Many people struggle to start an online business due to the start-up costs, I know I did. Trying to compete with huge companies with a massive stock inventory on eBay, Amazon can be challenging and they continue to earn money online without own business. But even if you want to create your ecommerce store, at the start of your online journey, many of you may be unwilling to invest thousands of dollars on buying wholesale products you aren’t 100% sure are going to sell.
Sure, you will have done your research on finding profitable niche markets and hot selling items, but there is always a chance, things won’t go quite as well as planned.
Being left with a garage full of the unwanted stock is an online seller’s worse nightmare, it totally freezes your cash flow, leaving you unable to purchase new stock and in the worst-case scenario causing you to close your business at a very early stage.
Wouldn’t it be great if a company offered to pay all the upfront costs of stocking a huge selection of products for you to sell? Maybe they would handle the fulfillment side of things too?
How Does It Work?
Sound too good to be true? Well, it’s not and welcome to the world of dropshipping? The process is simple:
- Find a reliable dropshipping company;
- Decide which products you want to sell from their inventory;
- Put the products up for sale on eBay, Amazon or your e-commerce site;
- Sell the product and collect the money from your customer;
- Order & pay for the product from the dropship supplier;
- The product will be sent directly to your customer;
- You will end up with a satisfied customer who has no idea the product came from another supplier.
Due to the simplicity of the process, many people believe that dropshipping is easy and that they will be able to make money on eBay using this model with little time or effort. I’m afraid this couldn’t be further from the truth.
So Does Dropshipping Work?
Although the dropship model is ideal for small businesses starting out, it’s used by some major online retailers to fulfill a proportion of their online orders.
For example, the Hut group which is an online entertainment distributor in the UK, dropship video games and other entertainment products for Asda, Tesco and Whsmiths, major UK online and high street retailers, proving that if used correctly the dropshipping model most definitely works.
Steps You Should Take
#1 Find the best dropshipping sites & companies. I have always found the best suppliers by using the following sites:
Unfortunately, you have to pay for some of these directories, but as the saying goes you get what you pay for. If I was only able to use 1 site to find wholesalers & dropshipping suppliers it would be Salehoo. In my opinion, this really is the number of resource and well worth the small investment if you can afford it.
#2 Using google. Use the following modifiers:
If you are struggling to find the exact products, be more generic eg type in electronics as opposed to MP3 player.
Search extensively on google is not just the first page results, many good suppliers will not be that great at SEO so may appear on the 5th or even 10th page of the results. Don’t let the fact that a website may look old and dated, as with SEO just because they aren’t masters of web design doesn’t mean they are bad suppliers or scammers.
If you are looking to source a particular brand of the product and are struggling to find suppliers, it’s always worth contacting the manufacturer directly. It’s highly unlikely they will drop ship the product, they may, however, be able to put you in contact with someone who does.
#3 Be Careful & Do Your Research. Never stop your research on a company after reading one good review. Be very careful of suppliers showcasing top selling products on their site for unbelievably cheap prices and charging a substantial fee to see the rest of the products and become a part of their program. Try and stick with free drop shipping companies.
Check the contact details of the company, look up the address on google maps. Find out when the website was registered using whois and if the details match those you have been given. Check the business terms, returns policy, etc.
- Little capital needed.
- No risk of ending up with products you can’t sell.
- Ability to process orders from anywhere in the world.
- Good for testing markets.
- Trusted business model.
Problems & Disadvantages:
- Suppliers double dipping, meaning selling the same products they are dropshipping on eBay, Amazon, etc;
- High prices, low margins;
- Slow delivery times & fulfillment mistakes;
- Can’t see products you are selling;
- Out of stock products you have already sold.
While sometimes tricky, it’s not impossible to find different suppliers for the same product, providing a great solution for out of stock products you have already sold. Slow delivery times are often due to the fact you are doing business with middlemen, who aren’t holding the stock themselves. Try and find reputable suppliers who have the stock on hand and ready to ship straight away.
As you order more from your drop shipping supplier, start to build a good working relationship, leading to an opportunity to negotiate lower prices. Concentrate more on excellent customer service, and building attractive auction listings.
Is dropshipping the key to overnight success? No of course not. Does it help to kick start a business with limited start-up capital? Yes, it most certainly does. Can it help successfully grow a business’s customer base quickly? Yes again. If used correctly the model can be an effective product sourcing strategy and a great way to make money online.