Part 4: Starting a Drop Shipping Business
This is the 4th article in a 5 Part Series that examines different ways those with Social Anxiety Disorder can build their own online business from home. We do not intend any of this content to be viewed as an alternative to professional therapy, but simply as a way of helping readers to see more potential work options than those offered in a traditional ‘employee based’ work environment.
In this article we will examine the Dropshipping business model.
What is Drop Shipping?
When you think about selling products to customers online, usually the first business models that come to mind are 1. Creating your own product line, or 2. Buying in bulk from a manufacturer and selling at a higher margin. The trouble with the first model is that it could be quite time consuming and you would need the capital upfront to buy the raw materials. The second model would also require a capital investment upfront to buy product and probably also a storage cost. In both cases there is the additional risk of possibly low demand and holding stock that may never sell.
The solution to the time and capital risk elements is to have an online drop shipping business. It has become one of the fastest and low-risk ways to get an online business started. You can sell products to your own customers without having to create or stock the items yourself. The shipping and delivery to the customer is done for you for a fee by your drop shipping partner who is typically a wholesaler or distributor. Its estimated that around 20-30% of all online retailers use drop shipping, so it’s a well established business model.
What Products Can I Drop Ship?
Firstly, you should try to work in a niche that you really enjoy. There are wholesalers in so many market segments that you should not have trouble finding products to market online. The challenge is to find the really hot items where the demand is going to drive your sales. Look for trends online that you can be a part of, and also check on places like Amazon for new items that are being driven by demand.
What Are The Benefits?
The main benefits of the drop shipping model are;
- Low cost of entry. The set up cost of an online store is minimal.
• Control of profit margins. You decide the retail price of your products.
• No need to tie up your cash in storing inventory, or buying products upfront.
• The packaging and fulfillment of orders is done by your drop shipping partner.
Some Do’s and Don’ts In Drop Shipping
1. Always think about your potential customers as ‘Global’. Too many new drop shippers don’t consider the world as their marketplace. You could find that some of your products sell better in other countries!
2. Choose a niche where you can remarket your customer. When you think about it, in time your business will have established trust with your purchasers. It will be easier in the future to sell (again) to those existing customers, so chose a niche where you can remarket to your customer list.
3. Manage your marketing costs. Use both free and paid marketing to reach your desired audience. Don’t spread yourself too thin by spending money on a variety of advertising. For example, you may want to start by just having paid Facebook ads and free exposure through a Pinterest account.
4. Research. Don’t be in a hurry to pick your products to sell. Keep an open mind. The product that you love may not be as appealing to your potential customers. So, do your research on the big online e-commerce platforms and look for trends.
5. Don’t be deterred by competition. Just because there is a lot of people in a market does not mean there is no room for you. A big market means that its profitable, so look at what your competition are doing a add your own unique twist!
6. Be patient. Building up a successful drop shipping business requires time, patience and a lot of testing. It will also take time to build up an email list of people interested in your products. So, make it easy for people to request information and give you their contact details.
Reviewing Drop Shipping Partners
Most people going into this business want to build a reputation for quality and reliability with their customers. They see the benefits of building repeat business and scaling out into other product lines. For that reason alone, you want to make sure there are no weak links in the chain. Having an unreliable drop shipping partner can kill your business quickly.
TIP: Try out being a ‘customer’ to experience first hand how efficiently your order is processed and delivered!
Here are some key questions that you need answers to so that you can partner with the right drop shippers.
1. Your customers will want to track their orders. Do they have an online tracking system so that customers can monitor the status of their order?
2. How long will orders take to be processed and delivered? You can compare their answer to your own experience as their ‘customer’.
3. How do they deal with problems? Eg: lost shipments or damaged goods. Will this cost you money? Remember that blogs and other forums can spread bad news as easily as good news. Check out their reputations with others.
4. What warranties or guarantees are they providing and what is their return policy?
5. Who are the shipping agents that they use? How reliable are they?
As I hope you have seen, there are plenty of reasons why drop shipping can be a great way to kick-start your online business. If you want it can also be a great way to build your own brand and add value to the buyer’s experience through better service and content.
As with the others in this series, this article is really just providing you with an overview of the drop shipping business model. If you are interested in learning more from someone who has built multiple successful online businesses, then this program comes highly recommended.
I hope you enjoyed this article and found its content informative.