Dropshipping is a great way to start selling online without having to invest a ton of time or money into inventory. In today's post I'll tell you what dropshipping is how to get started dropshipping and give you some tips along the way.

If you enjoy this article or feel I have missed out important information, then feel free to let me know in the comment section.

What is Dropshipping?

The dropshipping model is one of the most popular ways to start an eCommerce store. With dropshipping you don't need to worry about managing inventory, shipping, customer support, or anything else that goes along with having a brick-and-mortar storefront. You simply sell products bought through another distributor.

The beauty of this model is that it frees up your time and energy to focus on growing your brand.

Dropshipping isn't just for small businesses either. There are many successful entrepreneurs who use this method to build massive brands.

You may have heard of the company Oodie that does the massive oversized hoody blankets. Well, that originally started off as a dropshipping business which was branded exceptionally well to get to the size it is today. The creator of the Oodie company actually shares video content on YouTube fully related to dropshipping.

How Does Dropshipping work?

In order to understand how dropshipping works we first need to look at the supply chain.

Supply Chain: A Supply Chain is the process by which goods move from producer to consumer. When you buy something like a shirt from Amazon, you're buying from the manufacturer (the person who makes the shirts) and then they ship them directly to Amazon.

When you purchase a product from Amazon, Amazon will take the profit between what the customer paid and the cost of manufacturing. Essentially a large part of Amazon can be seen as dropshipping. 

There are many different ways to set up a dropshipping, depending on what type of product you sell. Some people choose wholesale partners while others go straight to retailers. Wholesale partners provide products directly to you. Retail partners allow you to sell directly to consumers. And some people use both types of partners.

A successful dropshipper must maintain a solid relationship with its dropshipping suppliers and distributors. If things aren't working out, it could end badly. But if everything goes well, you'll have a steady stream of sales coming in.

The basic premise is that you setup a store, brand and market the site where you sell the product, when a sale is made through your site the order will go directly to the manufacturer/distributer. They will ship the product and you will be able to cover the costs of the manufacturing and shipping costs with the sale price on your site.

You may be dropshipping T-shirts for example which your selling for £19.99 on your site, but only cost £8.99 from the distributor such as AliExpress. You would keep the difference which is essentially your reward for marketing and attracting the sale of the product.

Advantages of a dropshipping business.

Dropshipping is a type of ecommerce where you buy products wholesale and resell them online. You don't have to worry about storing inventory, fulfilling customer orders, or shipping items. All you do is find a product you think your audience might enjoy, purchase it from a supplier, and list it on your store.

You'll probably make more money if you're able to source high quality products, but there are plenty of low priced options out there too. If you're looking for a quick profit, you could try sourcing cheap products on eBay and listing them on Amazon.

Easy to get started.

Dropshipping is relatively easy compared to setting up your own eCommerce store, especially when you're just starting out. There are plenty of online tools like Shopify, Bigcommerce, and Volusion that make it simple to set up an online storefront. All you need to do is choose a theme, add some product images, and start selling.

You don't need any inventory or storage space because dropshippers buy products from wholesale suppliers such as AliExpress and eBay. They ship the items directly to customers, and Amazon handles fulfillment.

There are no shipping fees either. You simply pay a small commission fee to Amazon based on how much sales you generate.

Little to no investment.

Dropshipping is one of the easiest ways to start an online business. All you need is a computer, a reliable internet connection, and a few dollars to buy inventory. In fact, there’s can often be no risk (financially) involved in starting your own drop shipping business depending how you set the business up.

Similarly to the last point that the business is easy to start, this is also accompanied by this fact that you can setup a store for little to no investments.

You don't have to worry about inventory, warehouse space, potential customer support, or anything else. Your customers and distributers do all the work, while you focus on making sales.

Now don't get me wrong, if you want to grow your business then you will need to spend some money. Which brings me onto my next point...

Scalability.

Dropshipping isn't just about selling products online. In fact, it's one of the most scalable businesses out there. You don't need to hire anyone else to help you scale your business. All you need is some basic knowledge of how to sell online, and you're good to go.

If you find the right set of ads that work for your site and bring in a higher return then what you spend on the ads. Also known as a good ROI (Return on Investment) then you can simply scale the advertising efforts, get more sales on your site and continue the cycle.

Disadvantages to starting a dropshipping business.

Dropshipping is one of those things that sounds great on paper, but it isn’t always easy to implement into real life. If you want to know what disadvantages there are to starting a dropshipped business, here are some of the most common ones.

Highly competitive.

Dropshipping is one of the most popular eCommerce businesses today. But how do you stand out among the crowd? You have to make sure that you provide great customer support, offer quality products, and build trust with your customers.

Low margins.

Dropshipping is one of the most popular ways to start a business online because it requires little upfront investment. But starting a dropshipping business isn't easy. You'll need to find products that people want to buy, set up a store where those products can be sold, and make sure that everything is priced correctly.

