The Definitive Guide to Dropshipping
Please use the updated guide above for a more thorough, easier, and up-to-date guide on starting a dropshipping store.
If you’re looking to start a dropshipping business from the comfort of your home, you’ve come to the right place. Not entirely sure what dropshipping is? Read on. This guide will detail the entire dropshipping process and teach you the formula that all dropshippers follow. Dropshipping seems an extremely attractive proposal – and it certainly can be. When done correctly, it can lead to thousands of dollars (or equivalent!) added to your income every week. The master dropshippers make tens of thousands every month!
If you wish to create your own site for dropshipping, use domain.com to search for domains – they are the cheapest on the web.
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The Dropshipping Process
Dropshipper decides on where to sell and selects their products —>
Customer places an order for one of the dropshippers products —>
Using the payment received, the dropshipper places an order from the supplier —>
The supplier ships directly to your customer —>
Everybody is happy —>
Sounds simple – because it is. However, to be successful in dropshipping, one has to create and maintain a solid supply chain. Contrary to popular belief, many suppliers will ship products the same day, allowing you to offer next-day or short-term delivery. It is important to find a supplier based in the same country as yourself. Although sites such as Alibaba may seem tempting due to low pricing, 2-3 weeks shipping from China is always a turn off for customers. It may be a viable alternative if you wish to buy in bulk and ship the products yourself but this is an entirely different process and is not “true” dropshipping. You must also be wary of counterfeit products.
Finding Products and Wholesalers
Your first step is to make a note of the sort of products you have in mind to sell. The best types of customers to target are as follows:
Hobbyists – mountain biking, fishing, climbing – this is a niche that can be extremely lucrative – specialist bikes can cost more than cheap cars!
Businesses – usually more price savvy when making purchases, a business will the vast majority of the time order multiple products at once as they are usually catering for many staff members.
Repeat Buyers – If your goods are disposable, then you can bring yourself repeat buyers far easier than if they are not. For example paint supplies – if you offer quality goods and service, odds are they will continue to buy their paint from you!
It is worth making a sizeable list that you can research into, as many products have an extremely saturated market and are not worth pursuing. For example, phone cases are what a lot of people have in mind when they think about starting a dropshipping company. However, a quick scan on eBay and Amazon will show you that not only are there literally millions of suppliers already, but that they can offer them at prices which you can’t make a profit on. The goal here is to find a product that you can compete with. Goods don’t have to be cheap – I know that dropshippers in particular have had great success on drones before, costing hundred of dollars. The more expensive the product, the more room there is for a profit margin. It’s all about finding a balance between a reasonable profit margin, and a product that will get lots of sales.
To find a supplier, you should ideally use a wholesaler directory. They are not essential though, and if you are trying to start-up with very little funding then you can manually search for wholesalers on google, but be warned, wholesalers are notoriously poor at marketing. It won’t be as easy as searching “wholesalers for product x” and finding them on the first page. You must also be wary of scams. The most common scams are:
Not being a genuine wholesaler – if you can buy from the website then and there, they are not genuine wholesalers and they themselves will have a supplier. Legitimate wholesalers usually require you to verify your business before placing and order.
Charging on-going fees – real wholesale suppliers will not charge you a monthly fee to do business with them. Steer clear of any site asking for this.
If you have a little more to invest or don’t want to slug out hours on google, There are multiple options available in terms of directories.
Worldwidebrands – one of the oldest and most reliable directories for finding wholesalers. Every supplier on the site meets a list of criteria. However, membership is $299. It is a lifetime membership, but I’d personally be reluctant to use them without already having significant cash flow to cover the large fee.
Doba – Doba works slightly differently in that it has integration with its suppliers on the site. It only has 165 suppliers available but you can place orders directly to them through the site. Membership also includes a feature that automates eBay listings. At $60 a month, it is somewhat expensive, especially when you consider that if you can contact and build a relationship with their suppliers directly you can save yourself this membership fee, and other directories offer many thousands of suppliers.
Wholesale Central – Wholesale central is free and therefore definitely worth at least a look-over. The issue with wholesale central is that it is subject to the scams listed above. Don’t get me wrong, there are many legitimate suppliers listed on there but certainly be more cautious, in particular there are many companies disguised as wholesalers but actually selling at retail prices – You can’t profit on that!
