Online Businesses

How To Start An Ecommerce Dropshipping Business

Work from Home Anywhere In The World

One novel business venture that is quickly gaining momentum is dropshipping. You can find all kinds of obscure information on dropshipping on the internet, but very little on what starting a dropshipping business entails. So, what exactly does this innovative industry involve? You open an online store selling android phones, but you only have the images of the items on your website. You do not carry an inventory. When a customer orders a phone, you do the billing and then pass the sales order to a third-party supplier, who then ships the phone to the customer. Often, the wholesaler supplier is outside the country- like China, Vietnam, Thailand, and Eastern Europe.

The History Of Dropshipping

Most people have experienced the comfort of shopping online; you scroll through your device and decide on whatever item you need, press a few buttons, and then your goods are delivered to your doorstep. Did you know the first e-commerce transaction on the world wide web took place on 11th August 1994? They traded CDs through this website. From this one small transaction, all of the world’s largest e-commerce businesses emerged—even the likes of Amazon, eBay, etc.

eCommerce, alternatively called electronic commerce or internet commerce, is simply trading over the internet. It involves money transfers, payments, and so on, all performed on the web.

There is a slight difference between E-business and E-commerce. The former comprises all kinds of business done on the internet, while the latter explicitly refers to buying and selling goods and services.

Here are some handy links to get you started

Dropshipping Business Venture

Surprisingly few drop shippers are located in the US. Even those with a physical US address only store merchandise, but the actual shipment is outside North America. This is how Amazon conducts the majority of its business. Amazon does not have a stock of all its inventory; if you order something that Amazon does not stock, the company will contact a third-party supplier to ship the merchandise to you.

Dropshipping is a novel business venture, and although it sounds simple, it is not as easy to become successful or established. Firstly, you must arrange with a third-party manufacturer to showcase and sell their products; that company will cover the shipping. Your customer will pay the retail price. You, in turn, pay the supplier the wholesale price and what remains is your profit. You do not maintain any inventory or handle the merchandise during the entire transaction. You do not need any stock, so there are no high startup costs.

This business does provide a decent income for those who can work out a mutually acceptable agreement with a third-party supplier of merchandise. However, before you get too excited about making easy money, consider this- how many businesses do you know will allow you to make substantial profits without any investment?

What Are My Responsibilities As A Dropshipper?

Develop a website to showcase the merchandise that you want to sell
You will need to state the price and shipping costs
Keep in contact with the customer and supplier to ensure that there are no hassles during the transaction
Get insurance
Be aware of scams

Should I Buy An Existing Dropshipping Business?

Buying an existing dropshipping business also comes with a few difficulties. The key is to verify that it is successful, and you will want the company to have a base in the USA. You will need to inquire why the business is up for sale, how much money it makes, what items are on offer, the supplier’s names, contacts, etc. Be diligent before buying an existing business. More than 60% of drop shippers close within the first 12 months, and you want to avoid purchasing a lemon.

What Are The Cons Of Dropshipping?

Profit margins can be thin because many large online companies sell the same merchandise at a lower cost.
The competition is intense—hundreds and thousands of companies are involved in the global dropshipping business.
You must state the shipping options and costs on your website, even though you are not responsible for shipping. Your customers will need that information upfront to avoid becoming upset after getting an unexpected bill for shipping. Many customers will not order a product if the shipping prices are high. For example, on Amazon, a product may only cost $10, but shipping from China may cost $30.
Keeping track can be difficult. If you sell several products, you’ll need to keep track of all your supplies, coordinate shipping, and ensure good customer service. This process can be time-consuming and frustrating. Shipping delays are widespread, and many customers will demand refunds.
You will have to deal with customer complaints since you actually sell the merchandise. And what makes this difficult is that you have no control over the shipping or product quality. You are at the mercy of the supplier. When the product is defective or damaged, you will need to track the item back to the supplier, which is not always easy when the manufacturer is in India, Vietnam, or China. You will need to have a robust returns policy or be prepared to lose customers in the future. If your customer has significant issues, rest assured you will be facing legal and liability issues.

Dropshipping Business Plan

If you consider a dropshipping business, you’ll need to make a business plan to understand the financial issues involved. The business plan should answer the following questions?

How does one start a dropshipping business?
Can I buy an existing drop shipping business?
What are the startup costs for a dropshipping business?
Who are my suppliers?
Who will pay for the shipping costs?
What should I sell?
What should I not sell?
What are the pros and cons of a dropshipping business?
Is there fraud in the dropshipping industry?

Here are a few online business plan models

Why Should You Consider Dropshipping Over Other E-commerce Types?

Minimum capital; you do not need millions of dollars to start this venture: a functional website, some dollars in advertising, and a few more running costs.
Easy venture; most types of this venture are home-based, with no need for a warehouse to store goods. It is also entirely stress-free.
Any location works; you can swiftly deliver goods and services from any place worldwide over the internet.
Vast opportunities; there is a wide range of products to choose from.

