Everything You Need To Know About Dropshipping
Table of Content:
- What Is Dropshipping And How Does It Work?
- How Is Dropshipping Different From Traditional Order Fulfillment and Affiliate Marketing?
- Why Is Dropshipping a Preferred Method of Order Fulfillment?
- Challenges of Dropshipping and How to Overcome Them?
- Pros and Cons of Dropshipping
- Who Should Start Dropshipping Business?
- How to Start a Dropshipping Business?
- How to Create Dropshipments with your Existing Online Store?
- Common Dropshipping Mistakes To Avoid
- Tips To Make Your Dropshipping Business Successful
- How to Find a Profitable Niche for your Dropshipping Business?
- Current Trends in Dropshipping Business
- The Role of Technology in Running a Dropshipping Business Successfully
Nothing can beat eCommerce when it comes to making money online, especially if it is based on the Dropshipping business model. In today’s competitive online business scenario, there are many dropshipping businesses that are managing to sell more without huge investments and effort.
This article includes everything from basic concepts to detailed information helping you to establish and run a profitable dropshipping business. So, let's dive right into it.
What Is Dropshipping And How Does It Work?
Dropshipping is a business model wherein you can sell products on your online store without stocking them in your warehouse. You need to partner with the suppliers wanting to display their products on your online store. As soon as you receive the order for a particular product, you need to inform the respective supplier. The supplier then ensures that the order has been shipped and delivered to the customer within a committed time frame. You pay the supplier for the sale done after deducting your profit.
How Is Dropshipping Different From Traditional Order Fulfillment and Affiliate Marketing?
Why Is Dropshipping a Preferred Method of Order Fulfillment?
The global dropshipping market size was valued at USD 102.2 billion in 2018 and is expected to register a CAGR of 28.8% from 2019 to 2025.
These statistics indicate that using dropshipping as your eCommerce business model can be the most lucrative option. Moreover, it doesn't require investing in storing inventory, managing warehouses, or shipping costs. You just need a computer and an internet connection to operate your dropshipping business. Besides that, there are some benefits of dropshipping that prove its preference over traditional order fulfillment methods.
Benefits of Dropshipping
Allows to Sell More
Dropshipping means you are listing the products on your online store without storing them. That itself gives you the benefit of listing a maximum number of products for sale. You don't need to invest an amount by paying to the suppliers before their products are sold.
Saves Time, Money, and Efforts
Listing branded products on your online store already having a decent customer base means putting in no time, money, and efforts to the marketing campaigns. Instead, you can just focus on increasing the visibility of your ecommerce website on search engines and social media platforms to maximize sales and profit.
Owning a dropshipping business allows you the flexibility of working from anywhere at any time as long as you have a computer and internet connection. It also provides the flexibility of partnering with an unlimited number of manufacturers, suppliers, and wholesalers.
Challenges of Dropshipping and How to Overcome Them?
Dropshipping may seem like easy money. You sell the products of 3rd party merchants, and your business earns profit without spending on warehouse and shipping. But, it is not as simple as it seems to be when you consider the challenges pertaining to dropshipping business as below -
Pros and Cons of Dropshipping
Who Should Start Dropshipping Business?
How to Start a Dropshipping Business?
Below-mentioned are the six important steps that you can follow to start a dropshipping business successfully.
Step 1: Choosing a Profitable Niche
The first thing required to start a dropshipping business is to choose a profitable niche (the segment of the market). You need to research and find a market segment that has not been saturated or dominated by big brands. The common misconception about dropshipping is that you can be successful in any niche. For endless business opportunities, you need to sell unique products, with low competitiveness, and in high demand these days.
Step 2: Finding Reliable Dropship Suppliers
Finding reliable suppliers can be the most difficult part of starting a dropshipping business. The success of your online business depends on the suppliers as they are responsible for stock availability and accurate delivery. Moreover, you also need to check that your suppliers don't charge substantial order fees; otherwise, you fail to earn the required profit from your online business.
Step 3: Complying with Local Government Regulations
Every country and state has different regulations when it comes to starting and running an online business. As per US and Canada regulations, you need to possess a sales tax ID and Federal Tax ID number. Some states like New Hampshire and Oregon are exempted from this rule. Thus, you need to check with your local Government rules and regulations and ensure that you fulfill all the statutory formalities before you start your online business.
