What Is Dropshipping | Is It Right For you?- Ecom Warrior Academy
Do you see yourself working as part of “the force” forever? Never-ending days of 9 to 5 shifts, little to no holidays, and basically repeating the same routine over and over? You know you are always one decision away from changing your life for good. There are countless opportunities left for you to explore – take dropshipping, for example.
Before we get into the nitty-gritties of becoming a dropshipper, let me first tell you why this is a viable career option for you. Allow me to explain how different your life can be with a fully functional, self-funded business through numbers:
- If you start working in employment in your twenties (let’s make that 20 years old, to be exact), and plan to do so till you reach retirement, you will be working for an average of 40 years, which is more than half the average of human life.
- In those 40 years, you will get roughly 120 days off per year, supposing you don’t work during Saturdays and Sundays. If there are, on average, 365 days per year, it means that you are working 65-70% of the time.
- If you are earning an average salary, promotions and bonuses not considered, you earn around AU $84,968 (as per News, AU). Multiply that by 40 years, and you have roughly AU $3,398,720. Deduct taxes, cost of living, insurance, and whatnot. That’s how much 40 years of your life is worth.
It’s not very promising now, is it?
Dropshipping: A Way Out The Vicious Cycle
On the other hand, there’s dropshipping – a business you can start without worrying about product stocking, consumer risk, and working capital. You have total command over your time, energy, and money. As a famous Japanese ode once stated, “It’s better to be the head of a chicken than the tail of a bull.”
Even with little money, you can start your own dropshipping business, be your boss, and receive 100% of your income. Even if you’re not ready to let go of your day job completely, dropshipping can also be a profitable side hustle that won’t demand too much of your time.
Now that we’re done with our little pep talk, allow me to fully immerse you into the world of dropshipping. I’m sure that you have tons of questions – from where to get suppliers, how to start selling, how to manage inventories, and how to create an online store. Rest assured; all of your questions will be answered by the end of this short yet informative guide.
First things first, let’s define how this product fulfillment model works.
How Does Dropshipping Work?
One of the most common product fulfillment models out there is retail. In fact, it’s probably the only way of selling you recognize, along with wholesaling. However, modern times have brought forth more innovative ways to make money. We now have a way to sell and fulfill consumer demands online, and that is through dropshipping.
Don’t have too much money to invest in inventory stocks?
Are you too new in the world of business to attract enough investors?
Not sure what type of business to start?
Dropshipping overturns all these usual causes for hesitation by allowing startups to sell with zero stocks in their inventory. Dropshipping is a modern-day product fulfillment model which allows a third party to sell products manufactured or produced by another company to consumers and consequentially, gain profits from the transaction.
In the dropshipping model, there are basically three persons or entities involved: The supplier, the dropshipper, and the buyer.
The supplier is the company responsible for producing the goods that would be marketed in a dropshipping business. They also often sell the goods themselves but allow drop shippers to market their products so that they can tap into markets that are otherwise inaccessible or out of reach to them.
The dropshipper, on the other hand, assumes the role like that of a “product curator” or selector, wherein they are responsible for selecting, organizing, presenting, and marketing products so that they get to reach more potential buyers.
Lastly, there are buyers. These buyers are further subdivided into niche markets, with each market having commonalities in terms of preference.
As you can see, in this product fulfillment model, the dropshipper liaises transactions between suppliers and buyers. Many suppliers are too focused on product development and manufacture that marketing becomes the least of their concerns. Drop shippers, in their stead, invest their attention in properly introducing products to the market and direct most of their efforts into marketing the saleable goods.
How Do Dropshippers Make Money?
Here comes the big question: How easy is it to make money from this type of business?
It depends. The time, effort, and skill you pour into building your dropshipping online store will heavily influence the returns you will receive in the near future. While time and effort are things that you can willingly sacrifice for the realization of your goals, learning how to drop ship means undergoing considerable training.
Learning how to market your products, troubleshooting consumer or supplier-related problems, and growing your profit margins are just a few of the many things you need to learn about to launch a successful dropshipping online store.
Fortunately, the internet is a haven of possibilities and everything you need, from e-Books to dropshipping courses are readily available online.
Anyway, if you’re wondering how drop shippers make money despite selling items that are not manufactured by them, the answer is quite simple: Marked-up prices.
Dropshippers are allowed to sell the items at a marked-up price. This is in exchange for their marketing efforts that allow suppliers to gain additional sales from markets that would otherwise be beyond their reach. This means that they get to add on to the base or wholesale price of the items they dropship. This technically serves as their “cut” of the transaction.
While the profits are significantly lower when you drop ship compared to when you manufacture or stock up on the goods yourself, the risks involved are also far lesser.
Here are 5 reasons why:
No Stock Required
When you drop ship, you don’t need any stocks in your inventory. You can practically start with nothing and still earn commissions from each sale you make. This is due to the fact that items are shipped one by one from your supplier directly to the customer.
Zero Production Capital
Even when a product or set of products do poorly in the market, you are not affected in any way. You don’t lose any production capital; you don’t have surplus products to dispose of. When the products you curated do not do well, you just earn less or no profit.
Storage Warehouse or Office Not Required
There is no need for you to rent a warehouse, or any other space to place your inventory or stocks in. You also don’t need to rent an office since you can do most of the work at home. You sell the idea of the product and have another company supply the actual item after you have sealed a purchase from a willing buyer.
