What is dropshipping? Let us answer this question in the most beginner-friendly way. Also, we will discuss how to start your own dropshipping business online.
Here is my history in dropshipping
A long time ago, I have learned dropshipping in a hard way. I lost several times, and lost more than $3000, making stupid mistakes in dropshipping.
But, with lots of trials and errors, over the past years, I became somewhat good at this. Now, I make a decent amount of money doing dropshipping. Once I became good at what I am doing, I thought like, hey dude, why can’t I sell what I have learned? That is why I have created this guide to teach you what is dropshipping.
But, don’t worry. This guide is completely free. Anyway, you don’t have to pay to learn dropshipping. 🙂
When you search for What is Dropshipping on Google, almost all the resulting dropshipping guides are there to promote specific tools and services. And, most of the blogs are promoting some affiliated services for dropshipping. But, here, it is pure knowledge from my firsthand experience doing dropshipping for around 8 years.
The only way I am making money out of this dropshipping guide is from the Google ads, like this one down here. (I hope there will be an advertisement below this line 🙂 )
Now, let us go through the first topic of our Beginner’s Guide for Dropshipping.
What is Dropshipping?
Dropshipping is an online retail fulfillment method, where the retailer doesn’t need to maintain a physical inventory for the products that they sell. The sellers who are using the dropshipping business model use third-party services for the product sourcing and order fulfillment.
Does that make any sense? NO! It doesn’t. That definition for what is dropshipping is made by some Bigheads, who don’t want the commoners, like us, to make money from dropshipping.
What is Dropshipping? In beginner’s language
Let us say that you want to make money by starting an online business. By the way, dude that is a great idea!
But, obviously, you don’t want to make any products to sell. I mean who has time and money to manufacture products.
So, you decided to “re-sell” the products from some another manufacturer.
If you decided to use the traditional retail (re-selling) business model, now you have to purchase a whole lot of products and stock them in your warehouse (or, your bedroom), until you can make a sale. So, once you made a sale, you can deliver one item from your stock.
This traditional retail business model has so many disadvantages.
- You have to spend a whole lot of money to buy a product stock. And, if this business idea fails, you have nothing to do with the 2000 women’s leggings, which you have just purchased.
- It takes a lot of time. It takes time to ship the stock from the manufacturer to your bedroom. And, it again takes time to deliver that product to your customer.
- Also, you need space! If 2000 women’s leggings don’t fit into your bedroom, you might have to pay a lease for a warehouse too.
- Needless to say, you have to handle the shipping process by yourself. That is a whole lot of unnecessary work to make money L
So, what if there is a solution to all these problems, and make our business lives so easy?
Well, that solution has a name, and that name is dropshipping!
What is Dropshipping? – The simple summary
Dropshipping is a very simple method, to source and deliver the products you sell. With dropshipping, you can pass the responsibility of manufacturing, stock maintenance, and shipping to a third party service. All you have to do is, sit behind your laptop, sell and start making money.
What is your role in dropshipping?
Simple, you only have to handle the sales part. You can sell on eBay or even on your own online store with dropshipping. All you have to do is, when someone purchases something from you, just forward that order to your supplier.
What is the role of the dropshipping supplier?
Once you forward your order to your supplier, they will pack the product from their warehouse and ship that directly to your customer. So, this process saves a lot of time and money. They will do this whole thing anonymously, so, your customer will not notice the process.
Is Dropshipping legal?
Yes, it is legal. There is nothing illegal about it. Dropshipping is a simple way of order handling for your e-commerce store. You just pay your supplier to send the orders to your customers directly. And, you have to take full responsibility for what you sell.
But, in some marketplaces, there are certain rules like “You must own stock of the products that you sell.” That is just to protect the customers. In such cases, you can provide your dropshipping contract (the agreement with your supplier) to prove that you have a reliable supply of products.
Is Dropshipping profitable?
When you price your dropshipping products, you can keep a profit margin for yourself. This profit margin is for your efforts of maintaining your store’s processes (like site maintenance or customer service) and for marketing.
Can you make money from Dropshipping?
With a moderate knowledge about online marketing, I know that you can make more than $4000 per month. I sell around 10-15 products per day. And, I make more or less $4000 profit per month. But, I know that you guys are better than me. I am a money hoarder. I am scared of spending money (even to make more money).
But, with better investments for marketing, you will be able to make more money from dropshipping.
How much does it cost to start a dropshipping business?
- You can start selling with dropshipping in many different ways. If you decided to use a fully hosted platform, like shopify, to build your own online store, be prepared to spend around $600 (including the platform fees and initial marketing budget).
