What is Dropshipping and How Do I Make it Into a Business?

Have you heard of dropshipping? Are you curious about how it works or how to start a dropshipping business? Then you’ve come to the right place. Dropshipping has become a popular way for entrepreneurs to make money either as their main income, or even as a side hustle to a regular job.

Here, we’ll cover what dropshipping is and how to go about turning this into a business you can operate from anywhere.

What is dropshipping?

So, what exactly is dropshipping?

Dropshipping is a fulfillment service, which allows a retailer to sell products from a manufacturer or supplier, without keeping inventory on hand at a physical location.

A retailer or merchant can partner with a manufacturer or wholesaler that has their own products and inventory. All the retailer needs to do is forward their customer’s order and details to the dropshipper, who then packages and ships the order to the customer for the retailer.

This has become a popular business model for entrepreneurs who have e-commerce sites as their main source of income or those who run a site as a side side in addition to having a regular job.

Related: 5 Reasons Why Dropshipping is the Future of E-Commerce

Pros of the dropshipping model

As with any business, there are some pros and cons to consider before jumping in. First, let’s take a look at some pros to dropshipping:

  • No inventory: There’s no need to keep inventory on hand when buying from a manufacturer or supplier. They take care of all aspects of maintaining inventory—you don’t have at worry about it at all.
  • You don’t have to manage fulfillment: You don’t have to worry about fulfilling your customer’s order. All you do is pass on the customer’s order and shipping information, and the dropshipper takes care of it from there.
  • Low cost to start up: You don’t need to make a huge investment to start a dropshipping business. It may take only a small amount of cash to set up the business and then start earning money.
  • You can offer a wide variety of products: You’re not limited to the types or number of products you can sell your customers—you can offer a wide variety without the worry or hassle of inventory and shipping. You also have the ability to change products if something doesn’t sell well.
  • Not committed to inventory: As just mentioned, if something doesn’t sell, you don’t have to worry about unsold stock taking up room in a warehouse. You can choose a new product and possibly a new supplier, as well. You also have the freedom to test new products and see what sells the best.
  • Mobility: It’s possible to run your business from anywhere in the world as long as you have internet access.

Cons of the dropshipping business model

After looking at the pros, you’ll also need to consider the cons in order to make an informed decision about running this type of business.

There are some downsides to consider with dropshipping, including:

  • Low profits: Overhead for dropshipping is low; however, you’ll need to earn a profit to keep your business up and running. Remember that the manufacturer/dropshipper takes a cut of the profit, so be sure to figure this in to your business plan when it comes to expenses such as marketing, website expenses, operations, etc. Set realistic retail prices so you’ll make enough money to stay profitable.
  • Competition is high: Don’t be caught off guard with the low overhead of this business model. Remember there’s a lot of competition out there. Competitors may be selling the same product you’ve chosen. Not only that, but if the competitor has a larger business, they can afford to price their product lower than yours, which effects your profit.
  • Search for a good dropshipping partner: You’ll need to look for trustworthy and reputable dropshippers. If you buy from a supplier who has poor products, your business and reputation will suffer. You need to ensure that the supplier runs a legitimate business. You’ll also need to watch out for companies that sell trademarked goods—make sure they have the right to sell these products, to avoid any trademark and/or copyright issues.
  • Branding isn’t easy: You’ll need to brand your company, creating an identity that’s different from your competitors’. In addition, not all dropshippers will ship products with your company’s packaging. This could then become an extra cost.

As you can see, there are many pros and cons to consider before starting a dropshipping business. If you do your research and look for reputable partners, then it is possible to start a successful operation.

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How to start a dropshipping business

Now we’re ready to consider how to start a dropshipping business! Get ready for some in-depth research, business planning and more.

  1. Choose your niche: You’ll decide on the type of products you’d like to sell. What is your e-commerce site about? What products would do well in this niche? What would be of interest to your customers? If you’re unsure, you may want to consider setting up a shop that sells a variety of items, then wait to see what sells best.
  2. What’s selling: Next, you need to do some research to see what’s already selling well. You can check out the best sellers lists on Amazon—it’s a free way to check on competitors, popular products, pricing and more. Research your product ideas to find what’s trending and what products are popular.
  3. Search for dropshipping partners: Once you’ve chosen your products, you’ll need to find reputable dropshippers. There are dropshipping supplier platforms you can check out, the most popular of which are Oberlo, AliExpress and Modalyst.
  4. Build an e-commerce site: Once you’ve done the research in steps one through three, you’re ready to build your e-commerce site (or begin using an e-commerce platform). You may need to create content to go with your site, such as a blog, item descriptions, etc. Be sure to have all of this in place before opening up to customers.
  5. Get a tax ID: You may need a tax ID to run your business, so be sure to check out the requirements in your country.
  6. Ready to sell: Once everything is set up, you’re ready to sell. Have fun making money with your new business!

Remember, as with any new business, there will be issues and problems to solve along the way, which is to be expected. Think of these issues as a chance to learn, improve your business and become a better entrepreneur.

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