Drop shipping is a form of e-Commerce with higher competition but lower risk than operating an online store. Rather than purchasing products and storing them for later sales, you can sell your products and then purchase them from the supplier. The supplier will ship the product directly to your customer.
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Drop Shipping Guide
Drop shipping is one of the best methods for selling online, with a lower risk factor than traditional online stores. However, the level of competition means that drop shipping is not as easy as it sounds. In fact, despite previous positive experiences with selling products as a drop shipper, I no longer operate this business model, preferring affiliate marketing and freelance marketing businesses.
The Drop Shipping Process
This is actually a vey simple concept, originally thought up by online retailers like Amazon. You set up an online store or a selling account with online marketplaces, such as eBay. You offer products that you can get drop shipped. When a customer purchases one of your products, you send their address to your supplier and buy the product. You keep the profit and the product is sent to the customer’s address:
You list products for sale online → Customer buys product → You buy product from supplier → Supplier delivers to customer directly → You keep the profit
Why Start Drop Shipping?
The main attraction of drop shipping is obvious: You can sell products without having to buy them or handle logistics. This frees you from certain limitations that could affect you as a regular retailer:
- You aren’t limited by your ability to purchase inventory
- More cashflow freedom than buying stock
- No shipping and logistics
- No need for warehousing or storage
- You never get “stuck” with a product you can’t sell
You will still need to take care of several things just like a regular online store, such as customer service, returns and disputes, managing your online sales and making payments to your suppliers. You may also find that the price you can get from a retail drop ship supplier does not allow you to be competitive, so you need to choose your suppliers and sales platforms wisely.
How to Run an Online Drop Shipping Business
Although the concept of drop shipping seems simple, with extremely attractive benefits, this method of selling online is actually not recommended for beginners. In fact, you will find that the level of competition and the low margins will mean a lot more effort on your part. If you have never sold anything online, or if you are just starting out, you may prefer to buy items at wholesale or low cost and retail them online.
Essentially, to be a successful dropshipper, you will need to know what to sell, which suppliers to purchase from and where to sell them. In addition to this, your reputation as a seller will be key to your success.
Drop Shipping via Online Marketplaces
Before we get into choosing a product, let’s explore your options for making sales. There are plenty of places where you can set up a classified ad or otherwise reach out with an item for sale, however there are much better platforms. For best results, you will want a seller account on as many sites as possible. You should really operate your own online store, if you can – it’s really much simpler than it sounds.
Sites for buying and selling products have grown in popularity over the years, and there are now so many that it would be pointless to list them all. However, there is no point trying to sell something in the wrong marketplace, or on a great platform that has no buyers. For best results, get yourself set up with the major players:
- Social media classifieds (e.g. “Shopify” on Facebook)
- Other classifieds sites, depending on your products or location
Many of the above sites will let you build a mini “store” with your seller account. Some people swear by this, others say that your reputation as a seller is more important. I have always used web stores, despite the extra cost.
Building Your Own Drop Ship Website
Building an online store is a bit more advanced, but with a little coaching you’ll wonder why you ever hesitated. Using a simple web builder and a shopping cart plugin, you can list all your drop-shippers goods on your own site – but you’ll still need buyers to come to your site to make it worthwhile.
Some very easy web building programs for setting up an online store include:
- Siterubix, combined with a good shopping cart plugin and a payment gateway (e.g. PayPal)
- The Amazon shopping cart plugin can be added to existing websites, directing customers to your Amazon products, supplied by your drop ship supplier.
- Salehoo allows you to set up an online store and also hooks you up with drop ship suppliers
- Shopify is an increasingly popular option, with plugins for existing websites, Facebook integration and a whole host of useful features.
There are many more, and each have their own pros and cons. The three options above are particularly easy to use, as well as being very convenient for drop shippers.
Finding Drop Ship Suppliers and Products
This can be easier or harder than it sounds, depending on how you want to run your business. A simple Google search will return endless results offering products for drop shippers. To narrow this down, you will need to decide how you are going to operate.
If you are time-rich and you love a bargain, but don’t mind a high-intensity job, you can always try buying products at online specials, then selling them for a higher value. Companies like CostCo and Amazon are very cheap options that will ship direct to your customer, and you can add a few dollars as your margin. The trouble is, you need to list hundreds of products to make a decent profit, and there is nothing to stop your customers going direct to these stores for themselves.
One very viable option (although highly labour intensive) is to find “ending soon” listings on eBay and similar sites, place a winning bid that is way under value, then sell the item yourself at a higher price, then have the item shipped directly to your buyer. I’ve done this in the past and I have one good friend who is still making a living doing this. It’s high effort, but it pays off after a little practice.
