Starting a Dropshipping Business Without Breaking the Bank
Starting a dropshipping business can be a cost-effective way of entering the ecommerce market. You can build your own brand without having to own retail space, storage, or even your own inventory.
Choosing dropshipping as your primary business strategy can make running an online shop more affordable, easier to manage, and creates less overhead for your business.
Discover how to start dropshipping for yourself.
In this dropshipping guide:
- What is dropshipping?
- Benefits of dropshipping
- Disadvantages of dropshipping
- How to choose your wholesalers and suppliers
- Setting up your dropshipping store
- Frequently asked questions
What is dropshipping?
Dropshipping, simply put, is when an online retailer does not stock their own products, but instead works with a wholesaler that owns the items, fulfils the order, and ships the products to the customer.
This retail technique is becoming an integral part of many growing online businesses. It helps solve the problems of ordering inventory in advance and transporting those goods to your customer.
Instead, you just have the wholesaler ship the item with a customized label and invoice. The beauty of it is that your customer probably won’t know that the order has been fulfilled by someone else.
This supply chain method is a great asset to starting an online store and can take a lot of the admin out of running an ecommerce site. Starting a dropshipping business isn’t without its problems, though. Read on to discover some of the pros and cons to launching your own dropshipping site.
Benefits of dropshipping
The main benefit to dropshipping is that it eliminates the need to order and hold inventory. Wholesalers have large amounts of inventory and a wide variety of products on hand. All you need to do is create the shop window in which to advertise the products.
In practice, a customer will order from your ecommerce store and that order will be placed with the wholesaler who stocks the product. They’ll fulfil and deliver the order, taking a cut of the sale total in return.
Other benefits include:
- Product range. This allows you to offer customers a greater range of products. Not having to worry about supply as you create the demand can go a long way.
- Stress-free shipping. It also reduces the stress of starting your own online shop, not to mention the fuss of packaging and shipping.
- On-the-go access. You don’t need a physical location. You can run your business from the beach, or the shopping mall, or anywhere with a reliable Internet connection. Wholesalers will take care of that for you, shipping your orders directly to your customers.
Disadvantages of dropshipping
Dropshipping is not a well-kept secret. With its great benefits, many online retailers have already taken advantage of this tool. This in turn creates competition in the market. It can be hard to distinguish yourself from other online shops that are also offering a wide variety of products.
Other potential disadvantages to consider include:
- The potential loss of profit. So many rivals in one place means you’ll likely find you’re one of many businesses vying for a customer’s attention.
- Product clarity. It can also be challenging not to physically see the products you are selling – especially if a customer has a question about them.
- Quality control. You may lose the ability to quality control items before they are shipped to your customer, creating the opportunity for errors that are ultimately out of your hands, but your problem in the eyes of your customer.
Bottom line: When reviewing the pros and cons of dropshipping, it’s like any other venture, benefits mixed with problems. It’s not a foolproof way to start a business, but it can be very useful to help you get started.
How to choose your wholesalers and suppliers
Finding great wholesalers that you can trust is critical. The wholesaler is the backbone of your dropshipping business, so do your research.
Luckily, dropshipping is not a new or untested idea. Many major retailers, brick-and-mortar as well as online stores, include dropshipping in their business models.
It’s worth comparing wholesalers before you settle on one provider. Order a few products for yourself, test their quality, see how easy it is to return an item and what the communication from the company is like.
Tips for choosing the right dropshipper.
Using wholesalers for dropshipping is on the rise, so there’s plenty of them available. But you should do your due diligence.
Before you start dropshipping with a wholesaler, consider the below.
- Do your research. Thoroughly research your wholesaler before committing. Not only is this logical, it’s also a smart business practice. Since you are still working via the web, there will be a lot of unreliable options that immediately crop up. Take your time and delve deeper into different selections.
- Explore the ordering process. Does the wholesaler require a minimum order spend before shipping products. Test the ordering process for yourself and make a note of how well the items are packaged and how quickly they arrive.
- Weigh up costs. Total up how much profit you’d make on an order. Many wholesalers will offer reduced fees or discounts for bulk orders, while you may even be able to negotiate further price cuts if you order in high volume.
- Scalability. You’ve started your ecommerce site in the hope that it can grow and expand in the future. Make sure your chosen wholesaler can grow alongside you. Do they have the ability to handle large order numbers? Or ship globally?
- Get the right licenses. You might need a resellers certificate to sell certain items online. Do your research to make sure you’re operating within legal guidelines.
- Find multiple suppliers. You’ll need more than one on hand in case of sold out or back-ordered products. Using key terms that pertain to the products you are selling will help in your search of the right supplier.
- Customer service. A good way to distinguish yourself from your competition is by having great customer service. You may not be the one fulfilling the order, but you can be the one to offer your customers help when their needs arise. Great customer service goes a long way in pulling you out from the pack.
Setting up your dropshipping store
Once you’ve chosen your wholesaler, you’ll need to set up your online store. Consider the steps below before you get started with dropshipping.
- Do your competitor research.
What are your competitors doing? Take a look at rival ecommerce sites and see how the ordering process works. Get a feel for their products and how the items are marketed.
- Build your store.
You’ll need to build your ecommerce store online. Consider how you want your website to look, what your brand is, and how you’ll advertise your products. Test the ordering process yourself so that you can make sure it all works and iron out any kinks in the buying process. If it’s not totally seamless, your customers are likely to leave.
- Decide on a business structure.
Your business structure will determine how you pay tax. So, decide which one suits your situation best and go from there. Do your research here, as it’s essential that your business operates with the legal requirements of the law. Not doing so could land you in big trouble.
- Order your finances.
It’s best to keep your personal and business finances separate. So set up a business bank account to handle all the incomings and outgoings related to your business. You might want to speak to your local bank or building society for further financial advice.
- Start marketing.
Spread the word about your store – it’s the only way people will find out about your business. Market across your social media channels or consider other avenues, like PPC or email marketing, to raise awareness about your dropshipping store.
Ecommerce has created marvelous opportunities for both big and small businesses. It has changed the retail world by connecting shop owners with customers worldwide. A virtual shop can now be every bit as profitable as a brick-and-mortar store, especially with a Adobe Commerce, powered by Magento.
And with the popularity and easy learning curve of dropshipping, anyone can try it – you don’t even need a lot of capital to get up and running. The most important thing is to arm yourself with knowledge.
Frequently asked questions about dropshipping
Is dropshipping legal?
Dropshipping is a legal business strategy. As with any business, you’ll need to ensure your dropshipping business operates within the legal guidelines and rules of your country.
Can you start droppshipping by yourself?
If you’re willing to put the work in to set up the store and market your business, you can run a dropshipping business alone. This sales strategy can be a good way to earn money alongside your regular job or in your spare time.
How profitable is dropshipping?
A successful dropshipping business can be very profitable. But, as with any business, starting one doesn’t guarantee success and there is financial risk that comes with running an ecommerce site. Success isn’t guarantee and depends on a range of factors, as well as how much work you’re willing to put in.