If you’re here, you’ve probably seen a YouTube video or read an article by someone who has made money with dropshipping, and you want to know more. I’ll tell you right now that it’s entirely possible to make money with dropshipping, but there are many myths and just as many scams about this topic that we’ll analyze in this article. Before I talk about dropshipping, I want to tell you that there are many ways to make money online, some of which aren’t very well known, and if you want to know more, you can read the guide to make money online published in this blog.
What is dropshipping?
Dropshipping is a form of retailing that occurs exclusively online and does not require the retailer to purchase the products before selling them. Generally, selling a physical product online requires a supplier, a reseller, and a customer. Previously, online retailers had to find a product supplier, purchase, store, pack and ship the products when a sale was made.
Later, it was no longer necessary for the retailer to store, pack, and ship the goods; Amazon or other platforms such as ShipBob and ShipMonk handle this directly. However, the seller still has to buy the products in advance at a relatively high economic cost and then store them, for example, in the Amazon warehouses, which take care of shipping.
Dropshipping goes one step further: the supplier does not deliver the products to the retailer, but directly to the customer. This has both time and financial advantages.
How does dropshipping work?
Dropshipping is one of the simplest forms of commerce. The retailer (dropshipper) does not have to worry about storage, packaging or shipping costs. So you can run a real business without buying products and hiring employees for these tasks. Only a few activities are required, which I will list below:
- you must find a supplier of products that are of interest to him
- you must select the available products and offer them for sale in your online store
- you must launch effective marketing campaigns
- when a customer places an order, the request is forwarded to the supplier, who packages the product and ships it directly to the customer
Dropshipping is based on the principle that the retailer never physically sees the item he’s selling. He only has to virtually select the products he wants to sell and generate the sale, everything else is done by the supplier. The only exception is returns. Usually the retailers (dropshippers) take care of the returns, but there are also suppliers who accept returns directly from their warehouses.
Dropshipping is a great e-commerce business model, but of course there are pros and cons, which we’ll get to. Also, beware of vendors who offer expensive seminars and/or courses on making money with dropshipping. People often forget or don’t want to remember that anything we’re interested in can be found for free by simply doing a thorough search on the Internet. Sure, it takes time and effort, but it’s a good exercise.
Dropshipping vs Affiliate Marketing
Dropshipping, while similar to affiliate marketing in some respects, is actually quite different. In both cases, the reseller does not directly manage the products he sells, but only acts as an intermediary between the customer and the supplier.
- Signing of a contract between the supplying company and the reseller
- Creation and/or management of a real online store
- Cost of opening the online store and marketing (higher than affiliate marketing)
- Dropshippers have control over part of the sales process
- Dropshippers sometimes handle returns. Therefore, it would be helpful to have a customer service (chat, email, etc.)
- Simply join the affiliate program of any platform you like
- All you need is a link pointing to the products you recommend for purchase
- The only cost is Blog/website setup
- Affiliates have no control over the sales process
- Affiliate marketer does not accept returns. No customer service is required. Long story short: the company probably does not even know you are their affiliate
Make money with dropshipping
Yes, you can make money with dropshipping, after all, you can make money selling almost anything in this world, it just depends on your will and perseverance. In dropshipping, the profit margins are usually low while the marketing and advertising costs are high. So the key factor is to choose the right product.
It is not possible to know how many dropshipping companies are active and how many are closing, just as it is not possible to know how much dropshipping companies can earn in the market. Dropshipping is no different than any other business startup. There are opportunities. There are good ideas and bad ideas. With the right idea, the right work, and a little bit of luck (which you always need), all the ingredients are there to start an interesting business.
It’s impossible to know if a dropshipping business is doomed to success or failure, but to help you make money with dropshipping, I can give you some tips for getting a good start in business
Try to achieve low selling prices, especially in the beginning. But in order to do that, you need to lower the administrative costs. Therefore, avoid buying expensive online courses that provide little benefit. Look for cheap suppliers (do not limit yourself to AliExpress, where there are really cheap deals), but often poor quality products that lead to many returns). Use cheap e-commerce platforms and take care of customer service yourself.
