Menu Close

Dropshipping Basics – How To Start

Now is the time to get started in dropshipping. We are in the fourth quarter, the busiest shopping time of the year, and it is not too late to get up and running to take advantage of the shopping season ahead.

How Does Dropshipping Really Work

First let’s review dropshipping. As a dropshipper you find a wholesaler or supplier that carries a product you are interested in selling and you create a relationship with them. You post items on sites like Amazon, EBay, or your own website. Once an item sells and the buyer has paid you, then you notify your wholesaler. You pay the wholesaler for the product (with the money from the buyer, so nothing out-of-pocket for you) and they package and ship it.

There is no inventory to store, no packaging and shipping. You do the front end work and identify what you want to sell, post it on your site, and then do some great customer service. Most suppliers will have pictures and descriptions for you but you can always add some of your own ideas.

As I have said in previous blog post I think that dropshipping is one of the easiest ways of getting up and running online and creating income quickly. I am not saying overnight riches but even making a sale or 2 in the first few weeks helps you stay motivated and see the possibilities.

Here is an example of how dropshipping works:

You sell item X on eBay for $50. A customer buys Item X for $50. You then pay your manufacturer or supplier the wholesale cost, let’s say $30, and have him ship the item X to your customer. That leaves you with gross profit of $20. Deduct all your fee, such as your transaction fees, e-commerce platform fees, bookkeeping costs, merchant paymet processing costs, costs of advertising, and a percentage for the risk of returns and possible fraud. What is left is your net profit.

What To Sell

There are several ways to determine what to sell online. Is there something you have a broad knowledge base on that you enjoy and would want to spend some time researching? It’s easier to stay excited and motivated if you are interested and know something about your niche. I know very little about the latest technology and although that is a hot market it would be arduous for me to spend time learning about what’s new and why people need to have it.

Do some research and figure out what people are searching for, you can check out top sellers on Amazon, you can check what sold on eBay, you can read entrepreneur magazine to find out the latest trends, you can check out Google Trends and it will show you how many searches are being done in certain categories. You tube and Pinterest are also a great resource to find out what is trending.

Another strategy is to focus on items with a low cost and a high mark up that are a little more unique, this may require you finding a sub niche. This again will take some research, spend some time on google to identify what people are asking questions about and searching. If you have a keyword tool like Jaxxy for example, you can see how many times a keyword is searched each month.

It can be a good idea to identify one niche area that you want to focus on so you can build a relationship with your supplier and also build a following. You can start with just one or two items and then add from there. If you are interested in pet products (a hot niche by the way) you could start with a specialized product like dog socks or booties. These are socks for older dogs that have trouble getting around, they have rubber soles on the bottom to help them keep from slipping. Then you can move into matching accessories, clothing, leashes, or stay with the elder dog niche and add in supplements. See how that works. You could do items for small dogs, large dogs, or even narrow it down to a specific breed. The narrower and more specific the niche the better. (I have no idea how lucrative that would be, it is just an example of a specific niche item for a very specific problem).

Again, check out Google Trends to see what people are searching for. For instance, I went to search Pet Products, which is probably too broad but I was surprised to see that the number of searches has dropped over the last year although there is still a significant number of people searching. What it did bring up was the number of increased searches on goats as pets. Another category, products for goat pet parents?

You will also need to experiment, this is why starting with a few products rather than listing a ton is a good idea, easier to track what’s selling, and easier to build a product line when you find a profitable product.

If you enjoy research this may be a fun and easy process for you, if not it is an important part of the process and some time spent upfront can save a lot of frustration in the end.

Now you have an idea or several ideas so it’s time to check out wholesalers and find out if you can actually make any money selling this product.

Finding Suppliers

There are several options when it comes to suppliers. You can start on a site like Shopify if you want to build your own ecommerce store and have a relationship with a supplier like Oberlo that gives you access to thousands of items right away. You don’t have to go to the trouble of contacting suppliers and being accepted. Both Shopify and Oberlo offer some good training on dropshipping and ecommerce.

There is also AliExpress and I believe most of their merchandise is sourced from China which can cause long shipping times. If you have a product that is unique enough a customer might be willing to wait but when you can order an item on Amazon and have it the same day, most people aren’t willing to wait 4 to 6 weeks for delivery. (This is also an option if you want to buy some items wholesale and ship yourself, they have some really unique products at a very low cost.)