List Of Dropshipping Companies To Consider

Dropified – Best for AliExpress and eBay
Inventory Source – Best automation software.
Oberlo – Best for Shopify dropshipping.
Printify – Best for custom products.
SaleHoo – Best dropshipping supplier directory.
Wholesale2b – Best for total order processing.
You can import many products to your online store with all these suppliers. When a customer makes an order, it will process automatically. All you need to do is to make sure the order is correct. Then the supplier is automatically contacted, and the item ships to the customer. You can do this from anywhere on this planet.

How Much Money Can I Make As A Dropshipper?

It all depends on what you sell, your supplier contract, and your experience. You will not make much money if you do not represent the right brand. Some sellers make 100K a year (Internet data that is not verified), but most earn less than $40K. While exact numbers are unknown, it is estimated that less than 30% of drop shippers make it past the first 12 months.

How Can I Be Successful In The DropShipping Business?

You need to select products that are in demand
Select items that your competitors do not sell
Work with a reliable supplier
Build a trustworthy eCommerce website
Offer competitive prices
Keep on marketing your products
Develop trust with your customers
Know your manufacturer’s products very well
Be aware of scams (see below)

How Does Dropshipping Work?

You will first need to register or open an account with a reputable supplier to sell a product. You can find the suppliers in the following ways:

Search the supplier database like Alibaba, Aliexpress, or Dropship Direct
Use an integrated supplier directory to look for suppliers like Oberlo, CJ-dropshipping, Supplymedirect, CROV, Modalyst, DropnShop, etc.
Contact the manufacturer directly. Some may allow you to sell their products online. But all of them will have a contract detailing your responsibilities, shipping cost, commission, and mistakes that can get your contract rescinded.
Do a Google search on wholesaler suppliers and write to them.

How Can I Start My Dropshipping Business?

If you have little money to invest and would like to start a dropshipping business, some free platforms include:

AliExpress
Doba
eBay
Shopify
OfficeCrave.com.
Spocket.
Sunrise Wholesale
Wholesale2B
Worldwide Brands
Wholesale Central

However, even though some free platforms exist, most suppliers will charge you a per-order drop shipping fee that varies from $2 to $10, depending on the size and complexity of the merchandise that has to be shipped. Before you sign a contract, you’ll need to understand the fee structure.

However, all Dropship companies have rules that you’ll have to abide by. They will ban folks from selling their products if they break the rules.

Types Of E-commerce Models

Direct business to consumers; look up a retail store online and buy directly from it. From a business owner directly to an individual.
Business-to-business is a means of selling a service from one business to another.
Consumer to consumer; if you decide to sell a piece of art, perhaps, you put it online and connect to another individual. In this case, you are not a business owner but a fellow consumer.
Consumer to business; instead of a business owner offering services or goods to consumers, the consumer has a ‘service’ to offer the business/company. An example is brand influencing.

Examples Of E-commerce

Retailing; direct sale, no middleman needed.
Wholesaling; selling goods from a retail store, which operates between manufacturer and customer.
Dropshipping; the third party arranges shipment to consumers.
Subscriptions; The creation of youtube channels to share your course or program.
Crowdfunding; money is collected from consumers beforehand to serve as capital for production.

What Products Do Well With Dropshipping in 2021?

Small home appliances- heaters, electrical appliances, kettles, blenders, video doorbell security systems, utensils, etc
Power tools (drills, saw, wrench, sander, nail gun, etc.)
Tech equipment (modem, router, network switch, VoIP Phones, Headsets, etc.)
Lifestyle niche (e.g., sports bra, skateboard, balance boards, resistance bands, jump rope, etc.)
Beauty and health products (Sunscreen, nail care, combs, hairdryer, hair curlers, etc.)
Sports equipment: (football helmet, knee pads, mouth guards, jockstrap, etc.)
Drones and related accessories
Pet supplies
Home improvement items (water filter, humidifier, shower head, etc.)

Can I Dropship With Amazon?

Yes, Amazon does allow private merchants to dropship on its platform as long as they abide by the rules. You must be the manufacturer of the products on your platform, and your name must be on the packaging slip. The buyer must be able to connect with you. With Amazon, the customer is always right, so you must explain how you handle refunds and shipping. Amazon is also notorious for dropping sellers for minor infringements of the rules.

Which Products To Avoid When Dropshipping?

Big appliances are readily available in local stores, and there is no shipping fee. Why would someone buy a fridge from a drop seller abroad? The shipping costs would be astronomical.
If you suspect a product is counterfeit or violates copyright laws, avoid them. You will be banned from selling, especially from Amazon.
Firearms, dangerous goods, prescription drugs, illicit drugs, etc
Fragile items, glass items, etc. that require extensive packaging, which can increase shipping costs
Any product that you cannot advertise, you should not drop ship
Watches and jewelry are not the right products for dropshipping.
There is little market for shoes and clothes. You can buy these items on almost any street corner in America without paying shipping costs.
Most reputable brands like Apple, Polo, Gap, Samsung, Sony, Hitachi, etc., have their own franchise stores, and you will not be permitted to sell their products.