Create a nice e-commerce website. Don’t use amateur websites that consumers will immediately judge as unreliable. Product descriptions and website content must be professionally created. Free Shopify themes are usually very low-quality, with poor photos and descriptions.
Conduct constant market research. Sign up on other websites to receive notifications about the most popular products. Try to discover the trendy products that other stores are making money with.
Looking for a fast and efficient supplier. This means delivery within four/five days or less. This requires that the supplier be located near you. No one is willing to wait more than a week for their product, even if it is cheap. There are dropshippers who use AliExpress, but most of the products are not of good quality and shipping can take up to a month.
Familiarize yourself with different marketing tools, from social media to email marketing to rewards for affiliate programs. The best way to make money with dropshipping is to learn how to properly use Google ads and Facebook ads. If you do not know how to use these advertising tools, you have little chance of making it big because dropshippers, especially new ones, are not well known. Therefore, they have to attract customers with social media and search engine advertising.
Provide good customer service. The biggest dropshippers have good customer service. If the customer service is not of good quality, you will have many returns that will lead to the failure of the business. It is important to set up a live chat to answer questions about your products and an email support system to answer more detailed questions.
Sell quality products. A good dropshipper should invest a certain amount of money in buying product samples to really know what they are selling. Many products are overpriced and the fight to the bottom is fierce, so it’s better to find a unique niche and less “well-trodden” products.
Study the competition. Analyze their social networks. Study their Facebook ads. How many followers do they have? How are they marketing their products? What can you do differently to stand out? What can you copy? Familiarize yourself with your competitors’ content and look for templates that work best. Subscribe to your competitors’ newsletters to stay up to date.
If you want to try to make money with dropshipping, I strongly recommend you to follow these tips.
Costs for a dropshipping business
The costs for a dropshipping business are as follows:
- Creating a website. Website prices vary widely, but initially you can spend around $30 per month for an online store (Shopify, BigCommerce, WooCommerce, etc.). Avoid free websites
- Online payment fees. Payment processing fees are the classic 2.9% per transaction + $0.30 per transaction
- Marketing. Most of the costs incurred are related to marketing. Facebook ads, Google ads, email marketing, etc. To sell products, you need to invest in advertising. It’s hard to give an exact number, you can start with 100 $ per month and invest up to 4/5,000 $ and more. You can start with 10/20 $ per week for Facebook ads, see how many sales you make, and then gradually increase the amount for marketing
- Suppliers. Sometimes even high quality suppliers are free. Others charge a monthly fee of a few dozen dollars
- Shipping. Shipping costs are at your expense but many dropshipping platforms offer really cheap rates
- Returns. The return is the sore point of dropshipping. You have to refund the money, the product often returns to your home and not to the supplier. You will then have to try to reuse the item to ship it in the future In addition, the fee for the chargeback of the money to the buyer’s card must be paid
- Customer care. They vary according to the type of customer service offered. However, I recommend having good customer service as this allows you to significantly decrease the amount of returns
Make money with dropshipping – pros and cons
Make money with dropshipping, pros
- Elimination of many costs, such as shipping, packaging and storage, so the price of the final product will be lower
- Wide range of products for dropshipping
- No manual work, you don’t need to prepare, pack and ship the orders because the supplier will do it. You only need to pay the supplier and place the order for shipping
- Startup costs are low, you only need to pay for a website, advertising and partnership with the supplier
- Business risk is very low, and it is possible to switch to a new product at any time
- Favorable shipping rates, as suppliers usually sign lucrative contracts with logistics companies
- Easy management, the website is simply connected to the supplier’s order management platform. The latter then takes care of everything from packaging to shipping
- Great growth potential, with commitment, professionalism and a little luck, the business can be developed and expanded
Make money with dropshipping, cons
- It’s hard to build your own brand. Your logo will probably never show up in the package that arrives at the customer’s home. It will be others who will enjoy the benefits of the image and popularity of your work
- You are at the mercy of the supplier. If the supplier delivers substandard products or fails to meet delivery deadlines, it’s up to you to resolve the issues with customers. And often you have to take care of the returns
- You have virtually no control over products and the supply chain. You can not control the quality of the product or the packaging, etc.
