Dropshipping is a business model that allows stores to skip the difficult task of keeping inventory and avoid the cost associated with it.
Businesses that use this retail fulfillment method list merchandise they don’t have on their online stores. When a customer buys an item from a dropshipping store, the owners purchase that same item from a manufacturer that sends it directly to the customer’s address.
In This Article:
- How Does Dropshipping work?
- How to Start a Dropshipping Store?
- Dropshipping Pros & Cons
- Is Dropshipping Worth it?
How Does Dropshipping Work?
When a customer visits an online store and makes a purchase, the owner of the store uses the money received to buy that product for a cheaper price from a manufacturer that sends it to the customer’s address.
Businesses that usually use dropshipping buy merchandise from Chinese manufacturers for a very low price to maximize their profit margins.
Example:
A customer buys a watch from an online dropshipping store for $25, the owner of the store receives the money and purchases the watch for $8 from a Chinese manufacturer through AliExpress marketplace. Then the manufacturer sends the item to the customer’s address.
Assuming that the online store and the manufacturer both offer free shipping, the dropshipping business will profit : 25-8 = $17
This formula is simple and only reflectS the idea behind dropshipping. It doesn’t include any advertising cost or fees related to the online store including domain, hosting, and apps or plugins used to make it functional
How to Start a Dropshipping Store?
1- Finding Manufacturers and Products:
It is important to find a trustworthy manufacturer that offers cheap prices and quality products. A manufacturer can be located in your country, which will facilitate communication and help with fast shipping, or overseas, which will allow the dropshipping store to maximize profit (Most of stores use Chinese manufacturers featured on AliExpress).
1.1- Finding Products to Sell:
After you decide your niche you can: 1) Visit AliExpress and check their featured and latest merchandise related to your niche to find new products that are not introduced yet to your local market or even internationally. 2) Let your competition research and test products. Check Facebook ads to find out what they are selling, what’s making them money and how they find customers.
1.2- Finding Manufacturers:
Many dropshipping reviews will tell you that you only need some kind of app that will import listing from AliExpress to your online store to start selling immediately, but the truth is that when you start making sales, you will also get refund requests, customers asking about the shipping time, and most importantly returns.
It’s important to research and learn more about the manufacturers of the product you are selling instead of randomly importing listings to your store. Check their response time, learn about their shipping options and make sure they can honor their promises. Your store can be flagged by customers if you start making a lot of sales but the manufacturer can’t deliver the quantity you are ordering.
Keep in mind that finding a local manufacturer in your country with more expensive products can be more beneficial when it comes to communication, shipping time, customer service and returns.
2- Domain Name For Online Store:
Once a niche is chosen and the nature of the products to sell is decided, the next step will be to purchase a domain name that is easy to remember and reflects the content of the online store for SEO purposes.
2.1- Domain Name Tips:
It’s advised to chose a domain name that is short and has a .com extension. If one word domains are taken, use google keyword planner to find 2 or 3 word keywords that represent what you are selling in your store and that are low competition. (Visit Google Keyword Planner Here)
3- Hosting:
Now that a niche is decided, products are chosen and a domain name is selected, there are 2 ways to create a dropshipping store:
3.1 – Shopify:
What is Shopify? An ecommerce solution that will allow you to sell anywhere to anyone in the world.
For as low as $29/month, you can create your store in no time with Shopify.
3.1.1 – Shopify Pros:
- Complete ecommerce solution that will allow you to easily start your store quickly.
- Easy integration of third party tools that will improve customers experience and help you make more sales.
- Good customer service and an abundance of information in the internet to answer all your questions about using Shopify.
- Advanced management interface (managing inventory, reporting, and tracking customers orders)
3.1.2 – Shopify Cons:
- Monthly fee.
- Paid apps.
- The best themes for your store aren’t free.
- Possible need of a minimum developing skills to make changes to your store, or hiring a developer.
3.2- Woocommerce:
WooCommerce is an open-source e-commerce plugin for WordPress. It is designed for small and large online stores.
Hosting your store in one of the well know hosting platform such as Hostgator will allow you to install WordPress and activate woocomerce plugin to create an online store.
3.2.1- Woocommerce Pros:
- Huge Woocommerce community and abundance of information on the net.
- Open source plugin.
- Big selection of free and paid Woocommerce templates.
- Customers can check out as members of the site or as guests.
- Integrated SEO and possiblity to add all SEO in one pack for free through Yoast SEO plugin.
- Live reporting (Customers info, sales, returns…).
Is Dropshipping Worth it?
Many people claim that they are making a lot of money with dropshipping. Some of them publish screen shots of their earnings to attract new students to their online dropshipping courses and to prove how successful an entrepreneur can be with this business model, but they never tell us if the numbers they are showing us are profit or just sales.
Profit= Sales-Cost. Huge sales numbers can be tricky, especially that most of dropshipping stores don’t get organic traffic. Owners have to pay a lot of money to maintain the store such as paying for facebook advertising, and instagram influencers to promote products that are not sure to make any money.
If you add the stress of the upfront investment to the stress of bad manufacturers that don’t deliver, low quality products, refund requests and returns, dropshipping is not really worth it in my opinion. Unless you find a local manufacturer that can offer your customers good quality products and fast shipping, and offer you a good pricing structure to be able to cover your expenses and make you a profit.
And finally, it’s important to be honest in your store’s terms of use and privacy policy, and let the customers know clearly that their information will be shared with a 3rd party to avoid any legal issues. Please consult a legal expert on this matter.