Fraud in DropShipping

If any business promises you great money with zero investment, you should always consider it a scam. Many in cyberspace promote establishing a drop shipping company, promising paychecks of over $100K a year. All you need is a PC and wifi connection. The truth, unfortunately, is that dropshipping is also associated with some of the largest internet scams, which include the following:

Wholesaler supplier scams: Some of the biggest scams occur with wholesale suppliers. These fly-by-night operations have defrauded 1000s of entrepreneurs, both amateurs, and professionals. Once the wholesale supplier receives the money, no merchandise is ever delivered to the customer; then, you’re stuck with dealing with the customer, who has to be refunded.
Excess fees: Another widespread scam perpetrated by suppliers is charging exorbitant fees or excessive shipment fees for registering with them. A quick search or two will see hundreds of items with shipping fees of $30-$100 for merchandise that costs less than $30.
False leads: Often, suppliers will sell fraudulent lists of other shippers and suppliers to a novice entrepreneur. Once you pay the money for this list, you will never hear from the wholesaler again.
Fraudulent chargebacks occur when a customer claims they never received the mechanized and wants a refund, which comes out of your pocket. This particular method is a widespread scam. Sometimes the merchant and the customer are both in on the game.
Fraudulent purchases occur when the customer uses false IDs to purchase merchandise. The ID’s true owner then disputes the charges, and you are stuck with the bill.

Preventing Fraud In Dropshipping

Perform an extensive investigation into the shipping company and your suppliers. Do not just settle for an online review. Call the company, verify its physical location, talk to people, and ask for details about its business.
Work with trusted names like Worldwide brands, Oberlo, Salehoo, and Doba.
If you decide to work with AliExpress (owned by Alibaba), be advised that Alibaba has never caught on like Amazon, chiefly because of rampant scams and counterfeit products.
Pay attention to individuals who repeatedly make orders or those who make high-volume orders. Never get too excited that a customer has ordered a truckload of goods- it is most often a scam.
Know how to track customers’ locations using their IP address so you can verify where they are ordering from. Some countries like Nigeria, Russia, Ukraine, and India stand out as a haven for scammers.
Check to make sure that the billing address and shipping address match.
Check out the customers’ online presence and do a google search to determine if it is a real customer.
Call the phone number listed to verify the person and address.
Use Fraud apps provided by some platforms to check for the legitimacy of each order.
Finally, trust your gut; if you think it is too good to be true, then it probably is not.

Why Should You Consider Existing Platforms?

Existing platforms already maintain traffic.
It is easy to set up a seller’s account.
They have a solid track record.
You are open to money-making opportunities.

And why not?

The chargebacks on every sale might be draining.
Competition is high.

So should you go with creating your platform? Certainly! Reasons are;

You have total control of how it works.
Higher profit margins.
Less competition on your platform.

Sound like a perfect plan, but a few things can make you reconsider;

There isn’t existing traffic.
It costs money to create a dynamic website that can perform well.
Investing in SEO can be time-consuming.

Check out these companies.

Can I Dropship On My Website?

You need to build an eCommerce platform using an eCommerce builder like WordPress, BigCommerce, or Shopify. The website must look professional and be bona fide. You will need to market yourself extensively. Cyberspace is enormous, and just creating one website may take ages for customers to be aware of it.

Build Your Own eCommerce Website

Your restaurant domain name protects your website address on the internet. You can register a domain name with any hosting company you choose.

Some of the common domain registrars include:

Here is a list of some options for building a regular website.

Here is a list of drag-and-drop page builders for WordPress.

Promote Your Store.

Irrespective of the platform used, you’ll need to try soliciting your clients. Call it advertising, marketing, or promoting. The aim is to make more sales. There are many methods you can employ to get the desired result. Some reflect instant results, while others take some time. Some examples of fast track marketing include;

Facebook ads; can be boosted with a small investment, are easy to control, and track progress.
Google ads; The largest advertising platform in the world. It has to potential to give you all the necessary exposure.
Brand influencers; the use of celebrities to push your brand. It might be expensive.

Some free ideas are;

Email marketing
Content writing
Social media marketing

As the saying goes, ‘there is no such thing as a free lunch.’ Achieving success in any endeavor requires one’s best input. Dropshipping is no exception.

Conclusion

You might be disappointed if you think you might make a six-figure income in the first year as a drop shipper. Most drop ship businesses do not make much money in the first six months, so you have to be realistic. Since the investment is minimal, the returns are generally low when getting started.

What you will need to establish yourself are time and labor. You will need to spend an enormous amount of time building your website, selecting your suppliers, streamlining payment processing, and providing quality service from the time of purchase to delivery. It would help if you did not quit your full-time job, at least for the first year, until your dropshipping business shows signs of success. And no matter how successful you become, always be on the lookout for scammers.