- But, if you are going start dropshipping with a self-hosted e-commerce store, like WordPress + Bluehost + WooCommerce kind of package, it will cost around $400 (including the initial marketing budget)
- Also, you can start selling on eBay with dropshipping. Since you will not be selling more than 50 items per month in the beginning, you don’t have to pay any monthly subscriptions for the platform. So, it will cost around $100 – $150 (including the marketing budget) to start your dropshipping business on eBay.
Additional Reading: How to sell on eBay – Startup guide
Now, please note that your marketing budget can vary a lot. But, if you want to see a real difference, right from the beginning, you will need at least $100 for your marketing budget. If you can spend more, you will be able to make more.
To be honest with you, compared to the other startup costs, the cost of starting a dropshipping business is very low. But, it takes a lot (I mean, really a lot) of time to make it happen.
Can you dropship on Amazon?
Well, the honest answer is, no you can’t. In their Dropshipping Policy, it states, “Purchasing products from another online retailer and having that retailer ship directly to customers” is not permitted.
In such cases, you must use their FBA (fulfillment by Amazon) service to fulfill the order. Amazon FBA can cost around $4 to sell a t-shirt. And, this is on top of the platform fees, which can be about $8. So, $12 of charges to sell a t-shirt can lower your profit margin a lot.
And, anyway, to use Amazon FBA, you need to have a stock of the products at your location. So, it goes against the very meaning of dropshipping.
But, needless to say, there are a lot of sellers doing dropshipping on Amazon.
Can you dropship on eBay?
Yes, you can. But, you need to have a dropshipping agreement from your dropshipping supplier. In their dropshipping policy, they say that dropshipping is allowed on eBay. But, after some time of selling, they will temporarily suspend your account stating that you are purchasing from another retailer, and that goes against their policy blah blah blah… Then you can provide your purchasing contract from the wholesale dropshipping supplier to reinstate your account.
How do I start a dropshipping business?
Here is the practical process of starting a dropshipping business
- Select a niche (the product) to sell.
- Draft your dropshipping business and marketing plan.
- Find dropshipping suppliers.
- Create branding for your dropshipping store.
- Create an online store.
- Execute your marketing plan.
- Continuously analyze your process and keep optimizing.
How to select a niche for a dropshipping business
Even after the years of doing the same thing, still selecting a niche for dropshipping is one of the most overwhelming tasks for me. I mean, if you make a wrong decision, all your time and money for building your dropshipping business will be wasted.
Well, over the past few years, I came up with my own theory to find profitable products to sell online.
- See what is trending on Amazon or Trendhunter.
- Check the trend of demand.
- Verify the size (envelop to shoe box packing) and price ($25-$50).
- Check the potential profit margin.
- Check the average CPC (cost per click) and SEO difficulty.
- Check reviews to find customer’s pain points.
- Define your unique selling prepositions.
- Check for marketing opportunities.
- Add a pilot listing on eBay or Amazon for a single product.
I have described this process in detail on How to select the best niche for Dropshipping
You can copy the same method to find a niche for a dropshipping store.
How to plan a dropshipping business
If you are going to start an online dropshipping store, one of the first things you have to do is, creating an online business plan.
By drafting a proper business plan, you can outline everything in your mind about your dropshipping business into a readable format. Once you have planned your process, you can clearly set your goals and start striding towards them.
What will happen if you don’t have a business plan? The main advantage of having a business plan is, if anything goes wrong, then you will know the right time to tweak or abandon your business.
When I have started dropshipping, I didn’t make a business plan. I have just started selling pet toys. After a couple of months, I felt like that business was failing. Since I haven’t had a business plan, I just kept pumping more money. Then, after another few months, I lost all the money and time, which I had invested in that business.
You don’t have to make the same mistake. Make sure to prepare a good business plan. This article How to plan your online business strategy will help you to learn how to make a proper plan for your dropshipping business.
How to find dropshipping suppliers
This is the most confusing stage for most of the dropshipping beginner’s. There are a few methods to find dropshipping suppliers.
- Sourcing dropshipping products from Aliexpress (The most popular way)
- Sourcing products from Orbelo marketplace (The easiest way, if you are on Shopify)
- Sourcing products from the wholesale suppliers (The most profitable way)
These methods have their own advantages and disadvantages.
For example, sourcing from Aliexpress is the best place to start a dropshipping business. It is easy, and there are tons of varieties. But, on the other hand, most of the Aliexpress sellers are just retailers like you and me. So, their prices are high. Then, if you source from China, products take around a week to deliver to the US. Also, if you are selling on eBay, sourcing your products from Aliexpress is not the best way to build a sustainable business.
