The Ultimate Guide to Dropshipping

Dropshipping is a fantastic way to run an online business selling wholesale products, without worrying about warehousing and order fulfilment. Discover more about it, and how to get involved, with this ultimate guide to dropshipping.

How does dropshipping work?

If you’ve already heard of dropshipping, you’ll know that it isn’t a new concept. It’s been around for decades as a supply chain management method. It’s particularly popular in ecommerce, where an online retailer will sell a product and arrange for shipping directly from the manufacturer.

Dropshipping has a strong appeal for small retailers who don’t want to worry about buying, storing and shipping orders. In turn, this means worries about premises and cashflow are eliminated. It’s easy to see how dropshipping can work well for a small online business, selling anything from jewellery to phone accessories.

Small business owners can create a market for their products and find customers using their website and online marketplaces. When customers make a purchase, the retailer instructs the dropshipping company to fulfil the customers’ orders on their behalf. The retailer’s profit is then the difference between the wholesale and retail price. This means the retailer can run their business without having to worry about the potential cashflow problems that can come from holding stock.

How much investment does dropshipping require?

Individuals can start small online dropshipping businesses with minimal financial investment. Not having to invest in premises or purchase stock up front means initial costs are limited.

Startup investment should be focused on creating a strong web presence and marketing to customers. These costs can be adjusted to suit whatever budget you have for your new business. Make use of any existing skills – digital marketing whizzes will have an advantage here. DIY ecommerce platforms, such as Shopify and WooCommerce, can be used to create online retail websites out of the box.

Dropshipping lets you work from anywhere

Because you’re running an online business independent of any physical premises, dropshipping also makes for a fantastic remote business model. If the idea of being self-employed and working on your business from anywhere in the world appeals to you, then dropshipping could be the perfect solution.

This is already a popular way for entrepreneurs to work, so much so, that tribes of digital nomads are setting up shop in tropical hotspots all over the world. Where there is Wi-Fi, there is a way.

Digital nomads get together to rent accommodation and co-working space together, sharing online success tips and exploring foreign countries, whilst working remotely on their businesses.

The drawbacks of dropshipping

Whilst the benefits are obvious, there are also drawbacks to dropshipping.

To some extent, you are relinquishing control over a large part of your business supply chain. How and when your products arrive to your customers is a very important part of any ecommerce business. Do your research in dropshipping forums and groups online to find the most reputable dropshipping companies to represent your business.

Depending on the niche you are targeting, dropshipping may make you more or less profitable than if you handled the supply process yourself. If dropshipping is a more expensive option for you than purchasing and handling stock yourself, you need to consider if the pros outweigh the cons. But if dropshipping seems like a reasonable, low-commitment way of testing out a new market or product idea, then why not give it a go?

How to get started with dropshipping

If you already have an idea, consider how it could work as a dropshipping model. You might want to sell remote control cars or computer games. These niches may already be popular with dropshippers, giving you a choice of suppliers – but more competition.

Even areas such as photography or t-shirt design, which you wouldn’t ordinarily associate with retail dropshipping, are both examples of niches that can work very well.

Dropshipping business: an example

Let us take a t-shirt design business as an example. The initial investment in the business would involve developing a website, or a web presence on a marketplace such as Etsy or Spreadshirt. With dropshipping, your time and investment goes into designing and marketing the t-shirts, rather than purchasing and setting up printing equipment.

When customers purchase t-shirts from the retailer, an order is placed with the t-shirt printing and fulfilment company, and is shipped to the customer directly. The customer receives their order, and the retailer makes a profit.

Setting up your dropshipping business

Dropshipping is a great opportunity for online business models selling many low-value products, or few high-value products. Many markets are now becoming saturated, but there are still niches to be found. For example, if you’re thinking about selling phone accessories, this is a great time to specialize in sustainably sourced bamboo phone cases.

You could even go omnichannel and build an online dropshipping business alongside your current business. A chimney sweep and fireplace fitter could build a website specializing in wood burning stoves, drop shipped straight to your customer from the manufacturer. 

If you’re creating a business from scratch, start by researching ideas. Use tools like Google Keyword Planner to estimate the size of your potential market and see how many people are already searching for your product. Competitor research will also give you an idea of the potential market.

 

As with any business idea, make sure you can offer something unique – whether that be your brand ethics, product quality, or price. Dropshipping should be a small part of your overall business model and plan, which saves you time and investment and lets you get on with the more interesting aspects of running a store. The opportunities are limitless: and your lifestyle unlimited.

Patrick Foster, ecommerce entrepreneur, coach & writer

I’m currently writing on EcommerceTips.org where I share engaging ecommerce content for entrepreneurs and business owners. You can follow me on Twitter here.

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