Starting an e-commerce business is not difficult to do. Unlike a traditional business that requires the purchase of stock, an e-commerce business does not necessarily require buying and storing inventory. Online entrepreneurs can set up a nice looking website as their storefront, and start their business pretty quickly.
A drop shipping business model is a very popular choice for entrepreneurs who want to start a business without a huge capital and do not want to store their inventory either. It is a hassle-free approach to getting a business up and running.
Sounds like a great idea right? Now, you are wondering how the drop shipping business model actually works. This will be explained as you keep reading on…
You can also learn more about drop shipping by reading my article called ‘How To Dropship Wholesale Products And Make Money Online’ CLICK HERE!
How Does Drop Shipping Work?
Well, this can be explained in seven steps:
#1 Choose Your niche
Before setting up any kind of business, you need to at least have some idea of your niche, ideally something that you are passionate or interested in. Business owners are likely to do better in a business if they are working on something that they enjoy.
Would you rather sell something that you love than just sell something for the sake of money? I know there are people who would just try to sell anything that has a big profit margin regardless of what the product is. But, this is a personal preference. I personally would not enjoy selling things that I’m not interested in or that I don’t know much about. How about you?
If you are interested in fashion, perhaps sell designer clothes, bags, shoes, and accessories on your website. There are tonnes of ideas floating around. But, it’s best to look inside yourself and have a think about what it is that you would like to sell to your potential customers.
#2 Look For Drop Shop Suppliers
Once you had figured out what you want to sell to your potential customers, you need to find suppliers who are willing to drop ship for you. Note, not all suppliers or wholesalers are opened to the idea of drop shipping.
There are some middlemen out there pretending to be wholesalers too. The markup for the product is usually higher than usual. Be careful of those ‘fake’ drop shippers who would disappear once you give them your money.
It’s really important to do your research properly to avoid hardships like this. If you can meet with the supplier/wholesaler, then do so. Trade fairs are also great places to identify real and trusted suppliers/wholesalers.
If they are not opened to the idea of drop shipping individual products for you, then try to negotiate some kind of deal when you meet face to face with them. It is possible to arrange a win-win situation with them.
If you are looking for some trusted and verified drop shippers, you can also check out Worldwide Brands. The team of people behind this company have already done the hard work for you!. Read my review of Worldwide Brands CLICK HERE!
#3 Setup Your Account With The Drop Shipper
If you want to work with specific drop shippers, they usually require you to setup a reseller account with them.
#4 Promote Your Products On Your E-Commerce Store
Usually drop shippers are willing to supply you with professional images that you can use to promote their products on your website. This makes business so much easier for you since you are not the one holding stock.
Be sure that the supplier has the product in stock before you promote the items on your website. Any customer issues/complaints will come back to you!
Now, you need to decide where you will advertise these products. Would you like your shopfront to be on a marketplace like eBay, or an independent website that you either create yourself or get someone else to do it?
With eBay, there are advantages where there is already plenty of website traffic there, so your potential customers may be able to find you easily.
With independent eStores, it does take some time to get website traffic, but you do have better control of what happens on your website, such as the design and look of your eStore.
I would like to mention that SaleHoo makes it easier of people who want to do a drop shipping business. Read my review on SaleHoo Stores CLICK HERE!
Learn about how to become a power seller on eBay with SaleHoo Online Selling Tactics. CLICK HERE!
#5 Customer Makes A Purchase
Great News! You have made a profit at this stage. Be sure that customer has paid for the product first before you place your order with the drop shipping supplier. PayPal is one of the easiest and fastest ways to be paid.
#6 Place Your Order
Your customer has paid you in full now…so it’s time to place your order with the drop shipping supplier. The items will be delivered directly to your customers!
#7 Customer Service
This is an important one! When your customer receives their product, be sure to check up on them to see if they are happy with the items. You are the one who needs to deal with any complaints or issues that the customer has even though your supplier sent them the items.
Customers usually don’t know that you are using drop shipping to send them their products. They think that the items are coming from your warehouse or your place of business.
Good customer service goes a long way. If customers are happy, they can potentially spread the word to their friends and family about your business.
Happy customers, more referrals!
In summary, this is how the drop shipping process works. If you want to sell sterling silver pendants on your website, the supplier/wholesaler offers you a 40% markup over cost, then you can retail each piece of jewelry with this marked up price to your customers.
For example, each pendant will cost you $50. You promote this pendant on your website for $70. Once the the customer makes a purchase, then you can place the order with your supplier/wholesaler, and the item will be delivered directly to your customer. You have made yourself a $20 profit!
A drop shipping business can be really profitable especially if you are offering niche products that have less competition. It is a really good business model to use if you don’t want a traditional business where you need to keep stock at all.
But, not everyone who has an e-commerce business will use the drop shipping model. There are people who would buy the products in bulk, which allows them to sell individual items with a bigger profit margin. The choice is up to the business owner.