It’s 2022 and we’re still talking about how to make money with dropshipping. Surely this craze is over by now?
Nope, not if you do it right.
A dropshipping business model certainly isn’t for everyone. But with some hard work, strategic thinking, and realistic goals, it can still be dazzlingly profitable.
We won’t tell you that a positive mental attitude is all you need to create a thriving online store overnight.
Instead, we have stats, tips, and success stories to share.
Hold on – what is dropshipping?
For the uninitiated, let’s start out with a quick explainer.
One of the most talked about business models in recent years, drop shipping is essentially a fulfilment method.
The seller sets up an eCommerce store, selects products from a supplier, and markets them to customers.
Dropshipping suppliers charge the seller a wholesale price for each item. Sellers then add a markup, so they can make a profit from each sale.
When a customer places an order, the seller notifies the supplier, who ships the product directly from their warehouse to the customer.
Sellers never touch products that have been drop shipped.
This has some obvious pros, and some obvious cons, too – we’ll get into that.
Is dropshipping legal?
So, business owners are selling products that they aren’t even touching. If you’re a serious entrepreneur, you’ll probably want to check that this is even allowed.
It sure is: dropshipping is legal. Just remember to stay on the right side of the law when it comes to what you sell and where you ship your products to.
Licensing, trade, and tax laws vary from country to country. Do your research, and you can fire up a dropshipping business with relative ease.
Pros and cons of dropshipping
You’re already here, so you know that eCommerce is thriving. In fact, that’s kind of an understatement – retail eCommerce sales are set to hit 6 trillion dollars by 2022.
So if you’re itching to get started with an eCommerce store, we really don’t blame you.
But what’s the deal with dropshipping? Is it the right business model for you?
Like everything else, there are clear advantages and disadvantages to owning a dropshipping business.
The pros of dropshipping
Let’s start with the positive side to launching a dropshipping store.
1. Super low setup costs
The number one reason why dropshipping is so popular is that it’s probably the cheapest way to launch an online business.
Any eCommerce entrepreneur can get started with very little. You won’t need to pay for inventory, warehousing, or logistics.
The upfront capital investment with dropshipping is virtually zero. Sure, you’ll need to pay to set up your website, but you can start selling pretty much right away.
2. No inventory management
Every conventional retail store has to constantly keep track of the products they’re selling. But not with dropshipping.
Because you’re only the seller, it’s up to your third party supplier to manage inventory. They check what’s available and they’re responsible for housing it.
Not having to stay on top of inventory leaves you plenty of time to thrive as an entrepreneur, focusing on other business tasks like customer service and marketing.
3. The ability to scale and adapt
With no stock commitment, it’s much easier to grow your dropshipping business than with a more conventional online store.
If you want to widen your product offer, all you need to do is source new pieces and add them to your website. There are far fewer overheads to compete with your sales profits.
On a more extreme level, if you want to sell something totally different, you won’t have any old inventory to clear through. Essentially, you could just wipe the slate clean.
4. The flexibility to work anywhere
There’s a reason why digital nomads love this particular business model. If you like the idea of working from anywhere in the world, dropshipping is for you.
With no warehouse to worry about, or couriers to keep in touch with, you can run your dropshipping business from pretty much anywhere.
As your store starts to grow and you need to take on help, you’ll also have the flexibility to hire employees from all over the world.
The cons of dropshipping
Alright, let’s explore the downsides to setting up a dropshipping business.
1. No control over the supply chain
While it’s great to hand over the logistics to a third party, keep in mind that you’re then pretty much at the mercy of your supplier.
If a shipment is delayed, or if there are quality issues with the products, there’s not much you can do. Your supplier needs to remedy the issue.
At the same time, it’s completely up to you as the online store owner to liaise with your customers. You’ll need to be a customer support superstar to win at dropshipping.
How can this be avoided?
Things do go wrong – everybody knows it, and no eCommerce store is immune to issues. Your best bet is to work with reputable suppliers that you can trust. Later on, we’ll show you how.
2. Highly competitive industry
The global drop shipping market was valued at over 100 billion dollars in 2018, and it’s growing. Plenty of people still want to make money with this type of business.
Because the low commitment nature of the dropshipping model makes it so easy to get started, the competition is fierce.
It can be tricky to sell a product that isn’t available anywhere else, and hard to stand out when platforms like Facebook are saturated with ads from dropshippers.
How can this be avoided?
Start by finding a niche – we’ll explain how later. Finding a less generic product, and using more targeted marketing, will put you on the right track.
3. Relatively low profit margins
Unless you’re selling tens of thousands of products, it’s very likely that you won’t get exclusive deals or bargain prices from large dropshipping suppliers.
