Do a quick Google search of dropshipping and it appears to be the ultimate get-rich-quick business, where you can start to make passive income while wrapped up in your sheets snoring.
What is dropshipping?
But what exactly is dropshipping? How do you start a dropshipping business and is it all it is cracked up to be? (And as easy as it’s made out to be?).
Dropshipping essentially involves marketing and selling a product on your own website without having to organise the fulfilment and delivery to the customer.
Say you have a product for sale on your website for £30 and a customer buys it. Once they have paid, you go to the wholesaler and purchase the product from the supplier making, say, a £10 profit.
With few set-up costs, it’s a seductive business model for many entrepreneurs. You don’t need a large warehouse to store the products and you don’t have to deal with delivery.
You are, however, still responsible for the sale and any lack of quality or customer service will see customers banging angrily on your e-commerce door.
Dropshipping is still a business, after all: it will require thinking about the long-term, business strategies and takes work to be successful at it.
Steps to start a dropshipping business
#1 Set up your business
This means making sure you’re legal and ready to start trading. If you don’t register, you can’t get wholesale prices from suppliers who will vet you first before trading. This will also mean you will start paying tax on your income.
>See also: Becoming self-employed
Once you’ve become officially legitimate, you can receive goods from wholesalers. They will typically require you to buy in bulk and are notoriously difficult to find online, so consider sifting through a supplier directory to find the perfect fit for your niche.
You’ll also want to set up your website or dropshipping platform. Platforms such as Shopify can allow an e-commerce website to be made in minutes and at relatively low cost.
Shopify is a good example because you can design your site and sell through it straight away.
#2 Choose a product
Not every product is ripe for dropshipping. You’ll ideally sell a product which is popular (you can see what’s in demand by using keyword websites like Keyword Planner and Google Trends), preferably a repeat-purchase product, has an attractive profit margin to be made and is difficult for your potential customers to source locally (you want them to be searching online). You’ll also want to find a niche.
Trending products are perfect for dropshipping, especially those trending on social media platforms such as TikTok, as these will be achieving a high amount of exposure and get a lot of people clicking links to it online.
You don’t want to choose a product that is too big or too fragile as you have no oversight of how it is handled and any breakages upon delivery will come back to bite you with customer complaints. It also eats away at profits with the higher shipping costs.
You’ll also want to consider products that are easy to upscale from, for example a product with associated accessories.
In any case, make sure you get your hands on the product or samples of it first before you start marketing it. You need to believe in the product yourself before you expect your customers to.
#3 Pick your supplier
If a customer isn’t happy with the quality of a product, they will come directly to you. Ensure the supplier you choose has good reviews for both shipping times and quality of product.
Global suppliers can be found on websites like AliExpress, Alibaba, AW Dropship and SaleHoo. Looking through directories of suppliers will give you a better idea of which is best suited to your offering, but another option is to contact the manufacturer of products that you like directly.
Ask the supplier if they offer dropshipping, can add your logo to the product, what their shipping times are, and what their refund policy is before trading with them.
One dropshipping supplier is Teemill. They make eco-friendly, customisable t-shirts while taking care of the legal side like GDPR.
“We have a Shopify integration that means those with an existing Shopify store can sell products made using our circular supply chain,” Teemill’s Jon Wells says.
“We have also just launched an API, which means a simple line of code controls a production line, factories and supply chain, and anyone with an internet connection can get involved.
“Teemill’s public API, sample code and demos mean people can copy-paste to connect their online store or app directly to the factory.”
#4 Build customer trust and start marketing
Build your customer profile, find out the online communities they reside and who they’re inspired by (which could be valuable if going down the influencer marketing route).
Paid advertising will be essential, as in the beginning as you’ll have zero visibility and no trust yet. This will be your biggest expense, and it is quite possible to spend between £1,000 and £2,000 a month on it at the beginning.
Encourage reviews, gather customer feedback (make the good ones testimonials) and deliver good customer service.
After that, it’s about flexing your marketing muscles with strategies such as sales, discounts and scarcity strategies.
> See also: E-marketing made easy
What are the advantages of dropshipping?
- Low start-up costs making it a low-risk introduction into e-commerce – all you need is a laptop, broadband, an online store and a domain name
- Potentially high profit margins if a niche is found with high demand
- No need to store products
- Possibility of making passive income in time – it is quite possible for a lone dropshipper to make around £40,000 a year
- Can work from anywhere
- Easy to scale
What are the disadvantages of dropshipping?
- Fulfilment costs – you don’t have to store or deliver the product, but you do typically have to pay for the fulfilment and delivery costs yourself. This cost should be covered by your profit margin
- No eyes on quality before shipment – you must answer for supplier error
- There can be high competition
- Typically, there aren’t abilities to customise the product
- Potentially long shipping times
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