What Online Store Model is Right for You? Pt 3: Dropship Goods

August 13, 2014 in How to sell online.

While a lot of people are excited about the prospect of making a decent living through selling items online, others may feel a little intimidated by the costs related to starting up and buying inventory – not to mention the potential hassle of dealing with orders and shipping out products.

These are legitimate concerns, yes, but there is a way to sell products online for a profit without exorbitant startup costs and massive amounts of inventory to invest in and store.

It’s called dropshipping.

What’s Dropshipping All About?

Dropshipping GoodsUnlike selling products you’ve created and developed yourself, dropshipping involves selling other people’s products.

Basically, what you do is take orders from customers and send them off to your supplier, who will then send the item directly to your customer. This way, dropshippers do not actually have to hold any inventory in stock. A profit is made just like most other retailers, with the difference between the wholesale and selling price being the source of revenue for dropshippers.

Dropshipping is perfect if you don’t have a product idea in mind to create and trademark on your own. It’s also ideal if you don’t want to buy a huge inventory that will then have to be managed in storage. You’ll also have the opportunity to test out a bunch of different products instead of limiting sales from just one or two items.

If you want to go the dropshipping route for your online store, you can go about it two ways:

  1. Deal directly with the dropshipping manufacturer, or
  2. Deal with a dropship aggregator who in turn deals with various manufacturers. This can be helpful since you won’t have to keep contact with all the manufacturers yourself. However, this route will usually involve the aggregator taking a cut from your margins.

If you want to get started selling online without huge startup costs or having to manage large inventory stocks, dropshipping may be the perfect option for you.

Why Consider Dropshipping as a Means of Selling Online?

Dropshipping can be very appealing for a number of reasons for the online seller:

Lower Start-Up Costs

You don’t have to worry about investing a large amount of capital into inventory when starting up your online store through dropshipping. The cost of housing inventory can be one of the biggest expenses when launching an online shop, but you don’t have to worry about this with dropshipping.

Not only that, but you can probably get your hands on cheap shipping rates through your dropshipping supplier as compared to the rates you’d be subjected to when shipping your own packages.

Lower Risks

You don’t actually have any inventory, so there’s no risk involved when you can’t sell something you’ve already invested in. Dropshipping requires no up-front inventory purchases, which means there’e virtually no risk if your business doesn’t take off.

You don’t have to worry about any changes in trends that will cause certain products to fizzle out. Simply move onto the next and you’re good to go!

Hassle-Free

Since there’s no inventory to worry about, there’s no storage to be concerned about, either. There’s no hassle of packing and shipping items yourself, which gives you more time and money to scope out other potential products to add to your online store’s showroom.

Choosing the Right Products to Sell

Selecting the ideal products to sell through your online shop can be pretty challenging, but it’s also one of the most important aspects to consider when launching your business. Here are a few tips:

Start Off Small

Don’t get all gung-ho and crazy when it comes to selecting your products. You might be tempted to start off selling luxury items because that’s where you think the most money stands to be made, but starting off small is a much simpler task.

Staying conservative in your product choices will make it a lot easier for you to gain a rapport with your customers, and build your online selling reputation. Just because a product is worth more doesn’t necessarily mean you’ll afford the biggest margin. If you can get your hands on sterling silver necklaces for $10 and sell them for $50, that’s a pretty decent margin of profit.

Stormtrooper LegoGet Niche-y

Try to avoid going after products that have no connection to one another. Instead, try to keep your focus narrow to a specific niche so you can specialize in it. Star Wars collectibles, perhaps. Or beauty supplies. Or whatever else you can think of. It’s a lot easier for you to compete in a niche market.

Don’t believe me? Well, think about what it would take for you to tackle other generalized online stores like Amazon. Pretty tough, if not impossible, right? Instead, the products you dropship should be related to one another, which can even help you market them more effectively through your SEO efforts.

Differentiate Yourself

If you want to successfully compete in the market of your choice, you’ve got to stand out. Although it’s ok to get some ideas from other online sites, don’t copy them. You’ve got to differentiate yourself from others, giving customers a reason to buy from you and not your competition. Try to come up with a product that sets you apart from your competition. Think about a need in your market that customers cannot get anywhere else. Providing a solution to your customers will help drive your sales, and brand you as an expert in your field.

The Downsides to Dropshipping

As attractive as this online sales model is, there are a few downsides to dropshipping worth noting.

You Have Little Control Over Products

Since the products you’re selling aren’t actually yours, and are not coming out of your inventory, you basically have to rely on the product descriptions provided by the manufacturers. It might be sort of tough to accurately provide information about the product to customers, such as its dimensions, or other information they may request. You’ll have to get this information directly from the supplier.

You Have Little Control Over Shipment

Just because the supplier is shipping the product directly to your customer, doesn’t mean you aren’t responsible for what happens to the shipment. If anything goes wrong, it will be you who will get the brunt of the customer’s dissatisfaction.

You Have Tons of Competition

Since dropshipping requires little investment capital and no requirement to come up with a product of your own, a lot of people are going to give it a shot. This means there will be plenty of competition out there, making it tougher for you to stand out.

You Have Low Margins of Profit

You’ll most likely have to sell in high volumes in order to make a decent profit considering the very low margins of profit that comes with dropshipping.

Backordering

There will most likely be times when a product that a customer wants to purchase is out of stock, which is something totally out of your control. This delay in delivery can have a negative impact on the reliability of your online business. That might not seem fair, but it goes with the dropshipping territory.

Conclusion

If you do your homework, pick the right products, and get in touch with a number of reliable suppliers, dropshipping can turn into a viable business for you. This e-commerce model won’t necessarily turn into an overnight success, but it can provide you with a simple and affordable means to make decent money without having to invest thousands of dollars in inventory.

Is dropshipping a sales model you think could become a full-time business? Or is it worth the time and investment needed to go a different route (like creating your own products or buying wholesale)? Let me know your thoughts below!

Image source: moriaW_Minchel 

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2 Responses

  1. Klaus
    22 August 2014 at 9:36 pm #

    Hello, would like have a dorpshopping plugin for wothemes commerce . Do woothemes have one? I need A drop-Ship plugin that I can send the oder with the shipping address to the (manufactory) company. Can you suggest me the plugin? Thanks a lot.

    • pirategaspard
      17 September 2014 at 4:44 am #

      The Dropship Manager Pro plugin may work for you. You can search for it in Google.