Still do not know exactly what Dropshipping is and how it works or what are its advantages for a digital business? Don’t worry, because today you will discover what this powerful sales technique is all about and why more and more users are opting for it to start their own Internet businesses.
Contrary to what happened until a few years ago, now anyone who decides to create an online store can also go to a Dropshipping provider, instead of having their own products or warehouses to serve their customers.
Therefore, given the popularity that this concept has reached today and the relatively easy way to have a business of buying and selling products completely online, I think you should know and understand better what it is, what it is for and how this technique works.
What Is Dropshipping?
The Dropshipping is a business model based on selling through Internet products that do not have in stock, through agreements and negotiations with the manufacturer or wholesaler, to which it is sent directly to your end customer.
In this way, without having to invest in the purchase of a large own stock, you can also sell different items or products in your business that you do not physically own.
In practice, for example, if you are the one who decides to start this type of business, you would be responsible for a Dropshipping eCommerce , where you would sell products from a third party, which is called: “Dropshipper”.
How Does Dropshipping Work Exactly?
If you already have an eCommerce or are about to set up one, by creating agreements and negotiations with a manufacturer or wholesaler, you can sell items or products in your online store that you do not really have in stock.
And, at the moment that a person buys these products in your business, your supplier would also receive a notification, so that it is he who sends those products to those customers.
Ultimately, the retailer takes an intermediary role in such a sale. But, the items bought in your store, would be sent to customers with their own trademark (or even without any identifying sign)
What is the benefit for each of the parties?
- The business for the eCommerce owner is that he can sell products without stock and earn a commission on the price manufacturer or wholesaler price.
- The benefit for the Dropshipper is that they can sell more products on the Internet without having to worry about positioning and / or managing their own online store.
Do You Really Know How To Start Your Own Dropshipping Business?
There are already many entrepreneurs who resort to Dropshipping, because they have seen in this sales system a very interesting and profitable way to obtain income month by month in their eCommerces.
So, so that you too can start a system like this step by step, in this guest post, Elia Rosado has written us an extensive guide with everything you should know about it.
I leave you with her, I hope you find it as interesting as me to know this topic in depth. Good luck!
Mega Guide With Everything You Need To Know To Build Your Business Model “Dropshipping”
In recent times we have witnessed the phenomenon of the boom in online sales. Many people saw this as a way to make “easy money” and were encouraged to start all kinds of profitable businesses in this environment.
One of the most successful was the eCommerce model that we are dealing with today, due to its low initial investment and the ease of managing it on a day-to-day basis.
But is it as simple as it sounds?
I think NO .
Currently, no business is essentially simple, everyone needs a good investment of time and money, in addition to a knowledge of the commercial sector that they are trying to enter. And this case is not an exception.
For this reason, after having better understood what Dropshipping is and how it works, we will look at its advantages and disadvantages and deal with the subject in a more strategic way, in order to dispel all kinds of doubts about this type of sales.
In addition, you will discover why until now I have quoted the concept of «easy money» when talking about this topic, since as you will see, it requires effort, perseverance and a lot of passion to start an online business that is profitable.
What Advantages Does A Dropshipping Service Have For Your Business?
To start, I’d like you to understand what its main benefits are:
► Little Initial Investment
The retailer does not have to make a large initial investment to create this business model, so it can be said that this is one way of creating a “cheap” store.
No expenses are assumed in installations, supplies or distribution thereof.
► Fewer Logistics
The headaches of preparing packages and dealing with logistics companies for the distribution of articles disappear in this type of business.
► Reduction Of Fixed Expenses
As a business, the fixed expenses it generates are considerably lower than if the business were physical. Variable expenses are subject to sales success, so little risk is assumed creating this business.
► Great Scalability
As an online store, it has an entire horizon open for the sale of its products, scalability is a fact.
► No Need For Hiring
In theory, it does not entail personnel costs, since it does not have a warehouse, it does not need personnel to manage it and keep it up to date.
Potential Disadvantages Of Dropshipping
As with practically all new sales techniques that are developed online, they also have some possible drawbacks that you should weigh:
► Requires A Lot Of SEO and SEM Work
Taking this into account is essential: without a very good visibility on the Internet, thanks to an organic SEO strategy and a minimum advertising budget in Google Ads or Facebook Ads, there is no test system that can be profitable and survive in time .
»You may be interested to see: The 28 Best SEO Tools To Position Your Projects On The Internet
► Double Shipping Costs
If the retailer has two or more Dropshipping providers, the downside is that you buy a couple of items from different distributors and thus two different packages have to be shipped.
This entails assuming a double shipping cost and advising the client that their packages will arrive independent of each other.
This issue means that the profit margin that could be obtained with the shipment of a single package is reduced by being two.
