Dropshipping is a business model that requires relatively less capital than conventional business ideas. The major chunk of investment that goes into arranging and maintaining a warehouse or inventory comes down with dropshipping. There are many more reasons why many aspiring entrepreneurs express their interest in starting a dropshipping business. It can also be a profitable venture when you have a definite plan in place. There are many successful dropshipping businesses that are examples of profitability.
What is dropshipping, and what are its benefits?
Like any other business, you start this one with a clear idea of what you would sell and to whom. The one striking difference here would be the fact that you do not arrange for an inventory. When a customer places an order, you will arrange for the shipment to directly happen from the supplier’s warehouse or inventory. The burden of supply chain management comes down a little. The profit margins might be less, and the dependencies might be more in the case of dropshipping. However, there are plenty of benefits to launching a dropshipping business-
- Overhead costs come down
- The investment required is lower with dropshipping as you can eliminate the cost of renting a warehouse
- The fact that there are already many dropshipping businesses successfully running online means that you would easily find inspirations for better clarity
Drop shipping websites are in hot demand and people are often looking to buy popular ones. It’s worth checking out similar websites and running your website through tools to estimate it’s value such as Web Traffic Agents website value calculator.
What are the steps involved in starting a dropshipping business?
Create a strong business plan
Like any other business, you should have a sound business plan in place when you start dropshipping. You can decide on the kind of products you wish to sell and also use your innovation to refine the selling concepts. Inventory management is the only step that is absent from the business model. The customers would still be placing their order to you and getting in touch with you for any queries about the order. Therefore, the relationship that you build with your customers is still of great value.
Find the reliable wholesalers with whom you would work
Your wholesalers would be the backbone of your business model. In dropshipping, you would not be manufacturing the product that you sell. The items from the product catalog displayed on your dropshipping site would be going from these wholesalers. You would, therefore, need credible names for approaching. Look into trusted directories to find good wholesalers and stay away from scams. Remember that you would not have a ready stock of the products you list on your business site. Successful completion of each order involves dependencies on the wholesalers you work with. You should, therefore, choose multiple trusted wholesalers for your dropshipping business. You can even approach manufacturers who are the market leaders in the product category you choose. They would be able to help you with the details of the licensed distributors who you can then approach for your dropshipping business. Take the shipping costs into account when you shortlist your wholesalers. You would want those who offer lower shipping rates so that you can charge your customers less.
Diversify instead of narrowing down your approach
This is one step where there is a striking difference between conventional business models and dropshipping. When you start a full-fledged business with your own inventory, you will start small with a focused approach. You would often begin with just a handful of product types and then expand your product line based on the reception. With dropshipping, on the contrary, you would have to start with a broad spectrum of products and then work your way to narrowing the niche if required.
Build a website that makes an impact
Your website would be the face of your business. When you are running an online business, your website would be the only point of contact between you and your customers. You should take every step that any established business website owner would take so as to increase the traffic and boost sales. There are platforms like Shopify which make things simpler for the drop shippers and simplify website development. With this website in place, you can then work on the integration of social media for better customer acquisition approach.
If you look at most of the e-commerce retailers, they already offer an extensive catalog, work with multiple suppliers, and offer great discounts. Therefore you should work on finding a model that helps you tackle this competition.