- Competition is getting tougher as it is a business that has attracted many money hungry companies, so competition is very fierce. In many cases, the supplier also sells directly to retailers, making them an additional competitor. So the profit margins are very small. It is true that you can get into the business with little money, but it is also true that the profit margins are small. It’s the suppliers who get the biggest piece of the pie because they manage most of the supply chain
- Low visibility. It is necessary to do a lot of positioning work with SEO tools and invest in online advertising campaigns, because this is the only way to achieve sales, at least initially
But do not be deterred just because, there are drawbacks. That does not mean you can not make money with dropshipping.
Create a dropshipping website
Dropshipping is no different from other online stores, as it needs an e-commerce platform where you can display your products. The system has recently evolved and through applications it is possible to connect directly to the suppliers’ product catalog. The most common dropshipping platforms that require a small monthly subscription fee are:
There are several apps available to match you with suppliers and choose products. They also automatically notify suppliers when a sale is made, allowing them to ship to customers.
Here are some of the more popular dropshipping apps: Oberlo, Printful, and Spocket. Besides these, there are many others. You should search the app stores and try them all to find out if:
- They have the products you want to sell
- If shipping times are reasonable
- In which country the suppliers are located
- What are the profit margins?
- Product images and descriptions are provided?
- What are the membership fees, if any?
Be careful as many of these apps all link you to AliExpress, which is owned by Alibaba. With all the problems, which we have seen above. Finding a supplier from China makes sense for those who have warehouses, (super low costs), but it’s a nightmare for dropshipping.
An app isn’t the only way to find a dropshipping supplier, but this is especially true if you’re looking for a local supplier for a niche product.
To search for suppliers, you can try these directories where you can contact suppliers to find out if they offer dropshipping.
If these directories don’t help you with your search, go to Google and type in the word for the product you want by simply adding “dropshipping” or “supplier”.
Make money with dropshipping – which products sell?
Google Trend is the ideal source to determine the popularity of a product over time. However, this alone is not enough to know whether a product is profitable or not. Some products may be trending upward and may not have enough search volume to ensure profitability. At this point, it would be appropriate to see the actual search volume of the keywords, but this requires purchasing paid tools.
Alternatively, take a look at competing, more popular websites. This should help you understand what trends are going on and what products are currently selling best. Search Google for the name of one of the products you want to sell. The first ten results that appear will give you a good indication of your competitors.
Make money with dropshipping – conclusion
In conclusion, we have understood that there are three main actors in the dropshipping model: the supplier, the dropshipper (retailer) and the customer.
The role of the supplier is to distribute the product, manage the catalog, stock the warehouse and ship the products to the customers on behalf of the reseller.
The role of the retailer will be to select and market the products. He will also be responsible for handling customer inquiries and complaints.
To be successful and make money with dropshipping, you must:
- Find a product with more demand than supply
- Find a reputable and reliable supplier who matches their stock levels with the product catalog, so as not to risk customers buying products from you that are actually out of stock
- Have a decent profit margin
- Increase traffic to your store with organic placement, Google Ads or Facebook Ads
It is true that online sales worldwide reach 4 billion dollars every year and are constantly increasing, and the investment to start this type of business is very small.
But beware of too much enthusiasm, because there is a lot of misinformation about dropshipping on the Internet. The courses for sale that promise amazing profits and infallible methods are too expensive, and with patience and perseverance you can find what you need on the Internet itself. After all, the profit margins on many products are often too low.