Another option is Wholesale Central, it is a wholesale directory which you can sign up for and have access to suppliers in over 50 categories of products. You can sign up for free.

Sunrise Wholesale is a company that gives you access to over 15,000 products from home decor to electronics, to automobile accessories. They offer a free trial membership.

Salehoo and Worldwide Brands both give you access to thousands of suppliers in hundreds of product categories and have done the research on their suppliers so that you know they are legitimate. There is a fee to join both of these directories, Salehoo has an annual fee of $67 and World Wide Brands is $299 for lifetime access (sometimes they offer discounts so check the sit for price). I have signed up with Salehoo and like that they offer a lot of training, I have heard good things about Worldwide Brands as well but am not sure how they compare. From what I have read they have more supplier options. In my opinion, both are relatively inexpensive options to start your own business. If you want to do this with as little investment as possible you can also start out with one of the free versions just do your research on the supplier before you give them your business.

It is not my intention to make you feel overwhelmed, only to show you the possibilities. There are a lot of options for dropshipping and it is a good idea to do some research before jumping in. Even if you choose one of the free options, it can be really time-consuming choosing a product, setting up accounts and or a website, so identify a place you are going to want to stick with for a while.

Once you have figured out your niche then it is easier to choose a supplier.

Things to Check Out With Potential Wholesalers

There are definitely some things to know about your suppliers.

  • Many wholesalers will have a membership fee for dropshippers.
  • Most dropshippers will charge a fee anywhere from $2 – $5, I saw one that charged $7, that will really cut into your profit or increase the amount you charge and make you less competitive.
  • What is their return policy?
  • They may require a Tax ID in order for you to sign up with them.

Again it’s important to do your research, read reviews, go to their website, not every supplier works the same way.

It might even be a good idea to order a product from them to check out delivery time, packaging, and product quality.

Where To Sell

EBay is an easy place to start and you can list up to 50 items a month for free (at least at the time of this writing). Most of the blogs I read said to start with things from your home just to get started with the process and get used to listing items. The idea is not only to get some experience but also to get some seller feedback and get your profile up and maybe make a little extra cash to get you started. EBay has some good training resources on how to get started as well.

EBay shoppers are looking for bargains, so even if you have a buy it now price expect people to make counter offers. You have some high volume sellers on eBay as well as liquidators so the competition is steep, on the other hand there are millions of buyers looking.

Amazon is also an option, on Amazon you can in theory price things a little higher, but check your competition so you know you are still competitive.

Some less know options are Bonanza, Ruby Lane, eBid, eCrater, or you can create a Facebook store. Here are a couple of blog posts that talk about some of the alternatives to EBay –

http://auctionsitenews.com/alternatives-to-ebay/

https://www.salehoo.com/blog/top-6-places-to-sell-online#Sell_com

Your own eCommerce store is also an option, you can easily set up an online retail shop with today’s technology. A lot of wordpress themes are set up as ecommerce themes so you can easily add PayPal or merchant accounts. This is an option that is typically a little less expensive than joining a membership site like Shopify if you know what you are doing, if not joining a membership site can pay for itself in time spent getting up and running.

How To Market or Drive Traffic To Your Product

If you are selling on Amazon or EBay people will find you and there are ways to boost your products on those sites if you are willing to invest a little. If you have an online store a blog post will help you drive traffic to your site. You can use all the social media sites, that is probably your best free traffic. There are also several free classifieds just to get your name out there. It takes some time but with persistence will happen. There are lots of options for advertising online for a fee, Facebook Ads, Google Ads, Pinterest Ads.

This is probably the biggest hurdle for most dropshippers, getting traffic to your site. If you are comfortable with social media you will be ahead of the game. You Tube videos are also a great way to get some exposure, and with today’s technology not all that difficult to do.

Use your warm market, let friends and family members know that you are working on building an online business, have them give you some reviews on your sites are marketplaces.

Some Tips For Success

First do your research and know your budget.

When you post your items come up with unique titles, post good descriptions, and use a lot of pictures. If there are descriptions provided by the supplier, change or add to them to make your items stand out.

