Dropshipping is a fulfilment method where a store or retailer doesn’t keep physical stock of the products it sells. Usually when a store sells a product, it purchases the item from a third party such as a wholesaler or manufacturer and has the item directly delivered to the customer. This means the retailer never actually sees the product.
So, for example, the customer places an order with an online retailer, the e-commerce retailer passes the order to the supplier, the product supplier directly ships the order to the customer.
Of course, just like many things in life there’s advantages and disadvantages to this model.
Let’s look at the advantages first:
Easy to Get Started – Dropshipping is popular because its easy for retailers and online stores to get started. Running an ecommerce business is much easier when you don’t have to deal with physical products. With dropshipping, retailers don’t have to worry about managing or paying for a warehouse, packing and shipping the orders, tracking inventory for accounting reasons, handling returns and inbound shipments, continually ordering products and managing stock level.
Low Cost – Because retailers don’t have to deal with the purchasing, stocking and shipping of products, this means their costs are much lower than companies who do. Most successful dropshipping businesses are actually run from home, typically from a laptop or desktop computer. This means online retailers who use the dropshipping method can easily undercut physical retail shops.
Easy to Scale – Unlike a traditional retailer, dropshipping allows for easy scalability, as most of the work is done by the supplier, dropshippers simply have to focus on getting sales, rather than packing, shipping, delivery, storing the products and so on.
Selection of Products – As a retailer doesn’t physically have to stock any of the items they sell in a warehouse, this means there’s a huge range of products they can potentially sell. If the retailer’s supplier or manufacturers stock an item, they can simply list it on their website without any additional cost.
Let’s take a look at some of the disadvantages to dropshipping:
Low Margins – As the entry to the world of dropshipping is low, this means it can be hugely competitive, thus the profit margins can be low as a result. As setup costs are low, many merchants will set up shop and sell items at rock-bottom prices in an attempt to grow revenue.
Stock Issues – As retailers who dropship don’t physical have the stock in their warehouse, this means you can easily run into issues with stock. For example, it can be sometimes hard to keep track of items which are in and out of stock. This means stock at the suppliers can change on a daily basis. Increasingly there is software in some cases where retailers can sync data with their suppliers to stop this from happening, however most of these solutions don’t always work seamlessly and some suppliers don’t have this technology at all.
Shipping Times – Increasingly shipping and delivery times are arguably one of the most important factors for shoppers online, if a retailer decides to dropship products from multiple suppliers this means the shipping process can be complicated and, in some cases, longer than customers would generally expect. As the retailer doesn’t physical pack and ship the product out to the customer, they’re relying on the supplier to do it all in a quick time frame.
Supplier Errors – Of course, the suppliers can also make errors, fulfilling mistakes can happen all the time. This can mean missing items, sub-standard shipments, low-quality packaging and so on. This can easily damage a retailer’s reputation as many customers like to leave reviews on the internet and through social media.
Picking the Best Products
Of course, every retailer wants to have the hottest and best selling products, picking the right items can be difficult at the best of times. Remember most popular items will have huge competition, so retailers have to do everything in their power to stand out from their competitors. Typically, if you’re wanting to enter the world of dropshipping you should focus on adding value for your customers.
Think of it in this manner, what can you do better as a seller of a certain item that Amazon can do with their prices and streamlined logistics?
For most popular products such as smartphones, laptops, computers and so on, Amazon and national retailers like it, will be extremely hard to compete with, they can generally offer lower prices and faster shipping times, this means you’ll need to find an area where you can offer something different.
This means you’ll need to find niche markets, for example anybody can purchase running shoes from major sport brands, however you may hit on a market which needs a certain style of running shoe for mountain terrain.
As well as selecting the correct product, you also need to think about the pricing, you need to calculate the amount of work you need to do to sell the product. Typically, the higher the price of a product, the more likely the buyer will be harder to convert. This means you should generally stick to items which are below the £500 range.
Finding Drop Shipping Suppliers
Finding the correct supplier is arguably one of the most important elements in the entire process, after all they pack, ship and sometimes even manufacturer the item themselves. They’re a crucial part to any drop-shipping business.
Remember all dropshipping companies have their advantages and disadvantages. It is important for online businesses to evaluate the various dropshippers based on their own needs and requirements.
Here is a list of some dropshippers you may find useful, however as explained these are not a recommendation and you will need to conduct your own research before using them:
AliExpress – AliExpress is a wholesale and dropshipping platform that connects dropshippers to suppliers and products. The platform offers millions of products from suppliers in 40 niche categories like electronics and apparel. AliExpress also offers free sign-up.
SaleHoo – SaleHoo is a wholesale supplier directory that connects dropshippers to suppliers. It includes suppliers in a variety of niches that serve the United States, UK and Australia.
Doba – Doba is a marketplace that compiles manufacturers and suppliers into one place. With Doba you can search through products in your industry and consolidate them into custom lists.
Wholesale2B – Wholesale2B is a supplier integration system that allows you to choose from 1 million products, offered by 100s of suppliers, and sell them on eBay, Amazon, BigCommerce, Shopify or a custom website.
Worldwide Brands – Worldwide Brands is a comprehensive directory of dropshippers and bulk distributors. They continually update their list with new suppliers across all niches and certify that each is reputable and reliable.
Dropship Direct – Dropship Direct is a general dropshipper that provides access to over 100,000 products, all shipped from their own warehouse. They feature products in health and beauty, sports, apparel, electronics and more.
MegaGoods – MegaGoods is a distributor and dropshipper for goods like clocks, cameras, kitchen appliances, televisions and bluetooth products.
InventorySource – Inventory Source is dropship network that provides access to 150 suppliers and allows you to sync inventory and auto-upload product data. It connects to platforms like BigCommerce, Shopify, eBay and Amazon.
Dropshipper.com – Dropshipper.com is a general dropship platform that carries over 1,700,000 products from 890+ suppliers. Their products include beauty products, electronics, jewelry and more.
Things to Remember
Typically, if you want to succeed at dropshipping, you’ll need to have a positive attitude, after all some markets can be hugely competitive, this means you may need to find new sales channels and avenues to sell the items you want to dropship.
From customer returns, products going missing in the post and complaints, it’s all in a day’s work for retailers across the world. This means you should always remember to never give up, even when the going gets tough.
Equally, you should also keep in mind that markets with high barrier entry, can sometimes be the most lucrative, if you speak English, think about selling to non-English speakers such as on the German, French, Italian and Spanish eBay and Amazon platforms.
Of course, you can also tap into the huge social networks with millions of potential customers from all across the world.
Some of the more dedicated dropshippers even fly across continents to get into new markets, visit tradeshows and events to meet new suppliers and get a competitive advantage over their competition. Remember if the entry to the market is low, that means a lot of other people will also be doing it, thus you may find it harder to compete.
Remember dropshipping isn’t always about what’s popular right now, this can sometimes be the hardest markets to crack – after all your competition have an advantage on you, as they already have an established supplier and sales platform.
You need to be thinking about the next hot product, long term thinking is arguably one of the most important elements in increasing sales and conversions. By watching for new market trends, you can easily jump the queue and get a head start on your competition, by sourcing suppliers quicker and bringing the products to the market before they even realise what’s happening.
It’s not uncommon for some hot markets to simply dry up over night, throughout the decades there’s been loads of products and trends which have come and gone, the smart retailers aren’t relying on whats hot right now, they’re always thinking ahead.