Step 4: Selecting a Selling Platform
When it comes to choosing a selling platform, you can consider 2 options. Either you can register on marketplaces like Amazon, Ebay, etc., or you can launch your online store using eCommerce platforms like Shopify, Volusion, BigCommerce, etc. Selling on marketplaces is easy to set up, and you can start selling immediately, but having an independent online store gives you more control over your business. There are pros and cons to both methods. There can be various determinants like your business type & size, investment capabilities, and technical skills. Based on these aspects, you can select a selling platform that best suits your business.
Step 5: Executing a Marketing Strategy
Now that your online dropshipping store has been set up, you need to promote it to attract visitors to your store. Every day new eCommerce stores are emerging, and cutting through that competition can seem to be difficult. You can use expensive options like Facebook ads and Google ads, or go for low-cost options like SEO, content marketing, social media marketing, email marketing, etc. The key to success of an online business is designing a perfect digital marketing strategy that includes organic and paid advertising options both.
Step 6: Automating the Online Selling Process
After implementing a successful marketing strategy, if you are unable to provide flawless services to your customers, then your online store may fail to achieve long-term success. Syncing the inventory across all your selling platforms is required to provide the right product information to your customers. Moreover, after the customers place the order, you need to send an automated email helping them to track their shipment. Moreover, displaying the most competitive prices of the products can result in maximum conversions. There are dropshipping tools available that can accomplish all these tasks to automate and streamline your entire selling process.
How to Create Dropshipments with your Existing Online Store?
Following the above-mentioned steps can help if you are starting a new online business with dropshipping as the order fulfillment method. But, what if you already have an online store and just need to expand your product line using dropshipping concept?
Common Dropshipping Mistakes To Avoid
Every successful online business has gone through several hurdles before reaching an elite position. Several mistakes are likely to occur while building and growing an online store. As prevention is always better than cure, let's go through the common dropshipping mistakes to avoid, so that you can drive your online business towards predetermined goals without any glitches.
Tips To Make Your Dropshipping Business Successful
So far we have covered a bunch of information discussing everything from the basics of dropshipping to intricacies of selecting a niche and running your online business. It is quite easy to get overwhelmed while starting a new venture or implementing a new idea to an existing business. The below commonly asked questions and their answers can take away all your anxiety and provide the most useful tips to make your dropshipping business successful.
Common Questions Pertaining To Dropshipping Business
Question - Why would someone buy from my store when the same products are available on suppliers’ online stores?
Answer - Execution of Right Marketing Strategy
The question arising is, why should someone buy from my store when the same products are available on suppliers' online stores? The answer to this question is executing the right marketing strategy that helps in reaching out to the targeted audience before your competitors. Ensure you are following proven marketing methods that can improve your online store's visibility over search engines and social media platforms to attract maximum visitors that can be converted to customers. Moreover flawless operations and prompt customer services can guarantee the long-term success of your online store.
Question - How To Win The Trust Of The Customers?
Answer - Creating a Store that People Trust
Instilling trust for your online store in the minds of people is almost half of the job done. The people buy only from those online stores whom they trust as they are sharing their payment details on your store. Ensure that your website includes third-party badges, social proof, and evidence proving that yours is a legitimate company. Besides that, ensure that your store's design is professional, maintain transparency in pricing information(no hidden cost), and mention returns & refunds policy unambiguously.
Question - How To Engage Your Customer With Your Online Store?
Answer - Provide Detailed Information In Attractive Manner
Not providing enough information about the products you are selling would drive your customers away from your online store. The customers these days are quite knowledgeable and smart these days. They have visited several online stores before making a purchase decision. Make sure that you provide them detailed information about the products making the buying decision easy.
Question - How To Add Value To Your Customers?
Answer - Provide Comfortable Shopping Experience
Though managing inventory, maintaining stock levels, and shipping accurately is not your responsibility in the dropshipping business, you still need to ensure that these aspects get carried out without any mistakes so that your customers are happy. The main concern in dropshipping business is customer experience. Use the best inventory management software to sync product information across multiple channels to provide a comfortable shopping experience to your customers.
Question - How To Build Long-Term Relationships With Your Customers?
Answer - Customer-Friendly Returns & Refund Policies
In the eCommerce business how you handle returns and refunds plays a major role in keeping the customers happy. Similar to shipping products, managing returns comes under suppliers’ responsibility. But, the customers are buying from your store and not your suppliers’ store. In case, the returns are not picked up on time and refunds are delayed, it can spoil the reputation of your store. So, you need to ensure that your suppliers have customer-friendly returns & refund policies and respond quickly while returning a product and refunding the amount to the customer.
