Welcome to Dropshipping 101. In this post, you will learn the basics of the drop shipping business model as well as an overview of how to start a Dropshipping business with Shopify.
Dropshipping 101: What is Dropshipping?
Dropshipping is a retail business model that is best characterized as a hybrid of a fulfillment model and product sourcing method.
- In saying that dropshipping is a fulfillment model, we mean that it is a tactic used to deliver a product to a customer after they make a purchase.
- By calling it a product sourcing method, we mean that it is a means of identifying products to sell and suppliers to partner with for your e-commerce business.
Dropshipping is a process that starts as soon as a customer places an order. That process goes something like this:
With the dropshipping model, the seller doesn’t store any inventory. Instead, when a customer places an order through their online store, they communicate that to a supplier, who then ships the product directly to the customer.
Image Source: Oberlo
Whereas other fulfillment models involve buying and storing inventory at a warehouse, a dropshipping seller doesn’t hold any inventory at all. Instead, they establish an agreement with a supplier, usually through AliExpress or a “Print on Demand” company, like Printful. Once a customer places an order through the online store, the supplier ships the product directly to the customer. The seller doesn’t pay a dime to the supplier until an order is placed by the customer!
Mitchell Stern, Founder of SideHustle.Tips, is a big believer in the dropshipping model, especially for first-time business owners. “Dropshipping is a great way for new business owners to get into eCommerce without having to worry about shipping logistics,” says Stern. “There is real money to be made; as long as your dropshippers can ship in a timely manner.”
Benefits of Dropshipping
The first major expense of many eCommerce businesses is to purchase inventory. On the other hand, with dropshipping, sellers avoid this expense entirely.
The minimal upfront investment makes this model massively appealing to aspiring entrepreneurs. Low budget? No problem. A lower initial investment means lower overall downside and lower overall risk. It also means the entrepreneur is free to experiment: a dropshipper can test out products and pivot easily if they are unable to sell them. More on this, later.
How to Start a Dropshipping Business with Shopify
The primary steps to starting a dropshipping using Shopify business are as follows:
- Choose your product or niche.
- Create and optimize your Shopify store.
- Deploy a marketing strategy.
- Test, Evaluate, Revise, Repeat.
Choosing a Product or Niche
Many aspiring entrepreneurs never start their journey because they are unsure about what products to sell. Luckily, the Dropshipping Model affords you the ability to choose a product with virtually no risk.
Let’s say you decide on a product. You launch your store but get little to no sales. Are you screwed? Nope! You can simply pivot to a new product. The only cost is your time.
To get started, try choosing a niche or market segment that you are familiar with. Brainstorm product markets that you understand, are passionate about, or that are aligned with your hobbies and interests.
One option is to use a print-on-demand service, such as Printful. These services allow you to dropship custom designed items, such as T-Shirts, Hats, Flip Flops, and more. This model is very popular for creative entrepreneurs!
However, most dropshippers use AliExpress to research and find dropshipping products and suppliers. AliExpress is an extensive B2C marketplace where you can find very cheap but high quality products from Chinese suppliers. Most of these suppliers offer dropshipping services. You can find items for sale in almost any niche: AliExpress contains over 100 Million Products! For comparison, Amazon sells about 12 million products.
A simple way to choose a product is to browse AliExpress and look for popular products within your chosen niche. In the screenshot below, you can see the Consumer Electronics product category is pulled open.
Using the filters under the search bar, you can isolate products based on your preferred criteria:
- Display products only of a certain price point
- Show only those items that ship from the US (as opposed to China)
- View products that have a review rating of 4 stars or above
- Sort results by Total # of Orders, Price, or Date Added
A strong dropshipping product has strong sales, good reviews, and a was uploaded relatively recently.
Product Research Tools
If browsing products on AliExpress sounds like a mind-numbing exercise, consider using these product research tools. These searchable databases could just help you find the diamond in the rough:
Still not sure how to decide what product you should sell? Check out our post that goes over a proven method for answering this very question.
Create and Fill Your Shopify Store
Shopify is what is known as a “turnkey” eCommerce solution. In practice, that means you can sign up for Shopify and create an impressively professional e-commerce store in under an hour. No coding required. And the basic plan costs just $29 per month.
Shopify offers many free courses and tutorials on how to set up your store.
But to show you just how how easy it is, I made this video – where I create a real working Shopify store from scratch in less than 9 minutes.
As shown in the video, once you’ve gone through the logistics of setting up your store, you can easily add products to it from AliExpress using a free service called Oberlo.
Oberlo is actually an application that Shopify owns, so it plugs into your store seamlessly. It includes a free chrome extension that allows you to import products from AliExpress into Oberlo in 1 click. From there, you can modify the product details and publish it to your Shopify store. The entire process takes minutes!
In a separate post, I will discuss how to best write your product descriptions to convert prospects into buyers. I will also go over some of the tools and third party apps that you can use to optimize your store and maximize sales.
Marketing Your Shopify Store
To recap, dropshipping requires no upfront investment in inventory and the setup of your store is incredibly easy due to tools like Shopify and Oberlo. Therefore, the vast majority of your efforts will go into Marketing.
Common marketing tasks and expenses include:
- The development of a brand story, mission, and vision.
- The creation enticing product pages with good pictures and compelling product descriptions.
- Outbound Marketing tactics like Paid Advertising and Influencer Marketing, used to drive potential customers to your storefront.
- Inbound Marketing Tactics like blogging for Search Engine Optimization (SEO) and content marketing, used to drive organic traffic to your store.
Most drop-shippers rely heavily on Facebook Advertising. That’s because it provides cheap cost per click (CPC) ads that can be highly targeted. With Facebook, you can isolate an advertising audience based on interests, demographic information, geography, purchasing behavior, and much more. But there are a huge number of options when advertising.
Moreover, we strongly recommend you deploy a holistic marketing approach for your Shopify business!
Test, Validate, and Revise Your Strategy
As mentioned, one of the primary benefits of dropshipping is having the freedom to inexpensively test different products and marketing strategies. A good drop-shipper is frequently conducting A/B tests on the following variables:
- The products they sell in their store
- Product pricing
- Promotions, discounts, and deals
- Ad platforms
- The audiences they target through advertisements
- Their advertisement “creatives”
- Post purchase tactics like referral programs
You get the idea. Dropshipping is an ideal business model for anyone who is persistent and diligent enough to test the variables at their disposal. Conduct your tests, review the results, revise your strategy, rinse, repeat. That’s how to build a successful e-commerce brand with dropshipping.
Disadvantages to Dropshipping
Dropshipping, like any business model, has its downsides that you should be aware of before you dive in. Here are a few of them:
- Navigating the competitive world of online advertising can be difficult, and this often stops entrepreneurs in their tracks.
- Since you aren’t storing inventory, you have very little control over the consistency of the product quality.
- Furthermore, you don’t have great control over the timeliness of the delivery. As compared with Amazon FBA 2-Day shipping, dropshippers are at a disadvantage. Most dropshipping products take 2 weeks or more to be delivered.
- Differentiation is tough to execute in the world of dropshipping. You don’t have the option to customize your product or its packaging, which are very important in brand development.
Wrap It Up, Chuck
Don’t let these disadvantages discourage you. Instead, just be aware of them and implement thoughtful strategies to circumvent these downsides. Building a successful dropshipping business is a very attainable goal!
The dropshipping business model has a lot going for it. It is certainly worth considering for new entrepreneurs that are on a tight budget.
What’s the best next step?
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