Check to see if anyone else is selling your product and what they are selling it for. Once you have positive feedback and a customer following you may be able to sell the same item for a higher price, but just getting started you want to be as competitive as possible.

Make sure to check with the supplier on quantities available periodically, nothing more frustrating than getting a sale and then having to refund the money because the item is sold out.

If you have an item that is selling really well you might consider keeping a few on hand in case the supplier runs out.

Remember that this is a business and like any business needs time and work, and things online are changing quickly so you may need to try new things periodically.

When you get an order contact your buyer as quickly as possible to let them know that the order is being processed and to thank them for the business. Contact with your buyers will increase positive feedback.

When you are pricing your items make sure that you are taking into account all the fees that you will have, from eBay fees, PayPal or merchant fees, shipping costs, and add in a cushion for potential returns. You want to stay competitive but you are also in this to make money. So set your margins with all the costs in mind.

Avoiding Pitfalls

Test the waters, do your research. (I know, I sound like a broken record).

You might try selling a few things from around the house on eBay or whichever site you want to test and see if you even enjoy it before jumping in with both feet.

I enjoy doing the research but it does take a tremendous amount of time. Right now I basically have two full time jobs. So have a plan, how much time can you reasonably expect to put into it. And once again know your budget. There are a lot of free ways to get started but there are a lot of options available that can eat away at your budget quickly.

Dropshipping can give you a laptop lifestyle but it is not a hands off option like Affiliate Marketing, which can be a little tougher to get off the ground, but be less time intensive once it is up and running. This is basically a retail store and you will need to continue to give good customer service.

Downside

There are some downsides to this type of online venture as with any type of business.

The biggest issue is that you don’t have control over shipping and inventory. (This is why it is a good idea to order from your supplier first and see how quickly they fill orders and check out quality)

With dropshipping your profit margin is less than if you were buying in bulk from the supplier. You are basically buying 1 item at a time like a retail customer and will need to prove yourself to be able to negotiate better prices from your supplier. So until you get a customer base you may need to sell at rock bottom prices to compete.

There are a lot more costs involved than with some other online ventures such as Affiliate Marketing. You will pay the merchant fees, and many have a minimum monthly fee whether you are making a lot of money or not. This can be an added expense in the beginning, which is why PayPal is a good option. You may need to pay for google ads or Facebook ads initially until you get a following depending on how good you are at SEO and Social Media.

Is Dropshipping Profitable?

If you listen to all the gurus and the overnight success stories it seems like dropshipping is going to be the ticket to over night riches. My belief is that dropshipping can be a profitable business given you are willing to put in the time to build it, get a good customer base, and do your continued research on profitable items and find ways to continue to drive traffic to your sites. If you do these things you will absolutely start to see income.

You might even see yourself expand from dropshipping into starting to buy wholesale lots that would give you higher profit margins. One seller talked about his success growing on Amazon once he started to buy wholesale and have Amazon ship and fulfill the orders. Fulfilled by Amazon (FBA), is another way to grow your business, but another topic not for today.

It depends on what type of income you need, what your goals are, and how creative you can be. I see dropshipping as one of many streams of income online. You can absolutely combine dropshipping, eCommerce, and Affiliate Marketing. You then get to have the flexibility to work when and where you want. Yes you are still working but on your terms.

Summary

Dropshipping can be a lot of fun and an interesting way to make money. It can also be overwhelming to get started because there is so much information out there. My suggestion would be that you get your toes in the water with something like eBay, eCrater, or Bonanza to see if you enjoy the online selling world. If you love it you may want to expand to have your own web store. So the next step would be to sign up with either an online training platform like Wealthy Affiliate or Affilorama. Or you could choose to start with a site like Salehoo, or Shopify where you have access to suppliers and can build a web store. Both options will help you to learn the ropes, get some training, and have a community to help you get started.

There are so many resources available. The great thing about dropshipping is that you can literally be up and running in less than 30 minutes. The real work is in doing the product research, finding your niche and suppliers, and relationship building. And those skills are what you will need to continue to develop if you want to succeed.

One last thought, with the increase in online shopping there are plenty of consumers for everyone. This number continues to grow each year.

Please share any dropshipping successes or nightmares that you have had.

 

Leave a Reply

Your email address will not be published. Required fields are marked *