Dropshipping is selling something online without touching the product. It works like this: You find a product & supplier at a low price, you list the product(s) on your own website for a higher price and sell it. When you get an order, you buy the product at the low price and ship it to your customer while keeping the difference. It is by far one of my favorite business models and revenue streams. The simplicity to setup an online store using dropshipping, and it’s low cost to startup is what got me hooked. You’ll spend more time marketing, than managing a dropshipping site.
Table of contents
- Pros of Dropshipping Business Model
- Cons of Dropshipping Business Model.
- Growth Strategies
- Considerations when getting into dropshipping.
- Examples of dropshipping sites.
- Platforms & Tools for dropshipping
Pros Of The Dropshipping Business Model
The biggest pro of dropshipping is what it means to dropship. By not touching inventory you’re not associating any of the cost of doing business with physical products: no costs for storage space, staff & time handling products, packaging materials, shipping, inventory tracking. This brings us to the next point.
Incredibly low start up cost: E-Commerce solutions (online stores) are affordable to build and manage, especially if you do it yourself on a platform like shopify. A digital storefront (30$/mo+) & a domain name (12$+ per year) are the bare minimum needs to get into dropshipping.
Quick to setup: With only having to find suppliers for your products, setup and online store, & begin marketing, it’s not impossible to be online within a week.
Cons Of The Dropshipping Business Model
Lower profit margins. You’re at the mercy of the shipping options your fullfillment provider chooses to use. For example, if using Shopify’s free platform Oberlo you’re at the mercy of their providers & aliexpress, and the 2 week average delivery time of ePacket
It can be hard to find fulfillment providers based on the USA, especially early on.
If you grow too quickly, your fulfillment provider might not be able to keep up with you. It’s best to find 2 or 3 alternative suppliers for everything, but not completely necessary early on. If you don’t have a solution setup to stop selling when your supplier is out of stock of an item, it could cascade into a customer support nightmare.
Because of the very nature of dropshipping it can be difficult to stand out from your competitors. Unless you are super niche it’s likely you will be competing with hundreds, possibly thousands of other dropshippers selling the exact same product as you.
Paid ads: Buying ads works for any business model. If you’re skilled at understanding the wants & needs of your audience and target them it’s a recipie for profit.
Social: SMM is everyone’s friend and can be a great way to grow your audience as well as keep them engaged, warm & familiar with your brand. If you can craft viral content you can rocket in your following. This is #2 on my list of favorite traffic sources. With the proper management it’s easy to grow an audience of buyers even before you have your store up. Social media isn’t quick to start off but it’s worth managing in the longrun.
Organic: SEO is your best best friend when it comes to traffic & growth. If you rank in the search engines, you’re getting people that are interested & looking for your products. This results in a much higher conversion rate from visitor to customer. This is hands down my favorite traffic source as it’s both the best converting and free. The only thing required to benefit from it it is an investment of time (or paying someone to do it for you).
Considerations When Getting Into Dropshipping
Dropshipping is great for first time entrepreneurs with it’s low cost, and time investment to get started.
It’s a simple way suppliment existing ecomerce stores, by adding products to your listings without having to touch them. It can also be a fantastic way to test the interest of an audience to a product before buying large stocks.
Because of the sometimes lower profit margins paid marketing early on can be difficult if you have minimal startup capital. Your targeting needs to be on point for active consumers that will be interested in your product.
Examples Of Dropshipping Sites
Todays Viral Products
This site is one of my favorite examples of a Shopify + Oberlo dropshipping site. It’s a general store shipping from aliexpress suppliers with an estimated 40% profit margin.
Amazon – To a very small extent, amazon is a dropshipper with their third party sellers. Amazon is a bit of a hybrid, providing a place for anyone to list their products for sale as well as warehousing its own product lines (or people using FBA). If you’ve ever gotten a message that they are using a third party supplier, amazon is dropshipping.
Platforms & Tools For Dropshipping
Shopify: Shopify in itself is just an ecommerce solution but for first time dropshippers or professionals alike, this is the go-to platform. With integrations like Oberlo (free to a point) & Dropified (paid only) it’s easy to setup & manage fulfillment of orders across thousands of products.
Oberlo: Oberlo can be used to manage dropshipped products, and automate telling your supplier to fulfill the order. On the free plan it can manage 50 orders a month and synchronize 500 products. It also has the limitation of only working with aliexpress & partnered oberlo providers but that’s more than enough to start dropshipping.
Dropified: This is similar to oberlo but much more expansive. You get what you pay for though. Dropified can automate fulfillment with far more fulfillment providers than just those on aliexpress. This allows you huge fexibility & redundncy in your products, supplies & shipping options.