Then comes Orbelo. Orbelo is the most popular plugin for Shopify, and I must admit that it is super easy to work with Orbelo. You can automate your process, and there are some neat analytical tools to analyze and optimize your product quickly. But, products from the orbelo marketplace have expensive price tags. So, your profit margin will get thinner.
Getting into a dropshipping agreement with a wholesale supplier is the best way to build a sustainable business. But, it is super hard to find a suitable wholesale supplier. It takes time and money to find dropshipping wholesale suppliers.
This article provides a more in-depth way of finding dropshipping suppliers. Check How to find dropshipping suppliers.
How to brand a dropshipping store
People always ask me the same question all the time. Why would people buy from our stores, when they can buy the same thing for a lesser price on Aliexpress.
The answer has two words. Marketing and Branding.
We will talk about marketing a little later.
Branding plays a major role to give your store a legitimate and authoritative look. This authentic look is essential in marketing.
You must read this article of How Payless tricked fashion influencers into paying $600 for $20 shoes. It explains how branding can be a game changer.
So, make sure to pay sufficient attention to the branding of your store. Whether it should be luxurious or playful, modern or vintage, geometric or organic, make sure to include your branding strategy to your dropshipping business plan.
Be careful when selecting colors, your logo, and even the font.
I am not saying that you should buy a $3000 logo. You can get a logo and a social media pack (FB profile pic, cover, twitter cover, etc) for around $10-$15 from the freelancing designers on Fiverr or Upwork.
Also, the tone of your advertising campaign is a part of your branding strategy. Remember the voices for milk dud’s ads and Mercedes Benz ads cannot be the same.
How to create an online store for dropshipping
There are different possibilities for you to build your store for dropshipping.
- Build your store on eBay (Easiest and Cheapest option)
- Build your dropshipping store on Shopify (The most popular option)
- Start a self-hosted e-commerce store for dropshipping (the best option, if you know how to build a site on WordPress)
Dropshipping on eBay is the easiest and cheapest option for you to start a dropshipping business. There are thousands of good articles to learn how to create a product listing on eBay.
Shopify is the most popular option to build a dropshipping store. They have built-in themes, one-click integration methods to add payment gateways, best plugins to automate your process and everything. So, almost everyone starts their dropshipping websites on Shopify. They have excellent guides and videos to teach you how to build a dropshipping store on Shopify.
Having a self-hosted e-commerce store is the most sustainable and profitable way to build a dropshipping store. Then, you can have the full control of your site’s functions. And, WordPress has great plugins, and WordPress forums can help you to solve almost all the issues with site building.
Whatever the method you use, make sure to learn each and every step of the site building and functions. Of course, you can hire someone else to help to build your dropshipping site for you. But, you must have to learn how to do that.
Because, down the road, you will have to do a lot of changes and adjustments to your dropshipping store. So, if you completely rely on an external developer, you have to pay them each time you want to make a simple tweak.
How to market a dropshipping business
Marketing is the most important part of your dropshipping business. And, sadly most of the dropshipping beginners do not pay enough attention to the marketing.
As a rule of thumb, I allocate 70% of my processes for marketing.
There is no point of inventing the wheel unless you know how to market it. Online marketing is an extremely competitive area. But, still, you have plenty of markets left for anything.
All you have to do is understanding the right marketing concepts for your dropshipping business.
Some people believe that running an ad campaign on Facebook is the only way to sell your products.
How to grow a dropshipping business
Growing your dropshipping business to make a living out of it can be your dream. Mine was the same. And you can achieve this by paying attention to your business plan and marketing strategies.
My suggestion is to set short-term KPIs (Key performance indicators) for your dropshipping business. For example, you can set a KPI as “Reply to 90% of the social media inquiries within 15 minutes”. And, then adjust your process to achieve this KPI.
Likewise, correct your course with short-term KPIs to achieve your long-term goal.
Remember, the KPIs should be,
- Relevant to a broader business goal
- And, realistic
That means there is no point of setting a KPI as “Reply to 100% of the social media inquiries within 2 minutes”. That is not realistic.
And, always make sure to set your KPIs to adjust the course of your dropshipping business to reach its long-term goal. With such short-term KPIs, you will be always be engaged in your dropshipping business. So, your business will get enough attention and care to grow. Later your dropshipping business will start rewarding you, for your efforts.
“Years of grinding can make a lifetime of happiness.”
What is Dropshipping, Did you get it?
We have been discussing dropshipping in this whole article. By now, you must have a clear picture of what is dropshipping and how to start a dropshipping business.
If yes; great, I can be happy about my time and effort creating this post.
If no; what went wrong? Did I miss anything that you are looking for? Please comment or send me a message to develop this article about what is dropshipping.
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