Did you know that you can start an online business with close to no upfront costs? Starting a drop ship business is one of the most popular ways for people looking to start an online store.
If you’ve dreamed of running your own business but don’t have thousands of dollars to invest in inventory, starting a drop ship business might be the best alternative.
There are many things to know about drop shipping, so we created this guide to help get you started.
Keep reading to learn about the advantages of drop shipping and how you can start your drop ship business today!
How to Drop Ship (Drop Shipping 101)
What is Drop Shipping?
Drop shipping is a business model that allows you to sell products without holding any inventory – it’s considered a fulfillment model where you market and sell products in your store. At the same time, a third-party supplier handles order fulfillment.
Drop shipping is an excellent business model for running an online business because you get to sell products in your favorite niche without having to invest a lot of money, in the beginning, to get started.
Drop shipping is a process designed for beginning and expert online business entrepreneurs.
Let’s explore some of the pros and cons of utilizing a drop ship model.
Pros and Cons of Drop Shipping
There are a lot of advantages to adopting a drop shipping model for your business, as well as downsides to consider.
Let’s take a look at the pros and cons of using drop shipping for your business to determine if it’s a suitable fulfillment model.
Pros of Drop Shipping
Drop shipping has become a mainstream method of fulfillment thanks to the possibilities that it opens up for new and existing businesses.
Some of the top pros to consider starting a drop ship business are
- No inventory costs
- Low barrier to entry
- Automation
- Focus on Creativity
One of the most attractive aspects of drop shipping is selling a product without maintaining an inventory.
Inventory costs and management can be substantial and add a lot of unnecessary overhead if not planned correctly.
With drop shipping, a third party manages the production, storage, and shipping of all your products – that way, you can focus your efforts on the creative side of the business.
Drop shipping deals heavily with attaining marketing results. You can focus on building an effective brand, promotion, and customer service for your business.
Many people want to get a taste of starting a business without a lot of up-front costs – Drop Shipping Can be as simple as creating an Amazon or eBay listing before you begin selling.
Cons of Drop Shipping
With every positive comes a negative aspect to drop shipping. Although it’s a common way for entrepreneurs to begin making money online, many are unsuccessful.
Some of the cons to consider about drop shipping include:
- Market saturation
- No inventory/product control
- Personalization
Many people resort to the same (or similar) manufacturers for sourcing their products. There might be a lot of competition for several niches, especially for trendy products.
Since you are essentially promoting someone else’s products, there aren’t many companies that allow for personalization. When you make a sale, the company pulls the product from their general inventory to ship to your customer.
Also related, you have less control over whether a product will be in stock or when new products get released. Your inventory is based on the management of the third party.
Be sure to work with companies with a good reputation – since you’re not hands-on with the order fulfillment, you have to trust that the company will ship on time, and the correct item(s) will arrive at your customer.
How to start a drop ship business
Now that we’ve explored the advantages of a drop ship business, let’s dive into the steps necessary to get your business live. You could start generating profit in no time if done correctly!
1. Pick a Business or Niche
Believe it or not, starting a drop shipping business is the same as starting any other type of business. The first step in starting your drop ship business is picking a specific industry or niche to focus on.
The advantage of having a specific business or niche is to consolidate your efforts when starting your research and marketing.
Today, you can start a drop shipping business in any industry, and there are plenty of products to source for each. Keeping your business narrowly focused will make it much more attractive (and relevant) to future customers.
So how do you pick a business or niche? There are two main approaches to selecting a business niche:
- Based on your interests
- Based on trends
Most people recommend choosing a business based on your interests. Starting a drop ship business still requires effort to get it started, so working with a set of products that you’re passionate about can make the process more enjoyable.
Another reason for picking a niche based on your interests is because you’ll have a better understanding of the products and target audience.
Some of the most profitable drop ship businesses ignore personal pleasure and seek products that will sell the best. Trendy business ideas can be short term fads like fidget spinners and slime or more long term trends in society like vegan products.
Picking a niche based on trends helps with escalating the potential immediate return on your efforts because it typically has a higher volume of searches. The tricky part about building a site based on trends is that you have to act fast to be a part of the trend while it’s hot, and it might not last as long as other business niches.
2. Research Your Business and Niche
After picking your niche, researching your business is the next step – research is one of the essential parts to set up your store successfully.
Research is an essential part of drop shipping, but it could be the most time-consuming stage in the process. There are a few key areas to dedicate your research:
- Viability of business
- Competition
- Sourcing
- Profit potential
Viability of business
Whether you’ve chosen a niche based on your interests or trends, you need to see if you can actually make a business out of it – i.e., if there is an actual demand for products in this niche.
