Understanding Dropshipping: Basics and How to Get Started

Wondering what this whole dropshipping thing is? Or, are you looking to start a small online business, and you've heard the phrase dropshipping here and there? 

Either way, you're in the right place. 

In this article, we'll clarify what dropshipping is and how it works. We’ll cover the highs and the lows, as well as how you can get started as soon as...today. 

There's lots to cover, so we'll dive right in!

What's Dropshipping? How Does It Work?

Dropshipping is a retail fulfillment method that empowers online merchants to start selling without worrying about warehousing, inventory, or shipping their products. 

This is the core difference between dropshipping and traditional retail models. In the three simple steps in the diagram below
Instead, when you, the store owner, make a sale, you purchase the product from a third party, the dropshipping supplier. They then ship it directly to your customer on your behalf.
Simple, right? 

What is a Dropshipping Business? 

In short, a dropshipping business is any brand that adopts the dropshipping model outlined above. If you’re curious about starting a dropshipping business:‍

There are two avenues you can take to get started: 

1. Find the dropshipping supplier yourself, and manage these relationships and customer orders
2. Use a dropshipping platform like Spocket. 
   

Needless to say, the easiest of these two options is the latter. As everything is automated and taken care of for you. 

With Spocket, you'll get access to:

• Thousands of high-quality dropshipping suppliers situated across the US and EU 
• Filters to help you find high-converting products in your niche
• A discount on the products to help you maximize profit
• You can order sample products to quality check items before selling them. 
• You can fulfill customer orders with just a click. Spocket integrates with your online store builder so that your orders appear inside your Spocket account.
• Fast and reliable shipping

Why Would People Buy These Products From Me? 

You might be wondering why people would buy dropshipping products from you when they could go to the dropshipping supplier directly? Surely, this has to be cheaper for them?

Yes, you're right. 

But, there are a few reasons why customers choose eCommerce brands like yours over dropshipping suppliers:

Most Online Shoppers are Unaware

Although you've heard of dropshipping, the fact is, the majority of your customers won't have. 

So, even if shoppers wanted to purchase directly from your suppliers, most of your customers wouldn't even know where to begin.

This may sound patronizing, but the stats speak for themselves.

More often than not, when searching on Google for product names and popular shopping-related terms, dropshipping suppliers don't appear. Instead, you're more likely to find listings on eCommerce powerhouses like Amazon or Etsy, or independent eCommerce businesses - like yours!

When you consider a whopping 92% don’t scroll past the second page of Google's search results, it's clear there isn't too much competition from dropshipping suppliers. And, as such, it's no wonder the majority of online consumers aren't familiar with the concept of dropshipping.  

Trust

With some time, effort, and creativity, you'll create a customer experience that builds trust with your audience, which most dropshipping suppliers fail to do.

This is your time to shine! 

If you're unsure where to begin, you can do a few things to boost your credibility:

• Publish plenty of high-quality product photos
• Only use top-rated dropshipping suppliers (ones with excellent reviews and years of experience)
• Make your store’s returns policy is evident on your website
• Have an SSL certificate
• Where possible, clearly display any trust badges you have
• Provide tracking information for customers to trace their orders
• Offer fast and informative customer service
  

Another huge element to building trust with your target demographic is putting a unique spin on your product. So, always test the merchandise yourself and write compelling product descriptions highlighting the product's core benefits. 

You could even amp things up a notch by creating a couple of videos that showcase your merchandise in action. It’s an ecommerce trend that's taking the world by storm and it goes a long way to encouraging customers to visualize how your product looks and feels.

How to Start a Dropshipping Business

Kickstarting a dropshipping business is easily broken down into the following stages:

1. Select a Niche

Choosing a niche means honing in on a specific industry - and specializing in products for that sector. Needless to say, some niches boast higher demands and generate greater profits than others. So, make sure your potential niche satisfies the following:

• There's a wide array of products you could sell with high-profit margins.
• The majority of products are cheap and fast to ship. 
• The items in your niche appeal to impulse buyers.
• Customers are actively searching for products in your niche. 
• There are at least a few products customers can't easily purchase locally. 

2. Perform Competition Research

Some dropshippers make the mistake of thinking niches with little (or no) competition is a good thing. But, in reality, it's often a sign there isn’t customer demand for these products. 

So, before settling on your niche, make sure there's healthy competition to validate that there's enough of a demand for you to launch a sustainable business. 

