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How to Start a Drop Shipping Business?

Create Date: 2018-05-26 15:34:01

Drop shipping is an extremely popular business model for new entrepreneurs, especially Gen Xers and Millennials. Because it does not need a high-level financial capacity. It cuts operational costs as well as saves your time. Therefore, you can focus all of your efforts on customer acquisitions. You don't need to stock or handle any items you are selling.

You can apply the drop shipping model on an e-commerce website. You sell products and purchase them from a third-party supplier and manufacturers. Then they will deal with orders. So you can start a drop shipping business with limited funds. You can start it by following steps.

1. Select a niche

The selected niche needs to be laser-focused and you are really interested in. If not, it would be difficult to open a market. And you will be more apt to discouragement if you aren’t passionate about it. Because it will take a lot of works to successfully scale a drop shipping business. Here are some considering points:

  • Seek attractive profits. Select a niche with higher-priced products. Whether you sell a $20 item or $1500 one, the required workload is essentially the same. All you need is to focus on marketing and customer acquisition, when you are running it.
  • Low shipping costs. Find certain goods which are small in shipping costs. It gives you the option offering free shipping to your customers. And it absorbs the cost as a marketing expense to generate further sales. It is convenient for you that your supplier or manufacturer will handle the shipping of products. But it will make customers unhappy if the shipping fees is too high.
  • Impulse buyers with disposable income. When focused on driving traffic to website, you want to experience the highest conversion rate possible as most visitors will never return. The selling products should stimulate customers and appeal them with the financial ability to make a purchase on the spot.
  • Keep active. Use Google’s Keyword Planner and Trends to check some common search terms. And make them related to your potential niche. You are dead in the water even before beginning, if nobody is searching for the product planed on selling.
  • Create your brand. Your drop shipping business will have more values if you can rebrand them. You can pass it off as your own. Then, look for a product or line. So you can white label them and sell your own brand with customize packages and brands.
  • Sell unusual things. Pick something your customers can't find down the street. That way, you will become more attractive to a potential customer.

2. Perform competitive research

Remember, you will compete with other drop shipping operators as well as retail giants, like Walmart and Amazon. This is a common misunderstanding. Most look for a product with no competition. That means there is no demand for it.

There are many reasons why a product might not have a lot of competitions, like high shipping costs, bad suppliers, manufacturing issues or poor profit margins. Look for products with competitions. It shows there are high demands and the business model is sustainable.

3. Secure a supplier

Partnering with wrong suppliers can ruin your business. So it's important for you to not rush. Perform the due diligence. Most drop shipping suppliers are located overseas. So making a communication is extremely important in terms of response speed and mutual understanding. If you are not 100% confident with them, keep looking.

People are using Aliexpress and eBay vendors. But their drop shipping suppliers are experiencing a lot of troubles on the platforms. So most of them are changing to other platforms like CJ Dropshipping. Here is an article that tells why people quit from Aliexpress.

Try to learn from other entrepreneurs' path in the past. There are plenty of information sources available, from business and tech blogs to this subreddit about drop shipping. It's a popular topic that can help you avoid costly supplier mistakes.

4. Build e-commerce website

The quickest way to launch a website is to use a simple e-commerce platform like Shopify and WooCommerce also available on Amazon, Etsy, eBay etc. They support a drop shipping business model. You don't need a tech background to get up and running. And you've got a lot of apps to help increase sales.

Even if you have a large budget that would allow you to hire a web design and development company to create a custom solution, it's a much wiser to use one of the plug-and-play options, especially at the beginning. Once you are developed and the revenue comes in, you can then explore additional customization of the website.

5. Create plan for customer acquisition

Getting a great product and a website is fantastic. But you don't have a real company without customers wanting to buy. There are many ways to attract potential customers. However, starting a Facebook ad campaign is the most successful alternative.

This enables you to produce sales and revenue from the very beginning. And it can lead to a rapid scaling. Facebook lets you bring your product directly before a highly targeted audience. This will give you the opportunity to instantly compete with the biggest brands and retailers.

You do have to think long-term, and you can also concentrate on search engine optimization and email marketing. From the start, collect emails and set up automatic email sequences providing discounts and special offers. It is an easy way to leverage your existing base of customers and generate revenue without additional spending on advertising and marketing.

6. Analyze and optimize

You need to track all the data and metrics available to grow your business. This includes traffic from Google Analytics and conversion pixel data from Facebook, if that is your main channel for customer acquisition. By monitoring every single conversion — understanding where the customer came from and what direction they took on your website that finally led to a transaction — you can scale what works and remove what doesn't.

You'll never have the advertising or marketing solution set-and-forget. You must constantly test new opportunities and fine-tune current campaigns, allowing you to know when to spend the campaign optimizing or shifting it.