To determine if a business idea is viable, check to see the current search volume for related keywords to your products. Also, check social media to see if people are talking about a need for the product.
Competition
We all like to think that we have a unique business idea that’s never been done before, but based on the drop ship model, there’s a good chance that someone is already selling in the same niche.
Looking at your competition gives an idea of what you can do to improve – you have a chance to create a better brand, better-optimized site, etc. It’s also an indication that there’s an interest in the niche based on your competitors.
You don’t want a business too saturated with competition, but a few players in the same space could be beneficial.
Sourcing
To successfully achieve a drop shipping model, you’ll need to find drop-ship ready products in your chosen niche.
One of the most popular sites for sourcing products is Aliexpress. There are several others, either from marketplaces or individual businesses, to find products that fit your website’s niche.
The important things to pay attention to when sourcing products are shipping location and company reputation.
Drop shipping is completely hands-off for you, so you’re trusting a 3rd party to manage your fulfillment. You’ll want to ensure that you can trust them with this task to maintain excellent customer service through your business.
Profit Potential
Related to product sourcing, you also need to keep in mind how much profit you can expect by running your drop ship business.
The margins for drop shipping vary by product, industry, and order, so you should consider all of these elements when determining how you should price your items to make it a profitable business.
3. Set Up Your Drop Ship Business
Setting up your drop ship business can be as simple or advanced as you’d like to be. As a general concept to keep in mind, the simpler it is to set up your drop ship business, the less profit margin you’ll have.
Some drop ship businesses can be live in less than an hour, while others may take some time to develop an effective brand behind it.
The most common ways to set up a drop ship business are via:
- Shopify
- Amazon
- eBay
- Personal site
Shopify is synonymous with drop shipping in the online world. Many drop shipping companies start with the platform because it provides a user-friendly way to set up a professional site.
The benefit of setting up your site on Shopify is taking advantage of build-in plugins such as Oberlo for sourcing your products.
Oberlo automates the process of adding new products to your site, and it’s as easy as one-click to fill up related product categories in your niche. You can sync your entire site with a supplier’s product offerings.
When someone places an order via your Shopify site, all you do is confirm the order details, and it goes directly to the supplier to fulfill.
It’s also possible to develop your drop ship site on marketplaces like Amazon and eBay. These are the fastest to start up a drop shipping business, but also incur the most fees to decrease your profit.
You can create a product listing based on the products that you select to drop ship. When a customer orders and pays for product listing, you have to place an order with your supplier to drop ship the item to the customer’s address. Be sure to notify the supplier that the product must be drop shipped.
Creating a personal site gives you the most control over your drop ship capabilities. You’re not limited to plugins or suppliers for sourcing your products, but you have to be more aware of product/inventory management.
When you have your own site, you can achieve the highest profit margins and have more control over your branding features. It’s a great option for more advanced drop shippers.
4. Market Your Drop Ship Business
Marketing is a determining factor for the success of a drop ship business. There are lots of companies attempting to sell the same products, often sourced from the same supplier. The biggest differentiator is how effectively you can market your business so that customers purchase from you instead of a competitor’s site.
Regardless of the platform that you choose to set up your business, you can utilize many of the same marketing tactics to boost your chances of profitability:
- Social Media
- SEO
- Word of Mouth
Social media is the go-to place for marketing a drop shipping business. Marketing on social media includes a mix of paid and unpaid promotional content to increase your site or product’s visibility.
Consider running Facebook and Instagram ad campaigns for your drop ship business. These platforms are great for promoting product-based businesses.
Through these campaigns, you can build an email list to make announcements for new products, offer product specials, and even target customers who’ve visited your site previously.
SEO
An effective SEO strategy is necessary for all web-based businesses. SEO is a practice of targeting specific keywords to make your site the go-to resource when people are searching for those terms.
Remember those keywords you found during your research stage? You can build content and strategies around these same keywords as they are related to your products.
Proper SEO will put your drop ship business at the forefront of their results, whether someone is searching for your product or a solution to a related problem.
Word of Mouth
Word of mouth is a mandatory marketing strategy for any kind of business. Now that you’ve successfully set up your drop ship business, why keep it a secret?
Talk about your business in person or try to get some PR opportunities about your site.
The more traffic that you can drive to your site, the more sales and conversions you can make.
Final Thoughts
Drop shipping can be very profitable as an online business – it’s a way to potentially create passive income with proper maintenance. If you’re looking for ways to make money online, it’s a great way to test business ideas in a variety of niches to sell products.
Drop shipping can be very effective and profitable for generating money with the right strategy. As with all businesses, plan out your business goals and strategy to determine if a drop shop model is best for your business.
Let us know if the comments what type of drop ship business you would create.
