Are You Looking for a Way to Establish an Online Business?
Maybe Drop Shipping is the Answer
Earning money online is a dream of many people these days. However, unless you have a plan, it’s likely to remain just that – a dream.
Yeah, I know; I’m stating the bleeding obvious. But have you really thought about it? There are loads of folk earning what can be a very good living with internet marketing. What all these successful people have in common though, is a plan. (And the willingness to work at it)
I’ve talked quite a bit elsewhere on this site about Affiliate Marketing. Another avenue that lots of internet marketers choose to invest their time into is Drop Shipping.
So What Exactly is Drop Shipping?
Drop shipping was the first way that I ever heard of someone making money online. My older brother had a website way back in the early 2000’s selling fishing gear. He had a supplier in China and used to promote their products (mostly lures, reels etc) and customers would purchase through his site with the order being fulfilled direct from the factory.
In those days it was relatively easy to get a website ranked in the SERPS. He didn’t make a whole lot of money, but it gave him a decent retirement income up to his untimely passing in the mid 2000’s.
Basically, Drop Shipping works like this…
You, the website owner, or retailer, promote items of your choosing on your website. You never have to actually buy any of these products up front. Your ads will mostly consist of photos and descriptions provided by your supplier.
Customers view the items, and hopefully place orders. You accept payment at the retail price.
You then place an order with your supplier for the item. The supplier will then ship the item direct to the buyer and bill you at your agreed wholesale price.
Well, maybe not so much… There’s always a catch. Read on and I’ll try to explain the Pros and Cons as briefly as possible.
What’s the Best Part of Drop Shipping?
1. Drop shipping is a great way for a beginner to venture into internet marketing. There’s very little expense involved, and if you’re a good learner you can teach yourself the business by doing online research.
Not that I’d recommend that though. There’s a lot of misleading info out there and it’s hard to tell the good guys from the baddies. (In any case, you’ll need a platform to work with and training is supplied when you sign up. More on this later)
2. You can sell virtually anything you want to, and you never need to carry any stock or inventory. This is probably the best feature, as anyone who’s ever owned a brick and mortar retail store will tell you.
Even if you make some bad choices and fail to pull in much business, you don’t run the risk of getting landed with unwanted stock that you have to get rid of at bargain prices. You simply change your tactics or find other products to promote.
3. As I stated above, setup costs are minimal. You’ll need a website, and you’ll need hosting. Don’t be put off by this though, as these days it’s fairly simple and inexpensive to build a site with WordPress. There are places like this one, where you can even get a website for free to learn the ropes.
4. This type of business can be run from anywhere. You don’t need an office, a fixed phone, staff, in fact all you need is a laptop and an internet connection. Some even run online businesses relying almost entirely on free WiFi. You could be lolling in a hammock in the Bahamas or trekking the Himalayas. If the digital nomad lifestyle is what you’re seeking, drop shipping may well be the means to achieve it.
5. It’s easy to keep up with new trends. Whenever a new product or style comes out you can quickly add it to your inventory.
6. There’s no need to get yourself involved with shipping. All the goods are shipped directly to the customer by your supplier. All you need to do is process the order and the rest takes care of itself. (There is a downside to this though, which I’ll cover in the next section)
What are the Cons of Drop Shipping?
1. Profit margins with drop shipping are traditionally lower than other business models. Wholesalers or manufacturers know you are only selling to order, and will probably be ordering in small quantities. Their selling prices to you will reflect this. Weigh this against the benefits of not having to carry stock though, and you’ll see you’re still in front.
2. Competition is usually very high in most areas. Because drop shipping is so easy to set up, it’s attracted lots of punters. Many of these will be offering products at greatly reduced prices in order to get themselves established. Some suppliers will specify a minimum advertised price for their products to curtail this, but it’s not easy to enforce.
3. Since the customer is dealing with your website, any delivery or warranty issues will be your problem. At least initially. It’s no good trying to sheet the blame back to the supplier (even if it is their fault) as this only makes you look shonky in the eyes of your customer. This is why you need to carefully vet any suppliers before ordering from them.
4. As the products will be shipped direct from your supplier, you’ll have no opportunity to add your own brand, logo etc to the items. This makes it difficult to establish your brand and build trust. Some suppliers have been known to include their own advertising material in order to grab any repeat business for themselves. It goes without saying then, to avoid dealing with suppliers who also have their own online retail division.
It’s important to start building a mailing list of subscribers/buyers right from the start so you can maintain contact with them and promote future offers. Don’t worry if this seems daunting, it’s all included with any training offered by your drop ship agency. (More on this later)
5. If you deal with more than one supplier, your delivery costs may be higher as each will have their own minimum fee. Your customer, however, will expect you to bundle all delivery fees together. It’s also highly unlikely that all items will arrive at the same time.