If you don't do any of that, you won't see any profit. And even if you do, there's no guarantee that you'll ever break even. So how does someone decide whether or not to drop ship? Let's take a look at some of the pros and cons of doing so.

Supplier errors

The best way to avoid problems with your suppliers is to make sure you know what you are getting into before signing up. You want to find out everything about your potential partner. Ask questions like: How long have they been doing business? What do they charge for shipping? Do they offer financing options? Are there any complaints against them? If possible, ask someone else who has used them as well.

You don’t necessarily want to go straight to Amazon.com and place an order. Instead, start looking around online. There are plenty of sites where you can look up reviews and ratings of companies. Check out the Better Business Bureau’s site, too. And, of course, talk to friends and family members who have dealt with similar providers.

If you find yourself dealing with a questionable vendor, it might be worth asking for a refund. But keep in mind that you could end up losing money if you do this. So, unless you feel comfortable taking the risk, it might be better to just wait until you receive your product before trying to return it.

Key Factors to Dropshipping

Dropshipping is one of the most popular eCommerce models today. But there are many things you need to consider before starting your dropship store. Here are some key factors to dropship successfully.

If you choose to go down the dropshipper route, here are three steps you must take to succeed:

Market research.

Dropshipping is one of those things that sounds great in theory, but it takes some work to make it happen. You might think that dropshipping is easy—you just buy something online, put it in a box, and ship it off to someone else. But there are a lot of moving parts involved. And even though it seems like a no-brainer, you still need to do market research to figure out what people want.

Market research will help you understand if your company will work or not before getting started on setting up the business.

Strategic shipping systems.

Dropshipping isn’t just about selling products online. There are many different ways to use it to grow your business. For example, you could sell products through Amazon FBA, eBay, Etsy, Shopify, BigCommerce, Magento, WooCommerce, etc. You could even open up your own ecommerce store and start dropshipping there. But what does it mean to do strategic shipping? What are some things you can do to make sure you’re doing it well?

Getting Started With Dropshipping

Dropshipping is a great way for newbie entrepreneurs to start building their own eCommerce stores without having to worry about inventory management, shipping, or customer service. In fact, you don't even need to open a merchant account.

There are many different ways to set up a dropshipping store. Some people prefer to use a third party marketplace like Amazon, while others choose to list their products on eBay. Regardless of how you decide to go about it, there are some things you'll need to consider before launching your dropship store.

One of the most popular choices for creating a dropshipping store is the Shopify platform. Shopify gives you a 14 day free trial where you can try to setup your first store. It is even possible to become profitable within the trial period. If your not profitable then you can cancel the trial before the end.

Is dropshipping legal?

Dropshipping is a type of eCommerce where products are sold directly from one seller to another without passing through a traditional retailer. This method allows anyone to start selling online without having to go through the hassle of setting up a store front. However, there are many questions surrounding whether or not it is actually legal.

The biggest question people ask themselves is whether or not they can sell products under someone else’s brand name. While this is technically against the law, it is still very common practice among some small businesses. Some brands choose to allow others to use their name because they do not want to spend money on developing their own brand identity. Others simply don’t care what happens to their brand name once they give permission to use it.

If you decide to start dropshipping, make sure you have a contract signed before you begin. Or the more common method is to dropship items which are unbranded. You may even hear the term "white label" brands which allow you to add your own brand to the product. Often this takes more work to setup and some manufacturers may require you to take on a certain amount of stock.

The laws around dropshipping may differ depending on where you live. Be sure to read up on laws and rules for where you live to ensure you don't get any legal issues.

Do I need to register a business entity to dropship?

If you are considering starting a dropshipping business, it is important to understand what type of legal structure you need to use. If you choose to operate under a sole proprietorship, you do not need to register your business. However, if you plan to register your business then you can do this through the UK governments website.

Summary

While dropshipping may seem like an easy way to get started selling online, there are several factors that you must take into consideration. It is a very competitive space so finding success can be difficult. But iuf you do manage to create a successful dropshipping store then you can make a lot of money.

I am not a financial advisor and anything I say in my blog is not to be taken as financial advice. For any financial advice please contact a financial professional. My blog is based on my own opinions, research and understanding of the financial markets.

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Thanks for reading

FAQ

How does dropshipping work?

Two of the most common approaches for dropshipping are to seek out a supplier located in North America (or anywhere else in the world) using supplier databases, or to seek out an app that connects you and your store to thousands of suppliers.

Source: shopify.co.uk

Do I need to register a business entity to dropship?

Yes, you'll need to register your business once you start to make sales, but there is no rush to do so until you start making them consistently. This is because the majority of payment providers require you to prove that your business has such credentials.

Source: bigcommerce.com

How can I maximize my chances of success?

If you're ready to take the plunge and try dropshipping, there are just a few more guidelines you can follow to increase your chances of long-term success. First, just because there are no start-up costs associated with buying and managing products, it doesn't mean you should treat a dropshipping business like it's risk-free. You're still putting a lot of time into finding the right dropshippers and building your website, so treat that like an investment and do careful research beforehand.

Source: volusion.com