Drop shipping is often seen as the “new age” business model, removes the need to purchase any stock upfront, saves inventory costs, no “death stock” and in theory, giving you the capability of being able to operate it from anywhere and anytime in the world, so long as you have internet access and a laptop.
“Dropshipping is the art of banking a serious profit simply by reselling merchandise without touching it. You’re basically a middleman.”
— FeelTheBerด ้้้้้็ (@ZariaVonMars) May 9, 2016
We have seen a big increase of this method in 2016 as Aliexpress made it easy for everyone to order and get their products shipped in under a week from China suppliers directly to USA and EU.
The reality can be quite different, and the phrase “too good to be true” certainly springs to mind. So having heard nothing but positive things about dropshipping, what are the negatives, that perhaps you hadn’t considered, or more likely hadn’t been told about.
The Low Cost Of Entry
The biggest positive about dropshipping is the low cost to entry. While this is most certainly true, this positive also creates a negative. If the barrier to entry is so low for you, then it is equally low for those who have come before you, and those who will follow. A saturated market is never an easy nut to crack, and you could be defeated by the competition before you ever begin.
What Will Be Your Unique Selling Proposition
Lets pretend that you want to start selling your products by dropshipping them from China and your product of choice is widgets. If those same widgets are being sold by 2000 other online stores worldwide, how will you ensure that your eCom store is the number one destination for widget customers? The fact of the matter is that unless you can differentiate yourself from the competition, it could be argued that you don’t have a business.
If It Sounds Too Good To Be True ….
Whenever a business opportunity sounds too good to be true, it invariably is, and the reality is that dropshipping creates almost as many business tasks and challenges as an offline business. The margins, however, are much slimmer, and the competition significantly higher. Lets imagine you decide to stock 300 products on your website. You will now have to write or pay for someone else to write individual and unique descriptions of every one of those products. Then you will need to come up with a way of tracking all of the sales, arranging deliver from your various suppliers, and providing first class customer service, when things go wrong, which they inevitably will do.
Your Entire Business Is Controlled By Someone Else
Let’s be positive for a second, and imagine that your business explodes overnight and you get an order for 300 widgets, versus your normal sales of 2 widgets per week. Can your supplier cope with the demand, will they be able to deliver on time, and will they then retain extra stock for you next week, incase this growth is sales gathers momentum? You have no control over your supplier; you cannot force them to work longer hours or to hold back extra stock for you. In reality, you have a company that is totally reliant and controlled by your suppliers. If they decide to quit or to increase their prices overnight, you have little choice other than to pay the new cost; unless of course, you can find another supplier.
Adrian Morrison from eCom Success academny stated last week: “The dropshipping model is painted by many as the ultimate hands off opportunity, but the reality is much different, and you need to enter any opportunity such as this with your eyes wide open.” ( Source: Ecomsuccessacademy.net
Decision Made – How To Launch Your E-Commerce Store Fast
For many people reading this article, the decision may already have been made to try the dropshipping model, so rather than try and convince you otherwise, let’s embrace that enthusiasm and walk you through the steps to launching your E-Commerce Store.
The first thing you need to decide upon and research is the system you are going to use. In our case we choose to use Shopify, as we like how easy the system is to setup, and some of the team had previous experience with their software.
“In our minds, if you are starting a new online business, or just bringing an existing business to the online world, Shopify is definitely one of the easiest ecommerce builders to help you create your online shop” (Source: Websitebuilderexpert.com
There are numerous other options available, so it is essential that you perform due diligence, and decide on the best platform for your needs and requirements.
This is going to be the software you use every day, so this is potentially one of the most important decisions you will make. Once the business is established and profitable, with daily traffic, it will be challenging to say the least to try and swithc systems, so make sure you get it right first time around.
The main ethos behind this article is to get you moving forward, making decisions and achieving success. Many portential shopkeepers get to this point, and then spend hours, days or even weeks trying to figure out a catchy exciting domain name. The fact of the matter is that the domain name is nowhere near as important as some people think, so choose one and move forward.
Once you have chosen your domain name then select the sales channels where you want your products to appear. One of the benefits of Shopify is that you can have an online store, Facebook or even a bricks and mortar option, but again don’t spend too much time deciding, we want to maintain our momentum.
Your Store Design and Look
One of the biggest advantages of using a hosted e-commerce platform, other than the fact that most of the technical aspect is already done for you, is that most companies provide many different store themes. You are free to choose the theme that you prefer and in the majority of cases these themes will have been split tested by marketing experts in order to achieve the maximum conversion rate. These E-commerce platforms are as close to a business in a box as you can get, but it is also important to choose wisely both in terms of a suitable match for your products, and so that your store has some individuality and does not have the appearance of a cookie cutter site.
