Dropshipping Best Practices, Checklist and Case Studies To Help You Get Started in 2020
This, is the world of Dropshipping, where ultimate guides are a dime a dozen, $1M tips are given out like bags of candy and opinions run from this pole to the other pole.
The truth is, there is no truth.
Every opinion has validity within itself, but as a starter, it is frustratingly confusing, not knowing who to listen to, who to follow, what advice to take to earn $1.756.789 over a month like that one guy in all Facebook Ads you’ve seen recently.
With that being said, we are proud to be no Ultimate Guide, but you bet we cover all the basics of dropshipping, to help you take the first firm steps into the world of Dropshipping.
I. What is Dropshipping
Dropshipping is a retail business model in which eCommerce stores do not keep the products they sell in stock. Instead, when receiving an order from a customer, an eCommerce entrepreneur using dropshipping model will purchase the product from a third party, or the supplier, who will then handle the shipping. Dropshipping, in short, is an inventory-free retail model where your suppliers take care of most of the manual work for you - the inventory management and delivery.
Leave out all the buzz, dropshipping is no magic, and certainly not a get-rich-quick tool. Like other business models, it has the same foundation, hence requires similar expertise and knowledge - which we will go over right below.
II. What to Expect at Dropshipping
Dropshipping has often been lauded as the fulfillment model of 2020 - while the compliment itself may sound like a hyperbole, dropshipping does offer an array of benefits for eCommerce entrepreneurs. With dropshipping, you can quickly test different business ideas with limited downside, which lets you learn a lot about how to choose and market in-demand products.
1. You Won’t Have To Sell Your Soul.
With Dropshipping, less capital is required.
Opening up a store, online or brick-n-mortar, requires you to purchase the products for your inventory. That's the traditional way.
Dropshipping solves one of the most common headaches for first-time retailers: Investing thousands of dollars in inventory up front.
You only have to purchase a product when you’ve already made a sale and been paid by your customers, you made money before you have to spend it. And because you're not obliged to inventory investment, like in traditional retail business, the risk involved in dropshipping is much lower.
2. Stress-free For First-time Retailers
Compared to running a brick-n-mortar retail business, an eCommerce business rule out many of your worries:
- How to find a warehouse? What is the cost of warehouse management?
- How to track your inventory?
- How to manage the whole process of packaging and shipping? (plus: How to design and manufacture packaging for my product?)
- What to do if my customer returns the product? Managing or paying for a warehouse
3. Overhead Cost is an Easy Game Now
In business, overhead or overhead expense refers to an ongoing expense of operating a business, including but not limited to: Rent, Utilities, Insurance, etc.
However, in dropshipping, overhead costs are quite low when you don't have to deal with inventory management or warehouse management. In fact, you can sit at home with a laptop, a firm understanding of how things work (which we'll cover in this guide, but be patient).
Of course, these costs will grow as your business grows, but in comparison to those of brick-n-mortar stores, you will still get more benefits.
4. Easier to Get Started
- You can sell more than one product since you don't have to pre-purchase the products you sell, you have a much wider array of potential products. If suppliers stock an item, you can list it for sale on your online store at no additional cost.
- Easier to test: Dropshipping is a fulfillment model for both new online retailers, and for business owners looking to test new products. The reason is the ability to list and sell products without having to buy a large amount of inventory.
- Easier to scale: In traditional retail business, the more orders you get, the more work for your warehouse management team, the busier your delivery team gets. By leveraging dropshipping suppliers, you can focus on marketing and sales to expand your business and allocate efforts in getting more orders, without growing pain of processing orders and more incremental work.
III. Dropshipping Won't Work For Everyone? Why that?
1. Shipping Get Complicated Sometimes
Most dropshippers source their products from multiple suppliers, which makes shipping costs and shipping operations look like a nuisance to early dropshippers.
Let's say your customers place an order for 3 different products, from 3 different suppliers.
Let's pretend this is a basic math problem and all three suppliers are of equal distance to your customer, then the shipping costs will basically triple. And you will probably be the one to bear that costs since it’s never wise to thrust them onto your customers.
Even when you can find a way to include these charges in the product pricing, automating these calculations will be challenging.
2. The Faults in Our Suppliers
Being handsfree in Inventory and shipping may pose as a double-edged sword. Since your job is mostly done when you make the sale, and your suppliers handle the order preparation and shipping, you won't have 100% control over curbing mistake and faulty products from getting to your customers.
Let's place a little faith in human beings and make an assumption that your suppliers won't be mediocre ones that hail frustration upon you, or make basic errors in shipment,, or with low-quality products. Let's say you work with the best suppliers, but even the best make mistakes, even Achilles got a weak heel!
So when a supplier makes mistakes, it's you to take the rap and apologize. That's why you must be extra considerate and thorough when choosing your suppliers - which we'll discuss how to do exactly that in Chapter 2.
3. Low Margin
One of the biggest disadvantages of dropshipping, which is bound to happen when you think about how easy it is to get started. In the competition, not every player is your pal, many competitive stores will set up shop for the sake of selling products at the lowest prices possible to grow revenue.
And not every customer takes their time to closely evaluate your business and the other, even if you have a beautifully designed website and out-of-the-earth customer support. Customers can, and will, compare your prices to others, which will quickly hurt the potential profit margins in a niche.
One way to avoid this problem is to be extra calculated when choosing a niche that’s well-suited for dropshipping. Let's discuss how to do it in the very next chapter.
IV. How Does Dropshipping Work
What do we talk about when we talk about Dropshipping?
We talk about Shopify. Shopify is a great dock to sail your eCommerce Business.
First you need to have a supplier. The easiest way to find is to get on Shopify, seek out a supplier using Shopify, using supplier databases or to seek out a Shopify app that connects you and your store to thousands of suppliers.
On Shopify, there are apps for everything, for the latter, we recommend Oberlo, a marketplace developed by Shopify that helps independent business owners find products to sell, and Spocket.co - the go-to platform if you're looking for original US/EU products.
Now you have a supplier and a product, the next step is to build an online store - a beautiful one that converts!
Now that sounds too easy, too simple to be true, right? What about how to choose a product, how to choose a supplier, how to get a good deal, how to build an online store.
Of course, we don't fall flat on our premises.
In this guide, we will go with you from the beginning, till the end of line.