Besides, the tips mentioned above, selecting a profitable niche plays the most important role as it can make or break your dropshipping business. So, below are some aspects that you need to consider while selecting a niche for your dropshipping business.
How to Find a Profitable Niche for your Dropshipping Business?
Current Trends in Dropshipping Business
Dropshipping is a simple way to become a part of the global eCommerce industry but is competitive at the same time. Thus, to ensure your dropshipping business keeps afloat, you need to follow some trends as given below -
Selling on Social Media Platforms
Social media platforms like Pinterest, Instagram, and Facebook are flooded with online sellers these days. Besides, listing products on your online store, you can take advantage of these social media platforms too as you don't have to make much effort of driving audiences there.
Amazon had introduced this concept of one-click purchasing wherein the customers are allowed to complete the purchase without wasting time in putting in the information like their shipping address, payment details, etc. The store fetches the information from previous purchases. For online shoppers, it benefits because it doesn't take much of their time in completing a purchase, and for online merchants, it benefits due to reduced chances of cart abandonment.
Artificial intelligence used in chatbots has benefitted the dropshipping businesses to a great extent by being available to the customers 24/7. Many dropshipping stores are working with minimum or no staff members. Having the ability to respond to the customers' queries with less human efforts becomes an advantage for online sellers. The customers also benefit by getting solutions to their queries instantly.
The use of iPhone's Siri, Amazon's Alexa, Google Assistant, etc. prove that how popular voice search has become these days. The customers find it convenient to find the products they require using voice search technology. Implementing voice search in your online store can help in boosting sales.
Some of the marketing tactics like sending automated emails, ads retargeting, etc. are used by online sellers these days to drive audiences to the online store and improve conversions. Using the best marketing automation software can automate many of your marketing processes, minimizing human efforts, and maximizing sales.
Machine learning can make your online store smart. Suggesting products to customers based on their browsing and purchasing habits is one of the most important applications of machine learning that can be useful for your dropshipping business. It can also help you detect fraudulent transactions on your online store and save you from malware activities.
The online buyers feel delighted to view how the piece of furniture available for sale online would look like in reality. This is possible with the help of deploying augmented reality in your online store. Augmented reality can help in improving the shopping experience and enhancing the sales of your online store.
The Role of Technology in Running a Dropshipping Business Successfully
Technology plays an important role in running a successful dropshipping business. It can automate various monotonous and tedious jobs that humans need to do while running a dropshipping business. Incorporating technology into your dropshipping business would save your time and money both. The dropshipping software like Orderhive automates the tasks relating to marketing and customer service, freeing up a lot of your time to focus on your core business activities. Moreover, you don't need to hire a big team for dropshipping business management and pay them hefty salaries.
Besides saving time and money, below are some reasons that prove the significant role of technology in running a dropshipping business successfully -
Effective Marketing & Promotion Activities
Creating automated emails, scheduling social media posts, creating ads, and getting them executed are some of the activities that can be done using marketing automation software. Also, it ensures that you don't miss out on following up with even a single customer making your marketing and promotion activities highly effective.
Full Control Over Stock and Pricing
The inventory management tool allows you to auto-update the inventory and stock levels as soon as an item is sold or returned, refraining your store from overselling or running out of stock. You can go through the buyers' guide to inventory management software to select the best one that suits your business requirements. Moreover, there are also repricing tools available to ensure that the products' prices mentioned in your store are competitive enough to win sales.
Presenting the products in good picture quality is highly essential for conversions. Graphic design and web design tools make your products and website look attractive and resulting in more sales and profits.
An online store's functionality plays a major role in providing a seamless shopping experience to the customers. Thanks to web development tools that allow you to build a secure online store website having a user-friendly interface and easy payment options to satisfy your customers.
Around 33% of eCommerce businesses are using dropshipping as their primary method for fulfilling their orders. Some of the renowned names in dropshipping business are AliExpress, SaleHoo, Doba, Spocket, etc. Even eCommerce giants like Amazon, Ebay, Etsy, etc., also use dropshipping for fulfilling orders for some of the items they sell.
Dropshipping is an easy and beneficial way of order fulfillment, but it requires a lot of research and planning to deploy it profitably. To summarize, choosing the right product line & suppliers, offering competitive prices, having a streamlined selling process, and providing exceptional customer service are some aspects that can make your dropshipping business successful.
We hope that this article has helped you in understanding dropshipping in detail enabling you to launch your new eCommerce venture successfully or boost the profitability of your existing online store. Please leave your comments below or contact GoodFirms if you require any further information about eCommerce and dropshipping.
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