Salehoo – finally, Salehoo is a large directory with over 8000 suppliers. It caters largely to those wishing to sell on eBay and Amazon. It also features a tool set allowing you to find “hot” products. While this must be used with some diligence, it certainly allows you to identify products and niches that are trending and worth looking into. Salehoo costs $67 a month, and although this may seem a fairly significant start-up cost, they do offer a 60 day money back guarantee, meaning you can use it comfortably for 2 months and if you don’t see results get your money back. This is why Salehoo is my recommendation for starting a dropshipping company – you can sign up with peace of mind knowing that you are not $67 down if it doesn’t work out for you, while still having access to a list of verified wholesalers.
Connecting With Your Supplier
The next step is simple – pick up the phone and fire off some emails. Some people struggle with the idea of picking up the phone and calling people but don’t worry, many wholesalers will be used to dealing with newbies and will be willing to answer your questions in a friendly and professional manner. They should be happy to set you up with an account when you explain you are looking to start selling online.
Some suppliers have minimum order amounts, which on the face of it make dropshipping impossible. How can I dropship when I need to order 100 of an item? Well, the solution is to set up credit with them. You pay for 100 products in credit and then use the credit against orders when the customer makes a purchase from you. This way you are committing to buying that amount of the product but you can also dropship to customers. It can seem expensive to commit to buying so much product and therefore if this is your very first time dropshipping I’d look for a supplier that can fulfill orders directly just to ease the financial burden.
The most obvious and important part of dropshipping, is of course making sales. First of all you should have already put some thought into where you want to sell. Amazon and eBay are the big two. Amazon charges monthly fees ($39.99) which can be off-putting if you’re going for the low-investment route. They do offer a one month free trial but you are charged for the month and refunded later so you will need the investment to get started. However selling on Amazon allows you to build a reputation and after showing consistency, Amazon will start to favour your listings and may even eventually offer you a partnership in which you ship to Amazon and they will fulfil your orders. This is what “Fulfilled by Amazon” means, which you have no doubt seen when browsing on the site.
eBay doesn’t have upfront fees but they usually charge 10% (depends on final price and category) of the purchase price. PayPal takes a further few percent so this is definitely something to be wary of. A new eBay account with no feedback will also struggle to make sales, feedback is everything on eBay and so if you are starting from scratch I’d recommend buying a few cheap items and maybe selling some spare goods to begin to build your reputation, even with 1 positive feedback it will display as 100% which will certainly improve sales.
A third option is to create your own e-commerce website. The advantages of this is that you will have to pay no fees and have complete controls over you listing. However it will cost a small sum to create an attractive e-commerce site, and once it is completed you still need to find a way to attract customers to your site. I certainly wouldn’t suggest this for first-timers, particularly if you have no previous experience in website building. If you want to read more about e-commerce, check out my guide to a profitable e-commerce store.
Running Your Dropshipping Business
By this stage, everything should be set up, all the wheels in motion and you should have a supply chain, a selling account and maybe even a few sales! So now we move on to the problems you may encounter while running a dropshipping company.
The customer receives damaged or faulty goods – immediately apologize for the mistake, whilst contacting your supplier and letting them know what has happened. Any reputable supplier will replace faulty products free of charge. This way the mistake isn’t costing you anything to solve, but you still gain a reputation for great customer service!
Returning Goods – you will eventually sooner or later have to deal with returning goods. Your return policy should essentially mirror that of your supplier, and ideally your supplier should accept the return and credit your account back with the amount. However, most suppliers won’t pay for return shipping and so on occasion you may have to swallow some charges. Some suppliers may charge restocking fees for returning an item. Never charge your customer this fee as it will ruin your reputation.
Fraudulent orders – It is usually easy to spot when an order is illegitimate. The common signs include different shipping and billing addresses, unusual email addresses and different names. Any of these should raise caution but also remember some orders could be gifts or be delivered to different addresses for legitimate reasons.
Managing your inventory – be sure to be aware of the stock levels of your suppliers. Nothing is worse than having to tell a customer their order is out of stock. This gets more complicated the more items you offer, but is a vital part of growing your dropshipping business.
The most important step to being successful in any online venture is actually starting it! Everybody who has ever been successful in dropshipping started from nowhere. To be truly successful you will have to overcome your reservations and get stuck in. It will take a lot of work but there’s no reason why within 12 months you can’t reach $1000 a month in profit, some people have earned significantly more in less time!
I hope this guide has given you the inspiration and knowledge required to get started in online business. If this guide has helped you why not sign up to our newsletter for more great content?