The Basics of Running a Successful Dropshipping Business

  • To an untrained eye, it may seem that online shopping has taken over the world. Big retailers are closing down stores and more and more people are not just shopping online but also opening up their own stores.

    In reality, however, ecommerce still makes for only a small portion of shopping being done world-wide. While this is the case, there is definitely an upward trend of more online stores popping up and the concept of dropshipping is a major factor.

    But what exactly is dropshipping ecommerce and how does one make it work?

    What Makes Dropshipping Unique?

    Before we can start talking about running a successful dropshipping business, it is essential that we cover the differences between dropshipping and more traditional ecommerce.

    When you run a “traditional” ecommerce store, you either sell products that you manufacture yourself or that you buy from suppliers beforehand, build an inventory and then sell the products that you have in your inventory.

    With dropshipping, you do not have an inventory at all. Instead, when someone purchases something from your store, you order the product from a selection of suppliers who then ship the product to your customers. You charge more than you pay for the products and this is your margin and source of income.

    There are more than a few reasons why dropshipping has become such a popular way of doing ecommerce, the major ones being the facts that you do not have to invest large sums of money beforehand and that your suppliers will also handle shipping to customers.

    All you need to do is find suppliers whose products are cheap enough that you can have profitable margins (more on margins later) and make sure your store attracts enough potential customers.

    Of course, dropshipping has its limitations and a set of rules that you will need to be aware of in order to make it all work.

    Setting Up a Store

    In order for you to start a dropshipping business, you will need an online store where you will sell your products. The good news here is that a dropshipping online store will be no different from a traditional online store, at least when the customers are in question.

    Since dropshipping is a quick, affordable entry to ecommerce, you will not wish to spend too much on your store. You will want to check out the big ecommerce platforms such as Woocommerce or Shopify (Quikclicks did a great thorough comparison) and open up a store with one of them. This will provide you with a working and decent-looking store that you can start with in matter of hours.

    You should keep in mind that the point of your dropshipping store is not to revolutionize the way people buy X or Y. The point of your new store and business is to make sales as quickly as possible.

    This is why you should stick with the basics at first – a nice-looking, sleek and easy-to-navigate home page; clearly defined and well-organized categories as well as product pages that will entice visitors to purchase. All you need besides these is setting up payment options for your customers and letting them know shipping is free (more on this later), which will be a huge selling point for your store.

    Finally, you will have to set up tools that will connect your store to the marketplaces where you will find suppliers and products. This way, the orders that your customers make will be automatically sent to your suppliers who will then handle the orders from there.

  • Finding Suppliers and Products

    Arguably the most important aspect of running a successful dropshipping business is finding the products to sell and the suppliers whose products you will be selling in your store. The nature of dropshipping is such that you will be somewhat limited in your choice here, but with a bit of smart and meticulous research, you can still be very successful.

    The Products

    For example, you will not go buying running shoes on Nike’s website and then selling them for double the price on your website. Everyone is aware of Nike, their prices and their online store. The same goes for all branded products that people know where to buy, what their price is and so on.

    Instead of this, you will go for generic products and brands that are unfamiliar to customers in the parts of the world where you wish to sell them. For example, you can find a Chinese manufacturer (or reseller) or smartphone cases or unbranded shoes that you can then sell in your store.

    The reason why we are mentioning Chinese suppliers is that the majority of dropshipping revolves around Chinese suppliers who sell their products at prices that you can build margins on and make enough money to keep your company running.

    For instance, you can easily find more-than-decent men’s oxford shoes for $39.99 on AliExpress (the largest Chinese online marketplace and the main hub for dropshipping companies). You can charge $79.99 for them in your store and make a profit of $40 on a single pair. Even bigger margins are to be made on products such as smartphone cases and other mass-produced products that are available at staggeringly low prices on marketplaces such as AliExpress.

    The important thing is to find products and a niche where you can buy quality products at prices low enough that you can make money on when you sell them in your store. Of course, if you know something about the niche, it will only help you build your store and increase your sales.

    The Suppliers

    Finding the right suppliers is just as important as choosing the products to sell, as there are more than a few things you need to be careful about.

