What is Drop shipping | Does it work in 2019-20?
What is Drop shipping?
Dropshipping is a relatively new business model where you front store and sell other companies product and they have to deal with shipping, returns, customer support etc and you make money by selling the product on a higher price.
In this business model, you as a drop shipper can function without preserving a proper inventory or warehouse for storing products, and doesn’t have to ship these products to their customers themselves. Shipping is done by suppliers. Supplier is the one who manufactures products, then pack and supply these products to retailers customers on behalf of retailers. Retailer gets profit that is the difference between the wholesale and retail rate but some can conclude an agreeable amount of commission with wholesaler supplier as well.
This innovative idea got an instant boost when Aliexpress introduced itself in the US. Idea got endorsements by masses due to the appealing convenience and profit as it sounds. Drop shipping urges many people as in drop shipping seller is not bound to store goods plus remains hassle free for maintaining them. Not only this, drop shipping can be started even with minor investment. There are many well reputed companies that launched themselves with zero investment.
Dropshipping in 2020
Dropshipping has been a very alluring concept that gained attention from abound number of people within a short span of time. Dropshipping elevated many digital entrepreneurs to the status of millionaires. But now with mushroom growth of dropshippers, competition has been so high in the ecommerce market with number of dropshippers in the market, that it has become difficult for a small scale dropshipper to sustain in the market.
Let me share a fascinating fact with you.
In 2017, approximately 23% of online sales last year were fulfilled via drop shipping, which amounts to about $85.1 billion. Source 3dart
Some entrepreneurs wrongly interpret it as an end of drop shipping era. But case is just the reverse. Now there are more than ever people pouring in this profitable business. Drop shipping is a job just like any other job done by people. If people are courageous and creative enough to survive then they have bright chances ahead. Drop shipping is predicted to follow a very similar trend in 2020, opening doors to the number of drop shippers.
There are few challenges in drop shipping business.
Issues with order:
You will have a tough time to face, if the situation will turn a little embarrassing when you agree to provide orders to customers and find that the ordered item is out of stock with seller. Thus replying customer with such an apologizing email can produce some negative vibes.
If you want to immerse yourself in the field of drop shipping then you need to take the following initiatives.
1. Selecting products for drop shipping:
Selecting good products are the core basics of good drop shipping. They can make or break your business before it even gets started. While selecting products for drop shipping you need to focus on various aspects.
Select popular products:
While planning your drop shipping project, one should conduct deep research on currently in demand products. Select products that will be unique and not easily available to people. Choosing products that appeal to customers and are highly in demand will bump up your business profit. Rebranding an item while giving it a touch of your personalization will give more value to your items. You can reduce prices on these items as compared to your other competitors.
Here are some tips that you will find useful:
- Choose cute and attractive products that are under $10 e.g keychains, jewelry, smartphone covers, pet products, stuffed toys, etc.
- Try to pick up uniquely in demand products that are scarcely available anywhere else. Selecting products that are not on Amazon will land you in more profit. Try to keep the price of goods lower as consumers double check the prices from various resources.
- If you are choosing an expensive products then it must be a useful one.
Here are few example products you can Drop ship.
- Neck Phone Holder
- Magnetic Charging Cable
- Pocket Language Translators
- Posture Correction Belts
- Waterproof Floating Phone and Tablet Cases
- Moon Lamp
- Mirror Alarm Clock
- Portable Mini Air Conditioner
- Waterproof Shoe Protectors
- Mineral Rich Magnetic Face Mask
- Deshedding Pet Gloves
- Desktop Punching Bag
- Wireless Charger
- Car Phone Holder
- Scalp Massager
- Mini USB Electric Vacuum Cleaner
- Adjustable Nylon Rope Pet Cat Leash
- Multifunctional Plastic Knife Block Stand
- Digital Infrared Thermometer Gun
- Electric Flea Comb for Puppies
Keep in mind that these are just rough ideas, you have to do your own due diligence. The purpose of showing that list was to give you an overall idea of what type of products you can sell on your store and can easily drop ship.
Typically, these products are shipped from China another example is to create a store for indoor games and sell table tennis equipment like rackets, balls, Table tennis shoes and other indoor games equipment that you can sell at a high margin in the US and are pretty damn cheap in china.
Since your earnings will depend on the difference between the wholesale and retail rate thus you should fix prices of goods wisely. High priced products will benefit you but will attract less audience and vice versa is true for low priced products. You can earn good profit by deliberately keeping profit percentage between 15-45 %. Products less than $ 50 will be great for gathering your clients.