► Lack Of Seriousness And Supplier Commitment
As hard as the retailer tries, gets traffic, or offers great after-sales service, the business also depends on the seriousness and commitment of the provider.
If this does not comply with the provisions, it can lead to a disastrous experience for the client that will make him go to the competition the next time he buys online.
The responsibility for the reputation of the store is distributed, however the final responsibility before the client falls solely on the retailer .
In reality, this would not have to happen, the dropshipper is benefiting from a new sales channel and it does not do well to “throw it to the ground” , since many times these types of suppliers are only dedicated to wholesale.
► Great Competition
Being a type of business with great growth, the competition may suffocate us, which may force us to lower the profit margin , in an attempt to raise sales.
Hence the great importance of the initial decision to choose a profitable niche, with demand but little competition.
5 Steps To Create a Dropshipping Service
Again, taking into account that you already know what Dropshipping is and what its advantages and disadvantages are, now I will show you the basic steps so that you can implement this technique yourself:
1)Do A Search For A Profitable Niche First
The way to create a Dropshipping store starts from the search for a profitable and feasible niche by the retailer.
You must think of a niche that meets the following characteristics:
- Without saturation.
- That does not have much competition.
- Where there is a need to fill.
- Make it profitable.
- That it can be positioned quickly so that it attracts traffic to the eCommerce, because after all, what it is about is generating online sales .
The price of the products to be sold must also be taken into account in order to calculate the approximate profits.
That is, with this system the retailer will have a profit resulting from inflating the price that the supplier proposes.
Hence the importance of thinking about the final price of the products in that niche, so that the creation of such a business can compensate you.
2) Negotiation With The Dropshipper Provider
This point is very important since the conditions that will govern the operation of the business will come out of this negotiation, both in terms of product prices and the shipping of the orders that they will have.
The retailer will always have to try to have reasonable sales prices within the category of products that are, therefore, the price at which they are purchased from the dropshipper must be the minimum possible to have more margin.
► Regarding Delivery Times To Negotiate:
Delivery times must be as short as possible so that customers have their orders at home as soon as possible.
It is convenient and advisable to have more than one supplier , you never know what may happen and they may fail or have supply problems.
3) Creation Of The Dropshipping Online Store
WordPress or PrestaShop ?
Once the negotiations are closed and all the conditions have been clarified, an eCommerce can be created.
At this point, if the technical knowledge to mount the Web portal is scarce, you can seek professional help, despite the fact that the creation with WordPress or PrestaShop is very intuitive and has a simple handling, you can compare different budgets.
However, there are some companies that offer the exploitation of this type of business and provide the possibility of creating a website or online store intuitively and practically already assembled.
You pay an initial fee and then monthly installments, which according to your objectives, is an option to value, but the truth is that it is very difficult to sell with these stores, since they are not too optimized for search engines.
These types of businesses do not have enough visibility to generate a significant number of sales and ensure they have liquidity to pay those monthly payments.
It is about creating a portal with the supplier catalog that we have chosen. The treatment of royalty-free images and descriptions must be in accordance with SEO requirements that we will discuss later.
Once the store is created, it is already available for a user to make online purchases, when this occurs, the retailer manages the collection, buys the merchandise from the dropshipper and sends the shipping details of the order in question to the supplier.
It is the duty of the merchant to regularly check the availability of products in stock from the wholesaler , so as not to sell something that is not really available.
»You may be interested to see: E-commerce Platform Comparison for Dropshipping Model [2020 Guide]
4) Receipt Of The Order And Shipment Of The İtems
The dropshipper or wholesaler provider receives the order from the retailer and is responsible for delivering the purchased item.
This delivery must be made within the agreed delivery period and both the package and the articles will bear the distinctive or trade mark of the retail trade, or nothing else.
If an invoice has been negotiated with the retailer, this will be done. He is also in charge of managing returns.
5) Control Of Satisfaction
The final part of the online sales process for such a model is for the retailer to monitor customer satisfaction in order to assess the performance of their service. A call, an email with a brief survey or a question showing interest in social networks can be examples of how to contact the customer, to find out if the result of their purchase has been positive.
Otherwise, your feedback will be used to correct any errors that may have been made.
In this business model, the person in charge of standing up at all times is going to be the retailer.
From the dropshipper provider, the customer will never know anything, therefore, any problem or incident with the shipment, will have to be managed by the retailer, despite the fact that the responsibility falls on the provider, hence the importance of trust. .
This knowledge and concern for customer satisfaction is highly valued by them, especially in an online environment, where the treatment seems more impersonal.
When they receive a good service and, above all, they show interest in knowing the customer’s perception of the experience in eCommerce they like, which will achieve customer loyalty and make them make recurring purchases.
5 Types of Marketing Strategies for a Dropshipping Business
The main activity of the creator retailer and business owner of Dropshipping is to get a lot of traffic to your website to promote sales.
