How To Start a Dropshipping Business
One of the best ways of making money online, which has become very popular of late, is dropshipping. Dropshipping is not easy and it will take us some time to explain fully what it is all about, but here’s what you should know – it is one of the best ways to get rich quick in 2016 and beyond. Dropshipping is indeed a very profitable way of making money online.
So, What is Dropshipping?
Dropshipping is very unique and different from most offline businesses. It has a very interesting business model, one that makes use of third-party suppliers. Basically, with dropshipping, you won’t keep any inventory, but can sell any product you like. When someone makes a purchase from your online shop, such as your shop on eBay, you will buy the product at a lower cost from the supplier – which could be Amazon - and then ship it to the buyer.
Here’s how the process works...
- List a product for sale on eBay.
- A buyer orders the product from you.
- You then order the product from Amazon or other suppliers, for a lower cost.
- You then ship the product to the customer and pocket the difference. There are several things could potentially go wrong with this process if you’re not organized well enough. But you can make big profits without investing in any inventory.
Can You Make Money from Dropshippping?
The trick to making money with dropshipping is to sell or resell items that are in great demand which give you a nice profit. You can certainly make a lot of money from dropshipping if you are already an experienced eBay seller.
There are many top eBay sellers who earn a six-figure income, or even a seven-figure income from dropshipping. The idea is to connect with customers on eBay and to take advantage of the price differential between what you are selling on eBay compared to what the product is available for on Amazon or on other sellers such as Alibaba.
Starting Your Own Dropshipping Business
We have introduced you to dropshipping, let us now understand how it works. Before getting started with your dropshipping businesses, there are some things that you should get right. Let’s talk about them first.
Commit Yourself to Dropshipping
You will need to make a substantial commitment to dropshipping. This is not something you can start immediately and make money from day one. Dropshipping should be done from the long-term perspective. You will get rich with dropshipping, but it will take time. It does require a heavy investment of time and effort and a willingness to persist through the lean times. You will also need to invest money into the business.
There are two ways of making money from dropshipping – investing time and investing money.
You will need to invest time into dropshipping. However, this is less of a risk than trying to grow your business merely by investing money. You won’t need to spend a lot on things that you don’t need. You can take your time to learn the business. You will have more time to develop good relationships with customers and suppliers and will be able to learn your market better. You will also be able to develop your skills better. Unless you have a large budget to get started with, it is better to take your time with dropshipping.
You can get a flying start to your dropshipping business by investing money, but this is not necessarily something we recommend as it would carry a lot of risk. If you want to invest money into dropshipping you should hire someone to manage the business. They should have a high commitment to the task at hand. However, you should monitor the business on a regular basis.
Structure of the Dropshipping Business
The next step is to make your dropshipping company a legitimate business. You can make register it as a Sole Proprietorship, Limited Liability Company or a Corporation. We suggest registering as a Limited Liability Company as that would give you the protection you need for your business without being too expensive to set up.
You will have to get the following in order…
- Apply for an EIN Number.
- Separate your business finances from your personal finances.
- Find out if you need to pay sales taxes in your country.
- Set up an EBay Store
Now we come to the core strategies involved in setting up a dropshipping business – setting up an eBay store. Setting up an eBay store is pretty simple. eBay is one of the biggest internet companies in the world which made its name as an auction site. Today, eBay is a major global eCommerce marketplace that connects buyers to sellers.
To get started on eBay, you will need to set up your account on eBay first. It is an easy thing to do and will take you only 5 minutes. Next, you will need to set up your own eBay store.
Follow the instructions on eBay for setting up your store, there is nothing complicated about it. Just make sure to choose a good name for it, something that would attract buyers and select a good color theme as well. Write a decent description for the store, one that is packed with the appropriate keywords.
The Basic Store on eBay costs $15.95/month. This is the best option when you get started. You can go for higher level stores once you start making money with dropshipping. For now, this will do.
Find a Supply Chain
Once the eBay store is set up, you will need to find a suitable supply chain for the products that you plan to sell. This is something you will be using again and again, multiple times a day, hundreds or even thousands of times a month. So be very careful when deciding on a supply chain for your dropshipping business.
How to Find Dropshipping Suppliers
Follow the tips given here to find the right suppliers for your dropshipping business.