    For one, you should never do business with anyone with more than a few bad reviews. AliExpress and similar marketplaces all have various rating systems in place and you need to make sure that your suppliers are verified as reputable.

    You should also take the time to read the actual reviews by their past customers. It is especially important to check for photos of their products that their customers have posted. This way, you can ensure that their products look the same in reality as they do in stock photos. This way, you know that you are getting what you are paying for.

    Another important thing to check is whether they offer ePacket shipping. ePacket shipping was introduced as a safer and quicker way for Chinese suppliers to send products bought online worldwide. The products are usually shipped within 30 days (often quicker), the prices are reasonable and the customers (and you) can track the shipments all the way.

    Now, some suppliers will cover shipping themselves, but for the most part, you will be paying for it out of your pocket. We mentioned that you will be offering free shipping for your customers and this is because you will be covering shipping fees out of your margin.

    Once you start selling products by certain suppliers, you will want to check their responsiveness (you can even do trial runs beforehand). You need suppliers who will handle the orders quickly and efficiently as you do not want your customers to wait too long.

    Of course, you also have to consider the margins. If your suppliers are too expensive, you will not have the room for a margin. Considering that you should make at least as much as you pay to your supplier (the margin of 50%), it becomes clear that your suppliers also have to be chosen depending on how much they will charge you.

    Attracting Customers

    Setting up your dropshipping store and finding the products and the suppliers is just the start. You need to start making sales and the fact that you opened a store means nothing. There are thousands upon thousands of online stores out there, some of which will inevitably become your competitors. What is more, they will all have an upper hand, since you have just opened your store and no one knows about it.

    The next step is making sure people learn about your store and visit it. In other words, the next step is marketing.

    When we are talking dropshipping store marketing, there are a few things that you have to remember.

    For one, your budget is very, very limited. Unless you come to it with a serious investment, you will be operating with sums that correspond to the income you make from one or two sales. In fact, this is what most experts actually recommend – if you make a sale one day, you should use the money you made (your margin) for marketing the next day. If the ads you bought make you a new sale the next day, you have already covered your marketing spend and anything over that is pure income.

    The reason why we mentioned paying for ads in the previous paragraph is that paid ads on Facebook and Instagram (depending on what you are selling) are the most direct, scalable and effective way to advertise your dropshipping business. You do not have the time for content marketing or SEO (although it is still a must) and you do not have the budget for anything else.

    For the majority of dropshipping businesses, Facebook is the way to go, unless the niche is too particular and the buyers are not on Facebook. Facebook ads are perfect because they allow you to be very precise in your targeting and you can start off with as little as $5 a day.

    Moreover, you can easily scale up (or down) your ads on Facebook, depending on how you are doing. Most experts agree that increasing your Facebook ad spend in increments of around 10% is the best way to go.

    If you sell clothes or jewelry, you might also consider Instagram, but you need to be sure that your target audience is actually there. Some dropshipping businesses feel confident enough to try with Google ads, but for the most part, they are too expensive in the early days when the marketing money is tight.

    Keep in mind that we are talking the earliest days here. As time goes by, you will start considering other options as well, such as content marketing, a bit of free social media promotion, advanced SEO, perhaps some video ads and so on. In the early days, it all comes down to making one more sale and paid ads are the way to go. The good news is that you should be able to cover the costs out of your sales.

    As Your Store Grows

    As you can see for yourself, the majority of what we talked about so far deals with the very start of your new career and the rules change as your dropshipping business grows.

    For one, when you start making more sales and catering to more customers on a daily basis, you will probably need to upgrade your store a bit and increase the number of products you sell (and suppliers you work with).

    You might even consider taking on employees and providing customer support that goes beyond just handling returns from dissatisfied customers. As we already mentioned, your marketing will also evolve and start including strategies and tactics that will be more long-term in their nature.

    The most important thing to keep in mind is that everything comes down to sales, no matter how long you have been in the dropshipping game. In the early days, there is no shortage of reminders that the very survival of your dropshipping business depends on the amount of the sales you make. Later on, however, the focus can move and you should always remind yourself that it is all about selling.