The internet has revolutionised how we communicate, consume information, and even purchase products. It wasn’t long very long ago when e-commerce or borderless business was merely a distant dream. Today, it is a $6.3 trillion industry. Its growth can be attributed to many factors, including increasing internet penetration, dwindling shipping costs, increasing consumer demand for convenience, and more. Online commerce is not only convenient for consumers but also for individuals looking to start a business from their home.

Dropshipping, a subset of e-commerce has quickly become one of the most effective and best ways to earn money online today. Today, around <href=”#:~:text=General%20Drop%20Shipping%20Statistics&amp;text=Around%2027%25%20of%20businesses%20have,more%20profitable%20than%20affiliate%20marketing.”>30% of online businesses rely on dropshipping to fulfil their orders and as things stand, dropshipping represents around 23% of the global e-commerce sector today. So, what exactly is dropshipping and why are millions worldwide looking to set foot into the dropshipping world?

This blog explains what dropshipping is and provides precious insights into what budding dropshippers need to do to get started.

What Exactly is Dropshipping?

Dropshipping is nothing but a type of e-commerce business wherein a third party manages logistics and ships products for a business. For example, if a customer places an order on Store A’s website, the order will be fulfilled by a third party and not by Store A. That said, Store A needs to send all the details related to the order to the third party to ensure timely and accurate product delivery.

Now, let’s understand how to start dropshipping.

How to Start a Dropshipping Business?

Dropshipping is exciting and one of the best ways to make money online. But, what does it take to start a dropshipping business? This section covers the important steps one needs to take to start and run a dropshipping business.

  • In-depth Market Research for Dropshipping Products

Before you kickstart your dropshipping journey, it is important to find your niche and identify how you intend to stand out from the rest of the competition. One of the most effective ways to garner growth is to find an underserved niche and cater to that audience. This approach allows you to cut competition and predominantly focus on building a brand. Harness tools like Facebook Audience Insights, Google Keyword Planner, and Google Trends to find your niche and what people are looking for in that particular industry. Conduct in-depth research to understand the pulse of your audience and identify a few products you can sell on your digital store.

  • Find a Supplier or Reliable Third Part Shipping Partner

The success of your dropshipping business will depend a lot on your supplier. While the quality of your product is important, you also need to ensure it reaches your customers within the promised shipping period. This is why you need to find a reliable and reputed supplier to work with. There are different ways to evaluate whether a supplier is the right fit for your dropshipping business.

For starters, find out whether the supplier has a legitimate license and more about its clientele to avoid getting scammed. Next, find out the minimum order quantity or MOQ set by different suppliers and whether it aligns with your business model. Talk to them and understand how they work, their order fulfilment process, and what customer support channels they use to address concerns and queries.

Lastly, always create a dropshipping agreement before you start working with a supplier to avoid conflict and disagreements. The agreement should have all the key details including pricing, quality standards, delivery protocols, and more.

  • Build Brand Identity

No matter how niche or specialised your dropshipping business is, you must focus on building brand identity. It not only allows you to stand out from other businesses but also carve your niche in the cluttered online business world. Additionally, unique branding and brand positioning ensure that people do not forget your brand easily and purchase from you again.

Determine how you wish to position your brand and your unique selling point (USP). It is also crucial to give your business a unique name that is easy to recall. Find a pleasant colour scheme for your business’s branding assets, website, logo, and more. Use fonts according to your brand’s style, voice, and personality to build brand identity and recognition.

Find Suppliers and Wholesalers

As mentioned earlier, working with the right suppliers and wholesalers can make or break your e-commerce dropshipping business. Here’s how you can find suitable and trustworthy suppliers for dropshipping.

  • Online Directories

Going through online directories is a good way to find suppliers and wholesalers that you can work with. You will find all the basic information including the company name, minimum order quantity, for how long the company is active, pricing, and the product categories it specialises in. A few directories will also provide the contact details of suppliers making it easier for you to shortlist suppliers.

  • Google

A simple Google search can help you find the right suppliers for your dropshipping business. Use the right keywords to find legitimate, reliable, and relevant suppliers. That said, the onus is on you to establish the credibility of the supplier.

  • Communicate With Suppliers

One of the best ways to find a trustworthy supplier for dropshipping is to get in touch with them directly. Speak to them on the phone or communicate with them via email or chat to learn about their discounts, pricing, operating processes, and more. You can also ask them about their manufacturing and shipping process and establish a rapport with them.

Benefits of Dropshipping

This section explores some of the major benefits of dropshipping. Let’s take a look.

  • Less Risky

Dropshipping is not as risky as some of the other types of business since it does not require a very high capital investment.

  • Side Hustle

You can start a dropshipping business as a side hustle and earn an extra income without leaving your primary job.

  • Flexibility

Since almost all activities can be carried out online, a drop shipping business offers flexibility enabling you to work from any corner of the world.

Pitfalls of Dropshipping

While dropshipping is a great way to make money online, it comes with its fair share of challenges.

  • Limited Control Over Quality and Supply Chain

Despite finding the top suppliers and wholesalers, you have limited control over the quality of your products since you are not manufacturing them. Additionally, you also have limited or almost no control over the entire supply chain.

  • Profit Margins are Less

Despite dealing with wholesalers and saving big bucks on procurement and warehousing, profit margins in a drop shipping business aren’t that high. This is primarily due to the multiple hidden costs and other associated costs. The profit margins fall even more when wholesalers need to fulfil low-volume orders or low-selling products.

  • High Competition

Setting up and launching a dropshipping business is only the start. You need to learn a bunch of other interconnected skills including performance and digital marketing to stand a chance to cut through the competition. Let’s admit it, the competition is fierce and it will take consistent efforts to hit the ground running.

Final Words

While there is no doubt that dropshipping is one of the most exciting ways to earn money online, it is not as straightforward as it seems. The endeavour requires a thorough understanding of how the online market works, consumer trends, performance marketing and more. This blog is a good starting point to understand dropshipping and what it takes to -.

FAQs

Will dropshipping help make my business profitable?

While there is no sure-shot way to say whether dropshipping will make your business profitable, the chances of success depend on different factors including product niche, pricing, order fulfilment, discount, branding, and more.

Do I need to make a large investment to start dropshipping?

No, you do not need to make a large investment to start dropshipping. Some of the successful dropshipping businesses have started with as low as $200.

How can I market my dropshipping business?

You can market your dropshipping business through social media, performance marketing, influencer marketing, and attending trade shows.

What legal documents do I need for a dropshipping business?

Local business licenses, employment agreements, tax registrations, and agreements are some of the legal documents you need for a dropshipping business.