Content on any website is the key to it’s success, but if we want to get the site up and running as quickly as possible, then we cannot spend hours and hours creating compelling and interesting content, at least not initially. Focus on the essential pages, such as About Us, or Delivery Information how this bank does. Think about the information you would want to know before spending any money, such as the returns policy for instance – you can get the up with this free tool here. Just remember we are trying to get the site completed and up and running ideally within 24 hours. However, once this has been achieved, then we need to revisit tweak and improve all of this important information, constantly.
Setting Up Your Back End Office Settings
All that really remains at this stage, other than adding your products obviously, is to add a payment provider, which in the majority of cases will be paypal, or in the case of Shopify could be their own payments gateway. This option is probably our preferred choice, as the software is all designed to work together, but in fairness to Paypal, their system works just as well.
Don’t forget to include shipping costs, but local and international, although again this may be included in the items price. Don’t ever assume that either way, make sure you fully understand the cost and the RRP, as this is your profit margin. Many small businesses have failed due to a lack of attention to the numbers.
Stocking Your Store With Products
If we are still aiming to complete the tore setup within a twenty-four hour period, then we don’t have the time to painstakingly research thousands of products in a day. That’s where a company such as AliExpress becomes invaluable. All you need to do is visit their store, copy the product to your store, add in your margins and then the second you sell a product arrange for the shipping to be done directly to your new customer.
Aliexpress is the new king when it comes to dropshipping, and as a first-time entrepreneur combining Shopify with Aliexpress, with the exception of traffic generation, you have all the important components of an online business done for you. (source: The100kfactory.com
Don’t Try To Reinvent The Wheel
There are literally millions of different products available online, and there is no way that you as a single business person will be able to even view all of those products, much less choose the best ones. Rather than try to reinvent the wheel, do your research and find out what is selling well online. Visit sites such as Pinterest, or Wanelo, to see what everyone is discussing. Niche products will always be your best bet, as you can drill down and really focus on a specific group. This has the added advantage of filtering potential customers. By the time they have found their way to your site, they are probably serious buyers rather than time wasters.
Target Lower Priced Products – Within Reason
Impulse sales are always a lot easier to achieve, than trying to sell a higher ticket item. Set your highest products at no more then $60.00 as you are much less likely to encounter buyer remorse below this price point. Also the quality expected and subsequent ongoing support will always be proportionately higher for a more expensive product.
Get In Front Of The Wave Not Behind It
When it comes to niche products, especially crazes, you always want to be in front of the wave, rather than behind it. What that means is you want to be selling a product before everyone else, and while It is gaining in popularity. Jumping on the bandwagon later, means your competiton will be significantly higher, and your subsequent sales and opportunities much more limited. This is where Google Trends comes in as you can interrogate the data, and use that knowledge to choose your products.
In Stock Or Not?
One of the biggest hassles of the dropship model is keeping track of which products are in stock. Your reputation will quickly take a hit, if your products are never in stock. Always aim to use the highest rated suppliers, and products where delivery has been included in the price, as this will help your bottom line.
Try to edit the product information so it is not identical to AliExpress, and now your store is ready to open its doors. Sit back and enjoy the profits of your hard work …….. if only it was that easy. Everything mentioned above was done with the intention of getting your store launched and overcoming indecisiveness, which is where the vast majority of online ventures crash and burn. Once the store is launched however you are now free to focus on generating traffic and sales, safe in the knowledge that your infrastructure is in place.
Test, Test and Test Again
The final part of the puzzle is to work out where and how to generate targeted traffic. Facebook, Reddit, Twitter, the list is endless, and that is as much of a benefit as it is a curse. Once you have discovered the best platform for your niche and are constantly generating sales, then next part of the process is to scale uo that marketing, and even consider spending some money on it. If you can generatr $10 for ever $1.00 spend, then you would be happy to spend thousands of dollars, as the numbers work.
The key to making things work online, is to keep on going and to execute your ideas. Many people set up a site and expect to make sales overnight, but that’s not very likely. When you first setup a site, it is in the middle of the desert, or antartic. There is no passing trade, and if people don’t know your store exists, then they won’t visit and spend any money. You job is to advertise and drive floods of targeted visitors to your new store, but that’s a subject for another article.
Hopefully you are now motivated to get stuck in and take action, in which case what are you waiting for?