6. Keeping track of your suppliers’ inventories can be tricky. Until you place an order you’ll never know for sure whether a specific item is in stock. Placing items on back order can sometimes lead to cancellations. There’s software available to manage these issues but these will come at a price, affecting your bottom line.
So is Drop Shipping a Viable Business?
The short answer is Yes. Drop shipping markups can range from around 15% up to as much as 80-100% for select items. The key is to do the research and compare. Obviously, you’ll usually get much better margins dealing with a manufacturer than a wholesaler.
Much like with affiliate marketing, keyword research is an integral part of any successful e-commerce business. Knowing what potential customers are looking for and then marrying that with reliable suppliers is what it’s all about.
There are three basic levels of suppliers you may deal with.
Manufacturers: Not all manufacturers will be interested in dealing directly with a drop shipper. If you’re lucky enough to find one who is, the process will be so much easier and profit margins should be higher.
Wholesalers: A wholesaler buys in bulk from the manufacturer, then onsells to the retailer (you), via the dropship platform. They will retain a percentage. However, as their buying price will be better than any that you could negotiate, the price to you may be pretty comparable with a manufacturer direct price.
Aggregators: An aggregator will deal with multiple manufacturers, and can supply many products in the one order. The advantage being that you don’t have to worry about multiple shipping arrangements, multiple orders etc. Remember though, they will also add their own profit markup to the price.
How to Become a Successful Drop Shipper
The real trick to building a successful drop shipping business is to work with an established dropshipping specialist supplier.
The future success of your business relies on a good rapport with a company that has your back in any situation. You will be relying on them to process your orders promptly and efficiently. If they fail to deliver on your order, your brand is the one that suffers. A good drop ship specialist supplier knows that, and will do all they can to help you succeed. After all, it’s in their own interests to do so.
Avoid a supplier who deals in cheap copies, or knock-offs. Not only will you be laying yourself open to warranty issues and the resulting bad customer experience, but you could find yourself in a whole heap of legal trouble!
Look for someone who has good customer reviews and testimonials. This includes their delivery service. Remember, the customer will expect you to do any follow-ups and won’t always be as patient as you might think they should.
Where to start looking? Well Google is your best bet when looking for drop ship suppliers. Many websites dedicated to ecommerce, that come up in the search results, will have directories of drop shippers and their contact information. You can simply send them a short, polite email asking some relevant questions. That way you can gauge how quickly they respond and how helpful their sales reps are.
It’s not easy trying to decide whether a particular company will be a good fit for your business, but two or three pertinent questions will usually help sort the wheat from the chaff.
You’ll need to impress on them that you know your stuff (even if you really don’t) so they won’t try to take advantage of your naiveté. In particular, ask for the all-important details like profit margins, additional costs, returns policy, are their prices negotiable etc etc. Also make sure to ask if they are a retailer themselves. You don’t need a price war with your own supplier.
You need to get all this right, as you’ll be hoping for a long-term arrangement.
Remember too, that there will be some scam operators out there who will try to take advantage of you so be sure to perform your due diligence. Scam forums are a good place to check out someone you’re not sure about. Things to watch for are the lack of a physical address on their website, “membership” fees, wanting to deal only in bank transfers etc.
Establishing Your Online Store
There are a few ways to set up a drop shipping website. You could try building your own site using WordPress or a similar CMS and optimizing it yourself. You could add drop shipping to an existing affiliate or blog site.
With Shopify, you can get started for free, and run your online store for as little as $29 a month. This includes your website, hosting, and heaps of extras, and also includes training on all aspects of ecommerce, including drop shipping. Don’t just take my word for it though, the link above will take you to their site where you can check out all the finer details.
Shopify also integrates with Oberlo, an app designed to scout out products for you to promote within your site. Oberlo is a paid drop shipping app, but you can get it for free when you use Shopify.
AliDropship is a plug-in, that you buy as a one-off purchase.
The app costs USD$89.00 and gives you all the basics for a Drop Ship Business. If you choose, you can go with their advanced offer and have a complete Turnkey Business created for you at prices starting from $299. This is a one-off price, and is a good option (if you can afford it) for a beginner to internet marketing. Can you imagine anyone setting up a conventional retail store for just $299.00?
As with Shopify, there’s loads of training and resources available to get you up and running quickly and keep you on the right track.
So there you have my take on drop shipping. This post is fairly general, but I think I’ve explained the basics. I’ve been thinking of expanding into this field, so I thought “What the heck, if I’m going to research it I may as well write about it”.
Drop shipping and affiliate marketing are different animals. Can you do both? I don’t see why not. Can you integrate the two into one online presence? Maybe, but I think separate entities would be the way to go.
Curious about affiliate marketing? Check out this review on the best affiliate training system in the world. I know, that’s a bold claim, but you can test it for yourself FOR FREE.
Have you tried drop shipping as a business model? Do you have anything you’d like to add to the conversation?
Please feel free to comment in the box below.
For now, I wish you peace and prosperity.
Your Friend, Thomas. (aka BusyBee)