Packaging and shipping costs vary between different products based on how much packaging material and effort is required to ship the product. Dropshipping smaller items that do not require much packaging, will be easy to ship, will attract more customers and will provide you with a good amount of profit margin. Heavy and delicate items will need more effort with packaging and can lower your profit margin.
If you are selling one item for dropshipping then you can also extend your business to products that are related to it. e.g if you are selling notebooks then you can also choose to sell other stationary items that belong to the same niche. This will give you profit advantage. You can sell one product on low cost to attract audience and other product at a relatively higher price as compensation.
Top niches prevalent in 2019 are
- Pet products
- Phone accessories
- Novel jewelry shapes
- Sunglasses and hats
- Hair care and fashion accessories
Creating a proper login system will hold your client to stay for longer duration. And If you sell a product that is disposable or can’t be used for lifetime will force your clients to come back and shop again.
If you sell products that keep on updating themselves in short spans of time, you will have to keep switching up the content which would be a constant re-investment of time and money—with the added stress of actually updating everything physically.
2. Perform competition research.
Selecting products that are high in competition means that they are more in demand by the public. If you end up with picking products just because they have no competition will land you nowhere. Low competition indicated that they are not much demanded by public. It can be due to any reason. E.g shipping cost of product might be high, etc.
3. Secure a supplier.
Having good business communication skills are fundamental for success of any sort of business. Most of the time wholesale stores can be in another country. Therefore selecting store genuinely and better communication with them can make a big difference in your dropshipping career and can take you up to success.
5. Build your ecommerce website.
For registering your ecommerce website shopify and Woo commerce are two best options. Shopify has all the necessary guidelines and application that will move you towards your journey step by step and increase your sales. When it comes to drawback of shopify it can be costly if you want to start with minimum investment. Woo commerce on the other hand is much economic option. You only have to pay for your domain and for hosting your store, while you can run multiple domains from a single host.
6. Create a customer acquisition plan.
Now, after you have got all your ducks in a row by creating your domain and selling products, but you don’t have customers . Then this will push you to a dead end. You can attract customers by using your social media platforms.
Facebook, Instagram and Pinterest are more established dropshipping promotion tools. But they are useful to a limited extent. You should focus more on search engine optimization and email marketing for long term results. Google ads are also a good way for promoting your products on a broader level.
7. Analyze and optimize.
Keep track of all the data about your customers origin and how they come to stumble on your site. In a constantly changing world of ecommerce you can not stay content. You always need to come up with new ways of advertising. Thus tracking your customers basic location will give you new ideas about expanding your campaign.
Less Capital Is Required – Probably the biggest advantage to drop shipping is that it’s possible to launch an ecommerce store without having to invest thousands of dollars in inventory up front. Traditionally, retailers have had to tie up huge amounts of capital purchasing inventory.
With the dropshipping model, you don’t have to purchase a product unless you already made the sale and have been paid by the customer. Without major up-front inventory investments, it’s possible to start a successful drop shipping business with very little money.
Easy to Get Started – Running an ecommerce business is much easier when you don’t have to deal with physical products. With dropshipping, you don’t have to worry about:
- Managing or paying for a warehouse
- Packing and shipping your orders
- Tracking inventory for accounting reasons
- Handling returns and inbound shipments
- Continually ordering products and managing stock level
Low Expenses – Your business expenses become quite low as you are not bound to keep inventories and you don’t have to store products yourself.
No Location Boundaries– Dropshipping just needs a stable internet connection disregard of the location from where you are running your business.
Wide Selection of Products – As a shopkeeper has to purchase products for running their business but there is no such limitation for dropshippers. Dropshippers can promote any product that they wish to promote or find available with their suppliers. Thus you will have an option to publicize wide amounts of products.
Lesser Workload – Most of the work has to be done by suppliers thus your workload and responsibilities will be reduced.
Low Margins – You may be forced to keep your profit margins low for attracting customers or surviving tough competition.
Inventories– You have to match your inventory with your supplier for hassle free running of your business.
Shipping Problems – If a person orders multiple items from you that belong to different suppliers then this means that the customer will have to pay prices for all the products that he ordered. But this ain’t fieseable as customer will be unaware of your settlements with supplier. As a result you will have to adjust the shipping cost. This can bring you at little loss.
When Supplier is at Fault– Anyone can make mistakes but you will have to take blame for the mistakes that are done on the end of suppliers.