All about dropshipping and your own eCommerce business.

All about dropshipping and your own eCommerce business.
Does the idea of having your own business excite you? Do you want to know how you can start your own E-commerce website and start selling products online? With a business model with low investment(less than 1000$) You can start your own E-commerce website with products that don’t need a warehouse and purchases that you have to make only after your customer makes the payment.

What is dropshipping?

If you are seeking an online business opening, dropshipping is for you. Dropshipping is a modern internet based business that requires very little initial investment. Dropshipping is a retail fulfillment method where an online store doesn’t keep the products it sells in physical stock or warehouse. Instead, when a customer makes a purchase on the online store, it purchases the item from a wholeseler and has it shipped directly to the customer. Imagine having a shop where you only sell when you have a customer ready and has payed you beforehand. Then you purchase that item from a wholesaler and the wholesaler ships it directly to your customer while you pay the wholesale price, keeping a profit margin for yourself. There will be no physical stocks in your shop, only the listings of items that you create on your e-commerce website. Dropshipping sounds like a simple and easy online business with little investment at first. However dropshipping has both advantages and drawbacks that you should take into consideration before getting started. Let’s explore in depth about the pros and cons of running a dropshipping business.

Pros of running a dropshipping business

Starting and running a dropshipping business comes with many advantages such as minimum capital investment for entry, no requirement of warehouse storage or paying rent for a physical shop/warehouse. Listing items on a dropshipping website is easy and you only have to make an order to the wholesaler when a customer has put a purchase order on your website. The following are the advantages of a dropshipping business discusses further :

Minimal starting investment :

With dropshipping business, the initial investment is the investment to get your e-commerce website made along with any additional services such as sole proprietorship company registration and GST registration(for Indian citizens). After that is done, the per year cost comes down to site maintenance and SEO and advertising services.

Free of inventory and supply chain management:

Since there is no physical shop or warehouse involved, you dont have to pay monthly rental to stock products physically, you only have to purchase items directly from the wholesaler after your customer has paid money for it. The wholesaler then ships the product directly to your customer, hence saving packaging time and effort as well. The cost of warehouse, supply chain workflow, packaging and delivering saved along with the time and effort. Compared to a conventional shop, a dropshipping store saves the capital required to maintain a warehouse operation along with the human resource required to maintain shipping, packaging and handling.

Lower inventory management risks:

Having an online shop with no warehouse means you dont risk purchasing a stock upfront. You also save on the risk of having excess stock and items that dont sell since you can easily update products that you feel that are not performing well with the online marketing and client reviews.

Colorful product variety:

The best advantage of a dropshipping business is that you can list a wide catalogue of products in the niche that you build your website on. You can also go for a general store and list as many items you want to under different categories. Depending on the festivals, you can update your catalogue to mix and match with the current demand of trending products. This saves time and effort on spending on analyzing sales history and managing inventory accordingly. All you need to do is list hot selling items that your potential customers are looking to buy, creating a one stop shop for regular customers.

Selling and testing multiple products economically:

Dropshipping allows you to update and iterate your inventory easily and cheaply since it does not come with the constraints of a physical inventory. That means you can add products that are doing well with marketing campaigns and remove the products which are obsolete, without incurring any cost of handling physical stocks. You can also test new products, only paying for what you sell.

Scaling up your business:

With the ability of online marketing, traffic growth and organic followers on your social media, you can scale your dropshipping business and increase your conversion rates.  

Limitations of dropshipping

Just like any other business models, dropshipping is also prone to its own downsides and limitations. Learn more about them here to run a simple and headache free dropshipping business.

