Dropshipping may seem complicated to understand at first, but it really is simple.
Today, I want to share with you the basics of dropshipping.
By the end of this drop shipping process tutorial, you will have learned the following:
- What is dropshipping?
- How does dropshipping work?
- What do you need to get started?
- How much does it cost to start dropshipping?
- Pros and Cons of Dropshipping
Let us get started!
Dropshipping for Beginners: What is dropshipping?
Dropshipping is an online business strategy and model where you, the dropshipper, work with a supplier to fulfill the needs of a customer.
In dropshipping, you sell the supplier’s products, but you do not have to buy inventory, much less store them.
Here is a simple cycle that shows how the dropshipping business model works:
- You sell a supplier’s products in your web store
- Customers but from your store
- You order the product from the supplier
- The supplier ships the item to your customer
In the customer’s eyes, you are the person responsible for the sale.
What this means is that if the customer has a question, you are responsible for providing an answer.
It is also your duty to tell your customers where the package – is it in transit? Essentially, the customer thinks that the product he bought is your product.
This customer will not have any dealings with the supplier. You are basically acting as the salesperson of the supplier, but also the brand carrier of your own business.
Dropshipping is a great business option for people who do not have a large capital to start an online store.
Since it requires no inventory, the only capital you need is a website, which you can build for less than $100.
Later on, we will explore the positive aspects of dropshipping, along with the challenges that you have to face. For now, let us take a look at how it works.
How does dropshipping work?
To make dropshipping work, there are some tools and assets that you need to build. In this section, I will walk you through several of these to help you understand what you need to get started, along with the activities you need to maintain to be able to make sales.
Let us start with how you make a profit in dropshipping.
If a supplier sells the item for $20 and charges $5 for shipping, you cannot sell that product on your store for $25, or you will lose money.
Instead, you have to sell the item for $30 or more. If you sell it for $30, your gross profit is $5 for each item that you sell.
It is from this gross profit where you subtract your website costs, marketing costs, and other miscellaneous costs.
Dropshipping has four pillars of foundation. These are:
- Building the store
- Choosing niche and suppliers
- Marketing the products
- Fulfilling orders
Let us take a closer look at each one.
Building the store
Before you can dropship, you need to build your website store.
This is where you are going to display the products that you are going to sell.
Building an online store is probably the easiest thing to do in dropshipping.
Today, you do not need to learn how to code to be able to build a website.
What you can do is to use web-building tools like Shopify or WooCommerce.
These platforms have something like a drag-and-drop store builder.
All you need to do is to register, choose a theme, and then upload your products.
Both platforms have thousands of apps or plug-ins that you can install so your website can offer more functionalities to your users, or so you can make some of your tasks easier.
Choosing niche and suppliers
A niche is a category or an industry. You cannot build a dropshipping store and just sell anything that you want.
Only Amazon works that way because it is a marketplace for sellers.
Dropshipping does not work that way.
If you want to sell clothing, stick to that niche.
If you want to sell toys, you may want to drill down or niche down. Are you going to sell baby toys or drones for adults?
Your niche is a focus area, so your business is not all over the place.
This is where it can get tricky. Many dropshippers fall victim to what we call shiny object syndrome. They pick a niche, change their minds, and then pick a new one.
Before you even start, you have to pick a niche and stick to it.
To be able to do this, you have to ask yourself, is this my passion? Am I knowledgeable about this?
We all want to do dropshipping so we can make money.
But if money is your only reason for doing it, you will be chasing products again and again, and you will never develop expertise in any single niche.
After choosing your niche, the next step is to choose a supplier. You can look for suppliers from AliExpress, eBay, and many more.
Before you launch your store or select a supplier, you have to give it a test.
You need to order one product from that supplier, and then wait how long the shipping is going to take.
This is your opportunity to check the supplier’s product.
You need to hold it on your hand, and then see the quality of craftsmanship. If it is bad, do not sell it to your customers or you will be inundated with refunds.
A supplier is not someone you deal with directly. Instead, you have to use supplier directory tools.
Examples of these are Oberlo, Spocket (check out an in-depth review of Spocket here), and AliDropship.
These are companies that work with suppliers. They vet or ensure that the suppliers they work with are of good standing.
What you need to do is to install the apps of the dropship supplier tool, and then look for products from that app.
You will also receive orders and notifications from that app, and it is from that app that you have to fulfill the order.
Marketing the products
After choosing a niche and supplier, and after you have built your store, the next step is to market your products.
This is by far one of the hardest things to do in online business—there are billions of webpages in the world, so how will people find you?
Here are some of the ways you can market your store:
- Ads – the most common method that dropshippers use to drive traffic and sales to their stores is advertising. They advertise on Google, YouTube, Facebook, Instagram, and other channels. You will certainly have to do this, but you need to carefully assess your finances before you buy ads.
- Social media – use free social media platforms to build your pages and grow your followers. All of these are free, and all you have to do is to stay consistent. Do not just post photos of your products. Instead, focus on posting materials that solve people’s problems or materials that motivate.
- Email Marketing – in your dropshipping store, you need to put a section where you can take a person’s email address. In exchange, you have to offer something. Most of the time, store owners offer something free, like an eBook or a discount code. Once you have a huge list of email addresses, you can send marketing materials to your subscriber.