The above methods will work, but they still require effort and, in some cases, an upfront payment. What you really need to succeed as a drop shipper is a drop ship wholesaler or manufacturer who will give you better rates than anyone else can find online. This great drop shipping article highlights some of the do’s and dont’s when choosing a wholesaler, but here are the basics:
- Signup to a reputable wholesale drop ship network (probably your best option)
- Search drop ship supplier directories
- Form relationships with a supplier first, then ask for a drop ship account
- Use multiple existing drop ship suppliers (very labour intensive.)
How to Make Money Dropshipping
Once you have your platforms and suppliers set up, you need to effectively run your business. This will largely include placing effective listings, taking orders and then placing orders with your suppliers, however there is a bit more to drop shipping than simply exchanging currency for goods.
Two of your main contributors to success will be: Traffic and conversions. Having more traffic to your product listings or pages is the same as having more potential customers in your online store, and more conversions means that a higher percentage of those potential customers will actually buy something.
To increase both traffic and conversions, you should focus on the following main areas:
- Learn how to run an online business
- Increase your product range effectively
- Sell on multiple sites / platforms
- Outsource the hard work to other online sellers
High Demand Products
Now onto the good stuff: The products that everyone is searching for. The following list is just a guide based on my own research and experience – do your own research on what is selling.
- Video games
- Phones and accessories
- Other technology like cameras, tablets, laptops etc
- Sports shoes and clothing
- Most pop-culture items, or products with a cult following (Disney, Star Trek, etc)
- Collectibles (coins, baseball cards, stamps, etc)
- Drones and hot hobby items
- Brand name designer items, like clothing, jewellery and accessories
There is much, much more to this list, so keep on researching!
Promoting Your Products
From a promotional point of view, running a drop shipping business is essentially the same as running a more traditional online store. To get as many sales as possible, you need as many people as possible viewing your products. To get those product views, you need web traffic.
To promote your store online, you should make use of several key elements:
Social Media is an extremely effective way to build a following online, and drive traffic to your products. I have a personal preference for Facebook, Twitter, Google Plus and LinkedIn. Post more than just your product information – attach trending hashtags, write several times a day about different topics and try to get user interaction going. You can also automate a lot of your posts for easy social media followings!
Content Marketing is the best way to get traffic from search engines. Using blogs, forums and even your own website, you can target keywords related to your niche, getting ranked by search engines like Google, Bing and Yahoo. Effective content marketing needs to be a long term strategy, but is great for bringing in customers. Especially effective if you have your own website to sell products from.
Email Campaigns are one of the most lucrative methods of promoting your product. Using an email list builder like Aweber allows you to easily build a database of peopl who want to hear from you. This gives you a direct line to their inbox, where you can offer your products to them directly, automatically and with minimal effort.
Business Directories can be a great asset. Whether they are a free classifieds site like Craigslist or Gumtree, or a paid directory like Yext, these are a great way to reach people who are specifically looking for your products.
What to Watch Out For
- Low cost to start up
- Relatively low risk
- No storage requirements
- Labour intensive
- Liability for returns
- Very high competition
Beware of scammers and bad business practices. Unfortunately, drop shipping is very open to abuse, so you need to do your homework. Look out for offers like the below:
Account Fees to access products: Not always a scam, but generally you should not have to pay a supplier for the privilege of selling their products. There are some good wholesalers that charge membership, so do check out any supplier before deciding if they are legitimate or not.
Requests to use your eBay account: This should be a no-brainer. Never, ever give someone access to your eBay account. Another version of this scam is for suppliers to ask for you to sell something for them, using your account. You make a sale, you pay the supplier, the item never gets shipped. Be very careful of this!
Wholesalers competing with their resellers: Often you will find that the rates you can get from a drop ship supplier is only pennies above the price offered by other sellers on eBay or Amazon. This is often because the supplier is selling products online themselves, at the same rate that you are being offered! This one simply wastes your time, but it’s still an unpleasant experience.
Retailers posing as wholesalers: Similar situation to the one above. An online retailer offers you a drop shipping agreement, but they are selling the items cheaper than the price they have offered you. I have even heard of drop shippers making arrangements to supply more drop shippers – they don’t even have the products themselves!
Links and Resources
Drop shipping is a very real way to make money online, but the level of competition and the rates available to newbies make this sales model more for experts than beginners.
You can read more about drop shipping here: All Drop Shipping Topics
I prefer affiliate marketing to drop shipping, due to the lowered risk. You can learn from the same course that taught me how to build a business online: Wealthy Affiliate University