Starting a drop-shipping business is now one of the easiest ways to make money on the web thanks, in part, to the consistent growth of online marketplaces. With 22-33% of online retailers all over the globe now adopting drop-shipping as their primary business model, this knowledge alone is certainly enough to inspire curiosity.
Either hosting their own online site or listing products via an established eCommerce marketplace, the retailer drives traffic to specific products and sells each item at a higher retail price to the consumer. Although the retailer purchases the goods from a wholesaler at a vastly discounted price, the retailer does not house these products in their own warehouse, instead transferring their customer’s orders and shipping details to the wholesaler/supplier themselves. The role of the wholesaler then ends by sending each order to the customer under the name of the retailer via an integrated carrier.
Where to start...
1. Choose your products wisely
As a start-up, the best way to achieve success is to ensure that your site receives a high level of traffic. To get there, your products need to appeal to a precise segment in the market- the more specific the niche, the better. Choosing products based on your own interests is a great place to start. By doing this, you may have unique knowledge of a sub-niche that is currently addressed by very few online sellers. Screening your competition for larger, more well-known brands will also advise on the viability of your drop shipping business; will you be providing a point of difference in the current market, or will you simply be outvoted by more trustworthy sources? Undergoing research and taking these precautions will stand you in the best stead and prevent an exciting new business venture from becoming a losing game.
2. It’s a two-way street
Running a drop-shipping business involves being part of an inter-reliant partnership. The actions of the supplier are just as important as the retailer, and if you’re not the right fit then your business will be doomed to fail. Your supplier is also your shipper and therefore has huge influence over your customer lead times, delivery experience and subsequent product ratings. Sourcing a supplier that can provide higher quality products and/or faster delivery than your competition is advantageous and it’s also a good self-preservation strategy to work with an experienced supplier who can connect you with verified references.
3. Be patient
Wait for your hard work to pay off. On average, if your drop-shipping business begins as a side-hustle, you can expect to start accumulating profit after about 12 months in the game. It’s easy to get reeled into drop-shipping by wild success stories of online retailers making millions in their first 6-9 months. However, it’s important to stay realistic to maintain motivation and avoid disappointment. Following the previous steps, it roughly takes drop-shippers about a year before they start reaping the rewards.
The benefits of drop-shipping:
If done right the benefits of drop-shipping are far from lacking, the main ones being:
Greater gross profit: On average, the profits of a retailer that drop ships are 18% higher than those that opt for more traditional supply chain structures.
Save on time: While considerable time should be spent sourcing a successful inventory, drop shippers themselves do not have to research, design and manufacture the products that they sell. This convenience gives them a huge head start, allowing them to leapfrog their brand to market at a much quicker rate than traditional start-ups.
Minimal investment: As drop-shippers don’t store their own goods, they manage to avoid the risk of bulk-buying stock that then goes unsold. Although drop-shipping retailers still pay their wholesaler to store and ship orders on their behalf, these savings far surpass the expense of an independent warehouse and appropriate fulfilment facilities.
Where does fulfilmentcrowd come into it?
Our fulfilment software includes services tailored to drop shipping retailers. As an order is received by our system, it automatically identifies any products within that order considered to be ‘Drop Ship’. This, in turn, generates a purchase order for our clients’ direct dispatch supplier, sending order details and delivery instructions to them via our Supplier Web Portal. With our cloud based platform, our client’s wholesalers and shippers can then confirm dispatch and update purchase orders with expected delivery dates.
We hope this quick guide on how to start a dropshipping business has provided some useful tips to consider while painting a clearer picture of the eCommerce landscape. If you’re already a drop-shipper currently struggling to integrate orders with your supplier, our intelligent software simplifies the process by automating purchase orders and strengthening the lines of communication. Get in touch today via our contact form.