- YouTube – make videos that help people solve their problems. How-tos and listicles are great magnets to attract YouTube subscribers. These subscribers will eventually become your leads. What you want is to convince them that you are an authority in your niche.
If you are selling drones, it makes sense that you create YouTube videos about how to set-up drones, how to fly them, how to paint or customize them, and many more.
If you do this, people will view you as an expert, and you can always tell them to check out the drones you are selling in your dropshipping store.
To make dropshipping work, you need a system to fulfil your orders, which usually comes with the dropship supplier tool that we talked about earlier.
As you can see, it is cumbersome to check orders from your store, and then order it from another website.
The dropship supplier tool allows you to see orders and fulfill them in one place.
Dropshipping works if you have the right tools for your business.
If you do everything manually, you will be inundated with never-ending tasks, and this can make you give up.
Make sure that you choose the right platform and tools before you get started. Furthermore, you need to understand how these tools work.
What do you need to get started?
Dropshipping is may be simple, but you can get lost at the sheer number of options.
To help you out, I have listed down the most important factors you need to get started with dropshipping.
- Domain Name and Email – a domain name is the URL of your website. While many URLs are free from the platform provider, they do not carry your exclusive brand name. The better thing to do is to buy your domain name from a domain registrar and make sure you purchase an email address.
Do not use free email addresses. Customers do not like it. Free emails make your store look amateur. And worse, it looks scammy.
- Store Builder – the most popular option for dropshipper is Shopify, but WooCommerce is much more flexible. The great thing about Shopify is that it is easy to use, and you no longer have to worry about your web host. However, the web designs are limited, and you are left with a “me too” looking website.
As far as functionality and support are concerned, there are many apps that you can use to make your store work better and more efficient in the Shopify platform.
WooCommerce, on the other hand, has limited apps for dropshippers. In WooCommerce, you can barely find dropship supplier tools.
However, WooCommerce is a lot more flexible than Shopify in terms of design and structure.
There are many third-party web-builder tools that you can integrate with WooCommerce to make your online store unique.
- Dropship supplier tool – this is a critical component of any dropshipping business. What does it do? A dropship supplier tool connects a supplier’s product into your store. If that supplier goes out of stock, your store will also show out of stock. If the supplier changed its price, your store would also change the price. Everything in the dropship supplier tool makes your business automated.
- Social media pages – prepare to create social media pages for your business. Choose the right channels that resonate with your audience. Facebook is universal, while Instagram is best used for products about health and beauty.
- Graphic design – you have to learn how to create your own graphic artwork and even videos for your marketing activities. There are a lot of free tools you can use to do this even if you do not know how to use Photoshop. An example is Canva.
How much does it cost to start dropshipping?
The cost of building a dropshipping store varies—it all depends on the tools that you choose.
At the very least, you have to prepare $29 per month to be able to put up a store.
Let us take a look at some of your options.
Shopify – the least it takes to build a Shopify store is $29 per month. At this price, you can build a fully functional store. If you use WooCommerce, you have to pay for the services of a web host like Siteground or Bluehost.
WooCommerce is free, but the hosting service is not. Web hosting costs about $5 per month, and you will be charged at least one full year of hosting after signing up.
Domain – domain names vary in costs. One-word domain names are expensive. You can buy domain names for as little as $20 per year, and email addresses for as little as $10 per year.
Dropship supplier tools – most of these are free like Spocket and Oberlo. However, you need to upgrade to be able to get more juice out of these free tools.
While you may be able to use these free tools, you will not have access to the premium services like the analysis tools, or directories of top-selling products year after year.
If you do all the work, you can start dropshipping for as little as $29 per month.
Of course, this does not include a drop shipping for dummies dropshipping course that will help you prepare in your dropshipping journey.
Pros and Cons of Dropshipping
Let us take a look at the pros and cons of a dropshipping business.
- Small capital needed – you can start a store for as little as $29 per month; you can cut it off any time you want to stop
- No inventory needed – you do not have to buy bulk items; you only pay for a product that your store has already sold
- Easy to build – it is easy to build a store; you do not need to learn how to code
- Lots of apps and online support – there are many tutorials online where you can learn; there are also many communities for dropshippers here you can ask for help
- Product quality – you have no control over the quality of the product; you rely on what the supplier produces
- Shipping time – if you dropship from China, shipping can take up to eight weeks
- Competition – there are many dropshippers out there because the cost of building a store is really affordable; many of them close because they want to get rich quick, so do not worry about this. They close if they do not make a sale, so your key to success is perseverance.
There are ways to go around these cons. If you want better product quality, look for suppliers that do so.
Also, you may want to choose suppliers from the same country where you want to sell.
This ensures that your customers will get their orders in less than a week.
Here ends our drop shipping tutorial. Dropshipping can be a lucrative business, only if done right.
It also takes a lot of hard work and patience to make it work.
While many people are touting that it is an easy business, it really isn’t.
It is easy in the sense that any aspiring entrepreneur can make it happen, but it is never a get-rich-quick business.
Your best bet is to take a dropshipping course to set the right foundation.
Invest in your knowledge, so you do not waste a lot of money in paying for tools that you do not need.