conventional store at once. Yes, crazy, I know.
Unlimited reach – One of the problems that face conventional businesses is that they can only reach people in a certain location. With e-commerce you can do business with anyone with Internet.
Easy repetitive tasks – Once the store is set up and running, you will only need to be fulfilling orders. Depending on how well your store is doing you will need from 5 minutes to an hour of daily work, ideal for a side hustle.
Even though I know dropshipping has a lot of potential it wouldn’t be fair if I only shared the positive aspects of it, so let’s go over the negative sides now.
Low Margins – Dropshipping is very competitive and usually people know what they can pay for something. You will usually sell things that cost you $3 for around 10$, after you take out the costs of publicity and shipping you will end up with a gross income of $3, or 30%. If you try to be ambitious and sell a $5 watch for $50, there is probably another dropshipper selling it for $15, so you won’t make the sale.
People are waking up! – This business model is based on something very simple. You want to buy something cheap in a developing country and send it for double or triple the price to a customer in a wealthier country. This model will work until people in rich countries discover these cheap sites (disclaimer: it is starting to happen). It is not too late to start a dropshipping business, but it is not as easy as it was some months ago. Now almost everybody has heard of Aliexpress or Alibaba.
General supplier issues – As you will be sourcing from multiple warehouses you are a lot more likely to have external problems. There is no retail business where the owner has total control over what happens. With that said, dropshippers have a lot less control over the products that are sent to the customers and the way those products are sent.
From time to time a supplier may mess up an order and send the product to the wrong address.
Other times the products may get lost.
Other times the packaging may not be good enough and the products will arrive to the customer damaged.
In all these cases it will be the supplier’s fault, but you will be the one apologizing to an angry client.
Is Dropshipping worth it?
Dropshipping is not a perfect business. As any business it requires hard work and it has a learning process intrinsic to it. Remember: practice makes perfect, and if there are already many successful dropshippers, why not you?
Good supplier: Always check that you are selling products from a top supplier. A supplier that doesn’t take care of packaging will damage your products, and your image as a brand.
Find a niche people are passionate about: People are usually willing to spend a lot more money on their passions than anything else. Customers will spend more money on fishing rods than on toothbrushes.
Use compulsive buyer techniques; such as timers, discounts, upsells, promotions,…
Be extra clear! One of the biggest disadvantages of dropshipping is shipping times. People are getting used to Amazon’s quick deliveries. They need to know before buying that your products will take around 2 weeks to get there, if they are not aware of your shipping times you will be dealing with lots of angry customers.
Look professional: It is key that you gain your customers’trust by looking professional. Your store will be completely new to most of your clients so your brand must look reliable and trustworthy. If customers feel like they are not on a reliable site you will make no sales.
You might be interested in:
Click here to learn about The 50-30-20 rule.
Click here to learn How to Make Money Blogging.
Click here to read my review of Think and Grow Rich, by Napoleon Hill.
If you have any questions please send me a DM on Instagram @thewealthhike.
Thanks for your time and as always, remember, keep growing ;)