High competition :

Since the barrier to entry in a dropshipping business is low, it also means that the competetion can get high for hot selling products and hence lower your profit margins. Low capital investment and high scalable nature owe to the easy entry into dropshipping business. A wholesaler can sell the same product to a lot of retailers, since that means the wholesaler is making a good profit from multiple point of sales. That means a lot of dropshippers are already selling that hot product you’ve been eying on wholesaler’s website. Hence it is highly recommended to sell products belonging to a niche or custom designing your products(print on demand T-shirts, mugs etc with your own designs) to stand out as a unique brand. However that doesnt mean you cannot sell that hot product! Keeping a reasonable profit margin and marketing to online channels with exciting offers can give you that edge of uniqueness and the safe feeling for customer. Finding products specific to a niche or providing outstanding customer service will differentiate you from other dropshippers and your business will grow from word of mouth.

Operational challenges

Dropshipping business has the following challenges which come hand in hand with the advantages : 1. Making sure the workflow goes smoothly from order placement to delivery. Although dropshipping business owners do not directly deal with packaging and delivering, they have to make sure the process is smoothly managed from order placement to the wholesaler to providing the correct tracking number to their customers. This ensures the products are delivered on time along with a satisfied customer. 2. Dealing with multiple wholesalers is also a challenge that dropshippers must address. The wholesalers must be selected on basis of good rating and trustworthy product reviews. More details can be learned here on the subject of dropshipping wholesalers. 3. While dropshipping, it is essential to keep an orderly record of orders that are placed. In case the numbers of orders per day reaches a few hundreds, the logistics records must be able to handle those orders which will be fulfilled from different wholesalers. 4. When you have a website full of products from various wholesalers, it is possible to end up with a product which is not available which may result in potential customer care issues. 5. You may find yourself serving products in an over-competitive niche. Proper product research is essential to avoid this. 6. Calculation of shipping costs can be an issue if you have different wholesalers with different shipping rates, especially when you are giving a free worldwide shipping to your clients. Hence it is essential to add a shipping cost margin in your sales price. 7. Handling returns in dropshipping needs to be in place along with proper returns and sales policies. 8. Managing quality control can also be an issue with some items, as some wholesalers use clever marketing and provide sub standard products. Hence it is always a good idea to purchase a sample product for yourself for quality checks.

Road success in dropshipping business:

Despite the challenges in dropshipping business, it is also exciting to build a profitable dropshipping business if you focus on optimizing the following elements:

Contacting the right wholesalers:

Finding trustworthy wholesalers is the backbone of your dropshipping business. With that said we can establish that you should make a checklist of criteria to select the best wholesalers for your e-commerce website. Professional, responsive and reliable wholesalers will provide the best products that you can showcase on your e-commerce website and market further to potential clients.

SEO and advertisement strategy :

Establishing a wholesaler backbone will enable you to focus on online marketing and selling your products on social media such as Facebook, Instagram and such channels. To drive traffic to your e-commerce website and convert that traffic into clients you must focus on SEO(search engine optimization) and online marketing. Increasing SEO rankings of your websites by using relevant keywords that your potential customers will search online generates organic traffic from Google. Facebook, Pinterest and Instagram can be used to forge e-commerce based sales channels by using proper hashtags to promote posts that lead to your website. With proper focus and establishing a community based social media following, you can reap the benefits of organic traffic withing the first 3-5 months! Organic traffic is great to have, however it is a process that gives fruits over time, just like farming. You can also go for online advertising and soft sales on social media to accelerate the process and drive paid traffic to your website. with organic traffic backing you up, you will see your sales grow.

Value addition to the customer :

A successful e-commerce website offers much more than a physical product. They offer added value to a customer’s life by providing products with descriptions that talk about the information of the product in a way that it offers a solution to a problem. Customers are more likely to buy a product based on emotional values and a product which gives them a convenience. Your dropshipping business will outshine your competitors by adding value to your customer’s life instead of just making a website that sells products.

Secure Checkout :

In an e-commerce website, customers should have a keen interest in products that they can add to cart and quickly check out with safe payment via Paypal or similar gateways. With a safe environment, customers are more likely to make that purchase!  

How can you create your own dropshipping business?

As we have covered the basics of a dropshipping business, its your turn to take the next step. Start your own entrepreneurial journey and get in touch with us to create your own dropshipping e-commerce website today!

10 comments

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