Drop shipping involving setting an online store or shop without any products in stock. You use the store to market and sell products to clients but the manufacturer or supplier ships the actual products to the customers. Drop shipping sounds so simple that some people equate it to quick cash. However, the ecommerce business has its pros and cons. You require little capital to set up the online store and have a wide selection of products to sell. You will only pay the supplier when the customer pays for a product.
You can make money from drop shipping at low overhead costs. However, the profit margins are low compared to the profits from conventional ecommerce businesses. You have no control over the shipping process, which is a major concern for online buyers. You may incur a higher cost on customer service as your drop shipping business expands. Hence, before you set up a drop shipping business, you must consider the pros and cons. Here is a guide on how to set up the business in the right way.
Choose the right niche
You can set up a drop shipping business in any market niche as long as you have suppliers with a wide range of products. However, you bear the responsibility of marketing the products and convincing clients to buy from your suppliers. With the high competition in ecommerce, you need effective marketing tactics to beat your competitors. It is easier to market products in a niche that you are knowledgeable about.
Consider selling products that you have used before because you can differentiate good quality from low quality. You can also choose a niche where you have academic or experiential expertise in. Another approach when choosing niche is to conduct a thorough research on the customers’ needs in that niche. Start with your close connections and extend your research to find out the kind of products that sells in a particular niche.
Understanding your niche before starting the drop shipping helps you to serve your clients better. Remember that your earnings depend on the number of customers that actually buy products through your business. Your knowledge will also help you pick the right suppliers, as we will discuss in the next section. Do not rush the process of choosing a niche because it influences the success and sustainability of your drop shipping business.
Pick the right suppliers
Your choice of suppliers determines the level of satisfaction of your clients. As a drop shipper, you have no control over the shipping process. Your clients may receive damaged or poorly packaged products or get their orders when it is already too late. Such instances are common when working with unreliable suppliers. You will have difficulties in building a good reputation and image for your drop shipping business with poor suppliers.
If you want to achieve high levels of customer satisfaction, start your business with local suppliers. You can easily follow up on local suppliers to ensure that your clients receive products on time and in good condition. You still need to involve online suppliers to earn significant income from your business. Conduct thorough research on each supplier before selling the supplier’s products on your online store. Check online reviews from clients and other drop shippers. You can try ordering some products directly from them first to evaluate their shipping process.
Focus on adding value
Many people fail in the drop shipping business because they have the wrong perspective. Drop shipping is not just about moving as many products as you can to earn higher commissions while the suppliers add value. You have a role to play in adding value to the products. For instance, you have to differentiate the products you are selling from other similar products in the market. Product differentiation is one way to add value to the products.
An alternative way is to sell products that suit your target customers. Pick products that will meet their specific needs. For this reason, you need to research your niche and target market consistently to understand your clients’ needs. Another method of adding value is selling supplementary products to your ecommerce products.
Drop shipping is only profitable in the long-term if you understand the business and use the right approach. Do your homework and pick the right products and suppliers before launching your business. Do not simply follow what other drop shippers are doing. Gather all the information you can about your chosen niche and suppliers to make the right decision. In addition, be willing to adjust your list of products and suppliers to accommodate the changes in your clients’ preferences and purchasing behavior.