It’s cheaper for them to sell and ship each product in bulk. The higher your order volume, the lower the wholesale price.
Because you’ll want to be competitive, your product prices will need to be close to those from rival retailers. This could jeopardize your profit margins.
How can this be avoided?
It isn’t unheard of for dropshippers to go viral with a product, and sell them in the thousands. That said, it’s slightly more viable to find smaller suppliers and more niche products.
4. Tricky to build a brand
We can give you plenty of tips for building a brand. It’s the key to finding a solid customer base and enjoying long-term success as an eCommerce business.
But when you’re selling somebody else’s product, it’s really tricky to make a name for yourself. After all, you’re not in charge of product quality, and it isn’t your logo on the box.
While many dropshippers are just in it for the money, this business can be hard for those who want customers to remember and recognize their store.
How can this be avoided?
First, make sure that your online store is looking tip-top. We’ll tell you how to develop a website that looks incredible and will have people coming back for more.
How to start a lucrative dropshipping business
You’ve seen the good side and the not-so-good side to dropshipping.
It’s an incredibly flexible way to set up an eCommerce business, with minimal capital commitment and plenty of growth potential.
Just bear in mind that dropshipping isn’t a get-rich-quick scheme. Many people crash and burn with this business model – but they weren’t blessed with our advice.
So, lucky you: here are our top tips on how to start dropshipping the right way.
Commit to it
We know, we have just said that dropshipping is super flexible and requires low monetary commitment. And we mean it.
However, you’ll need to commit a lot of time and effort if you want to make serious money and win repeat business.
One of the first things you need to consider before opening a dropshipping store is whether you can put in the work to make it a success. If you can, here’s what you’ll gain:
- A deep understanding of your customers. The more you liaise with customers, the more you’ll understand your market.
- Confidence in operating your business. Getting stuck in from the get-go will help you make more informed decisions. It’ll also make you a better leader as your team grows.
- A laser-focused outlook. Staying close to the business will enable you to learn from mistakes. As you scale, you’ll know how to spend time and money more efficiently.
Find your niche
Choosing the right products to sell online can be like walking into a candy store. There’s so much to choose from – it’s tempting to pick one of everything.
But here’s the thing: you want to make sure that your product offer is special.
It’s easy to find yourself in a huge pool of dropshippers selling the same random, cheap items. Instead, be a little bit strategic and make your online business stand out from the crowd.
To be a truly successful drop shipper, you need to strike a balance between ultra-niche products and oversaturated markets.
Say you decide to sell pop sockets and iPhone cases. Suddenly, you’re competing with, well, the whole of the rest of the internet. Why would people choose your store?
Or perhaps you’ve found a supplier of basketball-shaped alarm clocks that say “good morning, Dave” as a wake up call. That’s a really, really niche market you’ve landed yourself in.
Spend time doing market research, and you can find out:
- Which product areas have a passionate customer base. Your store doesn’t need to have universal appeal, so pick a market. It could be anything from crafters to cat lovers.
- What will make you money. Look for products that you can add a healthy markup to – things like technology are easy to compare with other retailers, so tricky to profit from.
- How to earn repeat business. It takes more than great products to make customers order again and again, but that helps. Look for items that are consumable, collectable, or easy to cross-sell.
It’s always nice to have more than one option when we’re shopping online. But what is it that makes us decide who to give our business to?
Sure, a lot of the time we make purchasing decisions based on which store is offering the lowest retail price. But often, it takes more than that.
Once you have found a product type and a target market, take a look at your future competitors. What are they doing – or not doing – that sets them apart?
- Take note of shipping costs. It’s estimated that nearly 30% of customers abandon their carts because of unexpected shipping costs. What are your competitors charging?
- Figure out their marketing strategy. Would your type of business thrive on social media? Will you depend on affiliate marketing? Get an idea of your marketing spend.
- Look at how they sell products. Perhaps they have a signature style of photography, or a comical tone to their copy. Fire up your imagination – just don’t steal their ideas.
The beauty of being a drop shipper is that you never have to touch the products. But don’t take that too literally.
Test out your products before you sell them to customers. This is one of the most important parts of running a retail store, and something that most dropshippers will miss out on.
Don’t start searching for a laboratory. Yes, your products should be safety compliant, but we’re talking about testing user experience. Here’s what you should do:
- Order samples. Having the product in your hands is the best way to understand how to describe it to the customer, what to price it at, and whether you can trust your supplier.
- Do a drop shipping trial run. A great way to stress-test your new business is to order items from your supplier, and send them out to a small group of people you know.
- Test out a few suppliers. Using only one dropshipping company is high-risk, as we’ll explain in the next section. Take this time to trial products from a handful of places.