You don’t have to mind expiration dates or the condition of products placed in inventory for a long time. You don’t have to deal with product damages as a result of poor storage, either. That’s because you don’t have an inventory in the first place.
Overhead costs are close to non-existent. Except for a few online tools and services that you have to pay for on a monthly or annual basis (e.g. web hosting provider, ecommerce platform like Shopify, domain name, etc.), and some devices you need to operate your online store (e.g. laptop or desktop, WiFi), you don’t worry about much else.
You don’t have to pay warehousemen, inventory clerks, or product managers. You can run a highly profitable business by yourself and in the comforts of your own home.
Dropshipping is especially regarded for its “low risk, high reward” type of system so if risks of incurring large costs or losing money are something that holds you back from starting an online business, then the dropshipping business model may just be what you need.
Who Is Dropshipping For?
There are no educational requisites for starting a dropshipping business. This means that anyone can give it a go as long as they have the patience and resolve to make it work. Needless to say, the best way to start an online store and make your debut as a drop shipper is to undergo formal training.
A dropshipping business can be run full-time or part-time. It all comes down to the resources available to you – how much time you can invest, how much effort you’re willing to expend, and the relationships you manage to build with suppliers and buyers.
With that said, you can start a profitable ecommerce store even while you maintain a full-time day job. You can make it your side hustle to help boost your monthly income. Or, if you see yourself thriving in the online world, you can also make it your full-time gig. Learn more about ecommerce here: https://ecomwarrioracademy.com/ecommerce/.
One thing I can tell you is that you won’t need to have thousands of dollars to start this type of ecommerce business. You can be a salaryman earning minimum wage or even a student who has some of his leftover Christmas money tucked away.
Whoever you are, wherever you’re from, and regardless of your age, becoming a drop shipper is possible. You just have to be willing to “start.”
How Much Do I Need To Invest To Start Dropshipping?
In theory, you can start dropshipping at no cost at all. You can avail of freemium instead of paid subscriptions and build your store’s reputation through digital marketing strategies that won’t necessarily have you spend any money (e.g. Social Media Advertising through Facebook, Twitter, Instagram, and YouTube).
If you have a certain amount of influence online (e.g. YouTube or Instagram Influencer), you’ll have more edge at dropshipping since you can encourage followers and supporters of your online content to purchase from your ecommerce store.
However, if you do want to hasten the process of building your online business, you may choose to shell out a little bit of money for paid marketing. Then again, a little bit of money is literally just that – “little.”
Shopify even suggests that $500 can go a long way when it comes to building your dropshipping business. You just need to know how to allocate your resources in ways that’ll help you maximize the profitability of your business.
How Does Dropshipping Work On Shopify?
The first thing that comes to mind when you hear the word dropshipping is Shopify. After all, talks about Shopify are quite rampant in the World Wide Web, and they’re pretty aggressive when it comes to their marketing.
Shopify is an e-commerce platform; it is a safe space for online retailers who would rather not start a website from scratch. It also plays a big role in dropshipping businesses as it serves as a way to bridge sellers to consumers.
However, it is important to note that Shopify is not the only e-commerce platform out there. There is also WooCommerce, Weebly, Bigcommerce, etc. Still, in terms of convenience, Shopify is mostly preferred by new dropshippers.
Shopify is an online store building program. They provide set themes, widgets, and even help you process and receive payments from customers through their platform.
In other words, Shopify assists you in building your e-commerce business by giving you a place to strategically display and present your saleable items to consumers. They also provide you with the necessary tools every newly established online entrepreneur needs to operate a dropshipping business.
Who Handles Customer Service And Returns?
This is where most of your responsibility as a drop shipper comes in. Although I did mention earlier that your role as a drop shipper is mostly to curate products for your niche customers, it is not your sole responsibility.
Even if, in reality, you do not manufacture, produce, or even ship out the goods yourself, you are still the seller in the eyes of customers. You are their direct contact. Whatever arrangements you may have with suppliers is unknown to your buyers, and you have to keep it that way.
With that said, should there be any complaints or problems with the products your customers receive, you will be the one to address them.
Other than marketing, this is where most of your budget as a dropshipper should be spent: Customer Service. Since you are not spending for your stocks, the least you can do to make sure that your business is smooth sailing is to invest in top notch customer service.
You can either invest in your own training, or hire someone to do it for you. The way you deal with customers will affect your store’s reputation online so you have to be extra careful when handling complaints and returns.
If it is proven that the customer has received defective goods, you can always coordinate with suppliers to exchange or refund the item. The key here is to work with responsive suppliers and to maintain contact with them in case someone raises a complaint.
Your promptness in addressing the situation will surely encourage more business in the long run; word of mouth is a powerful tool in marketing, after all.
How Do I Deal With Product Quality Issues?
What do you do when you’ve received customer complaints about a particular item more than once? You contact the supplier about it. If nothing is done to address the quality of the products, it would be best to let go of your current supplier and look for others that can provide you with the same or a similar product.
Product quality is crucial in maintaining buyers happiness. If certain products you carry are repeatedly reported for poor quality or returned, it can negatively impact your store’s overall image. This could lead to a loss of potential business in the future and may be detrimental to your store’s reputation.
Letting go of poor quality products early on can help you avoid more alarming consequences later. You can always curate better quality products. Customers’ confidence in your online store, on the other hand, is hard to win back. Be sure to prioritise the latter.