Get in touch with the manufacturer for the product which you would like to sell. Ask for a list of the best wholesalers.
Look for wholesalers on a search engine such as Google or Bing. Most of these companies don’t have a web front, so you may not be able to find the information that you need.
Look for those on eBay who are dropshipping. On receiving the product from them, Google the return address on the package. That is the address of the supplier that you can use for your own purpose.
Connect with wholesalers on trade shows.
Buy a supplier directory. This costs a lot, but will be well worth it.
So what to expect from a possible supplier for your dropshipping business?
Not all suppliers are suitable for dropshipping. Here’s what you should expect from them.
- Do they understand the products being sold?
- What about the customer support?
- Do they make good use of technology?
- Do they accept orders through email?
- Are they located close to your customers? For example, if most of your customers are in Canada, you will need to hire suppliers who can ship the goods within 3 days and are within Canada itself.
- Are they organized properly?
Selling on eBay
The next step is to list your products on your eBay store and to sell it. This is the most important thing you will need to do. We cannot tell you everything you need to know about listing your products the right way and other things that go into selling on eBay; you will need to read more detailed books or websites on eBay selling for that. But here are a few basics you should know about.
#1: Use a great picture – You will need to find pictures of the highest quality for the products being dropshipped by you. The images should be copyright free and look authentic. They should stand out in the crowd.
#2: The description should be attractive and grab the buyer’s attention. It should also very accurate. You will have to address your customer directly as though you are face to face with them. Understand your customer. What does he or she find appealing? What would motivate them to take action? What are their greatest desires? What’s the problem they have that you can solve with your products? What are the right words and which words are inappropriate?
#3: Offer them attractive benefits. List the two important factors that your customers would find to be appealing. What problem does your product solve for them? Your goal should be to sell more than the product itself, but to promote the experience of using the product.
#4: Make sure that the products being sold by you are easily scannable. Create bulleted lists and headlines to make your point. Use bigger font size for your text. The reader should be able to take away the important points from your description even if they don’t read everything you have written.
#5: Set the right price for the product. This will require a lot of research. Google the product and find out the price other sellers are selling it for. Note the condition most of these sellers, especially on eBay are selling it for.
#6: You can now sell the item through an auction process or by setting a fixed price for it. Or you can use a combination of auctioning and setting a fixed price. Auction means you will need to sell to the highest bidder and setting a price means you can sell the product to anyone who pays the price that you ask for it.
#7: If you have smaller items, you can bundle them together and sell them as a package. This would fetch a much bigger price for it. You can offer free shipping to catch the customer’s attention.
Selling on Amazon
Selling on eBay is a good way to get started with your dropshipping business, but if you really want to make money with it, you will have to start selling on Amazon. Amazon is where you will be able to maximize your profits from dropshipping.
We have discussed everything you need to know about selling on Amazon on our blog. Do read this article, Selling on Amazon – How to make more sales. We have explained everything you need to know about selling on Amazon there.
Amazon is where your dropshipping business will really take off. Our advice is to use both eBay and Amazon together. This would give you a right over at least a quarter of the web traffic that visits online stores.
Focus on Your Marketing
The last thing you need to do as a dropshipper is to focus on marketing. It is no good having products listed on your ecommerce site if there are no buyers to visit your stores. Work hard on your marketing and focus on getting more people to visit your store. Here are some of the things you will need to do for your marketing.
Email marketing - Build an email list
- Blogging – Blog frequently and write informative and useful posts.
- Host contests and competitions on the social media, especially on Twitter, Facebook and Instagram
- Offer attractive discounts to email subscribers and social media followers
- Start a YouTube channel and use videos to market the product. You can start by doing product reviews on YouTube.
We have talked about the basics of dropshipping, its earning potential and how to get started with a dropshipping business. We have also discussed the basics of selling on eBay and Amazon and stressed upon the importance of marketing. If you are selling on Amazon, you will benefit from the excellent marketing services that Amazon offers to sellers for free. For this reason, Amazon is the perfect place for you to build your dropshipping business, but eBay is where you will be able get a good start. So, use both Amazon and eBay together in synch to get your dropshipping business off the ground.
We hope you enjoyed reading this. If you have any questions for us, do write them in the comments below, we will be sure to get back to you ASAP.