Find some amazing suppliers
It’s not impossible to find the best products, for the best prices, in the competitive world of dropshipping.
One thing that will guarantee success is working with the right people. As a drop shipper, you’ll be dependent on your suppliers for just about everything, so choose wisely.
And think outside the box.
If lengthy shipping times sound scary, consider alternative dropshipping methods. You can diversify your supply base and still make a thriving online store:
- Put faces to names. The most successful dropshipping entrepreneurs are the ones who forge relationships with their suppliers. Set up a call over Zoom to get things going.
- Spread your business. Don’t shy away from working with a handful of people. That way, if one supplier struggles with order fulfillment, you won’t be totally stuck.
- Keep it local. There’s no rule stating that you have to source products from far away factories. You could start dropshipping with neighborhood artisans.
Build an incredible online store
First impressions are everything. Even though you’re not holding inventory or delivering products, your dropshipping business still deserves a flawless website.
You don’t have to do a lot of development work to build a site that’ll dazzle customers and send conversion rates through the roof.
It’s all about website builders. Great for the beginner, or even the seasoned professional, the right platform can give you everything you need to start selling online.
Create a business entity
This part isn’t as fun as building a website, but it’s just as essential. If you’re serious about setting up a business, you’ll need to set it up properly.
Before you start selling to customers, do some research to make sure your dropshipping store is correctly registered and structured.
Regulations vary per country – seek some proper legal and financial advice from the outset and you’ll be good to go. Here’s an idea of what you should consider:
- Your business structure. Again, it varies, but typically you can set up as a sole trader, a limited liability company, or a corporation.
- Finances and taxes. Separate your personal and business accounts from the outset, and make sure you’re collecting the right amount of tax.
- Licensing and trademarks. Depending on where you are – or where your market is – you might need to factor in business licenses or copyright laws.
Map out your marketing plan
You’ll really notice the advantages of having a dropshipping store when it comes to managing your marketing strategies.
With more time on your hands to promote the business, you can experiment with a variety of channels. There’s plenty of competition, and great marketing can make all the difference.
In order to spike that all-important conversion rate and get customers hooked, your store needs to stand out. Here are just a few ideas:
- Influencer marketing. This tried and tested method is relatively affordable and often highly effective. Be sure to negotiate affiliate fees with your chosen partners.
- Paid ads. You can test these out pretty easily – Facebook ads in particular are really accessible to new business owners and they’re scaleable, too.
- Content marketing. If it suits your product niche, why not start a blog, YouTube channel, or podcast that engages your customers on a more long-term basis?
Dropshipping stores that are nailing it
Type ‘drop shipping success stories’ into Google, and you’ll probably find something about this one guy who went from $0 to $1,000,000 in just one month.
But we want to inspire you with examples of consistent success instead.
Here are two online stores that we think tick the boxes of a successful dropshipping business.
You’ll often find dropshipping businesses that came to life using Shopify, and Mooshe Socks is one of them.
This Shopify-powered store doesn’t look like a dropshipping site when you land on it, and that’s a huge part of its success.
Based in Canada and shipping to the rest of the world, Mooshe Socks does a great job of cultivating a brand image. We love:
- The obvious niche. If you want socks, this website is for you. Short socks, tall socks, sloth-print socks: this business has a clear focus that helps define its identity. You don’t need to be everything to everyone with your dropshipping store.
- The transparency. Often it’s hard to trust a dropshipping site – Mooshe Socks has a page dedicated to explaining shipping cost and duration per country. It’s a great way to deal with a notoriously difficult part of dropshipping.
- The brand philosophy. The landing page of this website immediately tells visitors of the Mooshe Socks way of life: minimal packaging and vegan fibers. Sticking to a philosophy even though you don’t handle the products? We respect that.
Sometimes, people like dogs more than they like other humans.
Dog Pawty is a drop shipping superstar that realized there was money in doggy-themed accessories, and ran with the idea.
Another Shopify site, this business has done a great job of finding a niche and sticking to it. Here’s a quick snapshot of what Dog Pawty does well:
- Something unique. There are plenty of stores drop shipping pet products, but Dog Pawty sets itself apart from the competition and does all things dog. You can pick up anything from beds and toys to paw print jewelry.
- Search engine optimization. By positioning themselves as the experts in all things canine curiosities, this store is making a clear name for itself. In the US, Dog Pawty currently ranks 5th in a Google search for hot dog beds.
- Constant content. In addition to the selling pages, Dog Pawty’s website also features a blog. As we said above, this is still a super valuable form of marketing – get your visitors engaged and your conversion rates up.
Let’s go, start your dropshipping business now.