3. Secure a Supplier 

This is where an app like Spocket comes into its own. Here you can research, use, and manage multiple dropshipping suppliers from the convenience of one place.  

4. Build Your Online Store 

Spocket integrates with most major eCommerce platforms, and joining through these is by far the easiest and quickest way to get up and running. Best of all, you don't need any tech or web design experience to create something truly remarkable! 

5. Create and Execute a Marketing Plan 

There are tons of ways to drive qualified traffic to your online store, but the best place to start is Facebook. Most dropshipping marketing strategies start there and then branch out.

With an engaging Facebook ad campaign, you'll get in front of a highly targeted audience, which works wonders for securing your first few sales. 

As part of your broader marketing strategy efforts, it's also worth SEO optimizing your online store. That's as well as building an email list to nurture leads that will hopefully convert into loyal customers. 

6. Analyze and Optimize

This final stage involves tracking your website using software like Google Analytics as well as data from your Facebook conversion pixel. 

This, coupled with diligent A/B testing, will paint a clearer picture of which marketing methods and web designs boost your conversion rates...and, more importantly, which don't. Every loss is a lesson!

Pros and Cons of Dropshipping

Like most things in life, dropshipping isn't without both its pros and cons. Let's cover the good and the bad, so you can get a better idea of what you're getting into.

Advantages of Dropshipping:

Let's start with the perks

• It's incredibly cheap to get started with. Unlike a traditional store, you don't have to invest thousands of dollars into inventory, warehousing, staff, etc., to launch your business. So there's way less risk associated with the dropshipping business model. 
• Logistically, it's easier for newbies. You don't have to organize or pay for warehousing, packing, shipping, returns, or manage stock levels. As such, there's way less to think about! 
• Low overheads. Your overheads remain relatively low (even when scaling your business), as you only need a laptop and a few recurring subscriptions to run your store (Shopify, Spocket, etc.) 
• Location freedom. Providing you can get an internet connection, you can run your dropshipping business from anywhere. 
  

Drawbacks of Dropshipping

Now, for some of the disadvantages

• (Potentially) low-profit margins. In some niches, fierce competition has forced merchants to slash their prices to the bone to remain competitive. However, this isn't true of all niches, or even of all products within a niche. Rather, it just means you need to do some digging to ensure you pick a profitable niche from the get-go.
• Inventory issues. Depending on your supplier, inventory levels can fluctuate daily, so you'll need to keep track of that to avoid selling out of stock products. 
• Supplier mess-ups. You're responsible for the failures of your suppliers. Even the highest quality vendors screw up every now and again. In these instances, you'll have to shoulder the responsibility and apologize to your customers. 
• It's hard to brand your products and packaging. Typically, the product(s) you're dropshipping are designed and branded by the supplier. Consequently, you don't have much control over its branding. 
  

Is Dropshipping Profitable? 

Is Dropshipping Profitable? The short answer is: yes. 

The total profits across the dropshipping industry boast an impressive $4 billion per annum. That's a 7% year-on year-increase over the last decade! 

But, let’s use the scenario below to illustrate just how profitable dropshipping can be. 

For instance, say you want to earn $100,000 per year.

To achieve this goal, you'd have to source a high-quality dropshipping product costing $15, which you then sell to your customers for $30. Of course, you'll need to factor your shipping and marketing costs, so let's say you make $10 in profit. 

When you do the calculations, you'll only have to make 34 orders a day to reach this target! Successful dropshippers have tried and done it, so don’t think it's impossible, it simply requires grit and a positive attitude, just like any small business idea!

Is Dropshipping Legal?

Is Dropshipping Legal? Yes, providing your supplier isn't selling products that violate copyright laws, dropshipping is perfectly legal. Suppliers are simply the wholesalers of these products, and they have no interest in marketing and advertising.

Having online retailers like you is essentially their own personal sales team. You make sales, and everyone profits!

Ready to Start Dropshipping?

We hope having read this blog post, you now have a clearer idea of what dropshipping is and how to get started with it yourself. It is an excellent opportunity to start a side hustle or small business, and become an entrepreneur. We're here to watch you soar, and support you every step of the way.

If you think Spocket could benefit you as you embark on this new venture, then why not try it for free? Note: you don't have to hand over your credit card details, so rest assured, you have nothing to lose and everything to gain. Enjoy!

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