Capturing traffic and converting those visits into sales should be the main objective of the strategy.
► SEO Strategy
An SEO strategy must be implemented , to enjoy a very good positioning and thus be able to gain more visibility on the Internet, since, no matter how beautiful and prepared the web portal is, if it is not possible to sell, nothing makes sense.
► Strategies in The Blog
It is highly recommended that the sales portal have a blog section . This will allow adding value to users or customers with posts related to information on items for sale, promotions, curiosities and any other topic in line with the purpose of eCommerce.
The important thing is to be able to enter content with keywords , both in the articles and in the catalog photos and product descriptions, to work SEO.
Making comments on blogs of similar themes or solving doubts on other pages, providing the knowledge that they possess, also help to make us more visible.
► Strategies With Sending Emails
When you already have a fairly powerful number of clients, you can distribute a newsletter with the aim of promoting sales, sending them the latest news, best-selling products section or related news.
Another option that does not require much expense that will enhance the strategy is email marketing.
► Social Media Strategies
Social media should be used as a platform to spread our product catalog.
It is not recommended to open all the existing profiles and for having, only those that best combine with our business model in this system.
They can be used to publicize the latest news, promotions, product information or even as a post-sales service channel and thus achieve customer acquisition.
► Advertising Investment Strategies
When launching the business, it is recommended to carry out a paid positioning campaign that gives us an initial push while the SEO strategy does not pay off.
It is about getting more sales , so even if the investment is small, it is very necessary. We can also use Google Ads to gain visibility on the search engine results page or create Facebook Ads ads for social networks.
How Do I Choose The Best Dropshipping Providers?
It is important to ensure that the supplier with whom you are negotiating is the official one and that there are no others in the middle that fatten the price of the items in each link of the chain.
The most relevant Dropshipping providers usually have sales representatives who will answer any questions and show the catalog according to the interests of the niche in which the store is going to be moved.
Note : some ask for an amount of money to close these agreements as a provider. But, good providers will never charge for the association, they charge for each order.
● Provider Location
Another important factor when choosing a provider is its location .
Usually they are usually foreigners, since Dropshipping providers are not common for them to have competitive prices.
Being from outside, the shipping costs are higher and we also find customs, and that is a very factor to take into account in terms of the margin on the benefits that remain for the merchant.
Many suppliers are from countries like China or Japan, but with the issue of shipping costs, it may be more profitable to work with closer wholesalers and with faster delivery times that will also have an impact on the final satisfaction of the client.
On the Internet there are several pages with supplier lists, but you can start the search in the local market , since there may be companies with products according to the niche that we operate and attractive prices.
With the economic crisis, many companies have rethought their sales channels and they can find closer wholesale suppliers than previously thought.
The truth is that this would greatly simplify the issue of negotiations for shorter delivery times and the resolution of possible incidents.
● Packaging And Shipping
The dropshipper must be aware of the importance of the details regarding packaging :
- Have a package tracking service.
- Include invoice or not.
- Reverse logistics in case of returns.
All are aspects that must be agreed in advance and rigorously followed in order to generate trust in customers.
On the other hand, a clause is also usually signed, which covers various aspects of the treatment of personal data of customers who make purchases. The dropshipper cannot use them to communicate with him, nor for his own benefit.
This is also related to sending the order anonymously to the customer, without any distinctive sign other than that of the retailer.
How To Recognize a Serious Supplier?
One more symptom to recognize a serious provider is that it is accessible , that is, the information between him and the retailer will basically flow through Internet connections.
You must have a complete website with high loading speed , quick response to email, have the company equipped with a technological system that indicates that orders will be received correctly and operations or queries are resolved quickly.
What Is The Difference Between A Dropshipping Website And An Affiliate Website?
The truth is that these two store models work quite similarly. Let’s see the differences.
► In The Online Affiliate Store
The merchant who owns the online portal charges a commission for each sale made from its sales portal, but does not close any sale, simply redirects customers to the website of the associated or affiliate companies .
► The Dropshipping Store
It does deal with closing sales, even if it is also selling third party products. Therefore, you must have payment gateways to charge the customer and then be able to pay the provider.
The closing of sales, that would be the substantial difference between one business model and another, since otherwise, they are all similarities:
- They sell other people’s products.
- They do not have to have stock and, therefore, storage.
- They require little initial investment.
In practice, many affiliate businesses end up in Dropshipping stores as profit margins are higher in the latter business model and the remaining advantages continue to be maintained.
After this reading, we can conclude that creating a Dropshipping sales system is a cheap and interesting option if you intend to start a business and try to make a living from the Internet.
It is quite accessible, even without technological knowledge, since management and investment is minimal.
Being able to position the portal to generate sales is the only thing that requires a little more time. It is necessary to spread the brand and proclaim the benefits of buying our items before other competing websites.