Dropshipping Business Model Explain

Dropshipping Business Model Explain

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Dropshipping Business Model Explain

What is Dropshipping?

Dropshipping is a retail fulfillment method that enables you to sell physical products without purchasing them first.

When a customer buys a product from you, a third-party supplier fulfills the order for you from their warehouse and ships it directly to the customer.

In essence, you’re acting as the middleman between the third-party supplier (a wholesaler) and the customer.

You can sell using any number of platforms including your own e-commerce site, Amazon, eBay, Wayfair, and so on.

Find A Profitable Niche & Products

This is one of the hardest parts of starting a dropshipping business but if planned right, this could result in unbelievable profits. Start by looking out what’s trending on –

  • Google Trends
  • Pinterest
  • Amazon
  • Etsy
  • Aliexpress
  • Reddit
  • Instagram (check the ads)

Some niches you can look for are –

  • Accessory-heavy niches like laptops, phones, drones, etc. so you can target the accessory micro-niche and pave your way through.
  • Accessory-heavy hobbies like golf, biking, etc. where you can target their passion and or problem.
  • Products that are innovative and hard to find locally.

 

How Does Dropshipping Work?



You decide on a platform (or platforms) you are going to sell on.

Then you source products you want to sell from dropshipping suppliers. Any product imaginable is available, from electronics and gadgets to sporting equipment and housewares.

The suppliers provide professional photos of the products, descriptions, and the wholesale price. When a sale is made on your website, the customer’s order is automatically routed to the dropshipper, who then packs and ships the item. The package will ship with a label, listing your business as the source.

With dropshipping, you are not responsible for inventory management or shipping.

Is Dropshipping Legal?

Yes, dropshipping is a perfectly legal way of selling goods and fulfilling orders.

How Much Does Dropshipping Cost?

Costs vary but you can expect to spend anywhere from $80/month to $500/month or more depending on the software you use, the volume you’re selling, and how much you spend on marketing.

Your costs will include an e-commerce website and web hosting (if it’s not included with your site). Easy-to-use website builders like ShopifyBigCommerce, or WordPress are popular and incur modest monthly fees.

You may also choose to use dropshipping automation software that allows you to add products, product catalogs, categories, images, and descriptions to your website with a few button clicks.

What Are Dropshipping Suppliers?

Dropshipping suppliers provide sellers with products and all collateral needed for selling, such as product images, videos, descriptions, and categories.

When someone buys a dropship product from your website, the supplier is automatically informed via an email. They then pack and ship the product directly to your customer.

How Do I Find Dropshipping Suppliers?


There are multiple ways to find dropshipping suppliers. The easiest (and quickest) way is to use a dropshipping directory like Inventory SourceDoba, or WorldWide Brands.

Directories provide listings of vetted suppliers. They also typically provide multiple ways to search. For example, you can search for products first and then discover suppliers for those products. Or you can search for a supplier first, and browse the products they offer.

Another way to find dropshipping suppliers is to do a Google search. The drawback to this approach is, as the Shopify blog has points out, middlemen positioning themselves as dropshipping suppliers tend to rank high in search results, while true wholesalers are harder to find.

Contact the manufacturer: If you know the manufacturer of the product you want to sell, you can contact them directly and ask for a list of wholesalers that they work with.

Browse our list of popular dropshipping directories and suppliers to get started.

  • Inventory Source – Provides a free directory of dropshipping suppliers and millions of products. Also offers syncing software for a fee.
  • WorldWide Brands  – This directory of dropshipping suppliers is rated A+ by the Better Business Bureau. Over 16 million products.
  • Doba – Directory of drop-shipping suppliers, plus syncing software. Over 2 million products.
  • Modalyst – Dropshipping supplier focused on 5-7 day shipping. Integrates with Shopify and BigCommerce
  • Spocket – Dropshipping directory and supplier focused on U.S. and E.U-based products. Integrations with WooCommerce and Shopify
  • Wholesale2B – Dropshipping directory; over 2 million products plus automated software. Multiple integrations including with Shopify, BigCommerce, Amazon, eBay, WooCommerce, and Ecwid.
  • TopTenWholesale – Provides a directory of dropshippers by product category
  • Wholesale Central – Also provides a directory of dropshippers by product category
  • Saleshoo – Directory of over 1,000 dropshipping suppliers.
  • Megagoods – Supplier of electronic goods and video game products.
  • Sunrise Wholesale – 15,000+ products, integration with Shopify and BigCommerce, dropshipping services include returns handled for you.
  • U.S. Direct –  Network of U.S. suppliers with fast shipping. Requires an Inventory Source account, which provides automated import of selected products to your online store.
  • DropShipTown.com – Products with same-day shipping. Provides dropshipping services like automated product import, real-time inventory updates, and coaching.
  • Rockline Dropship – Hundreds of dropshipping products featuring officially licensed rock band and musician merchandise. Multiple genres available including blues, hip-hop, country, punk, and techno.
  • Unfi – Grocery and wellness products from top brands.  Dropshipping for over 35,000 non-perishable products. No minimum order size.
  • Petra Industries – Wholesale consumer electronics distributor with massive warehouse and logistics expertise. Offers same-day shipping, no minimum orders, and dropshipping tools.
  • FBAFox – For Amazon FBA sellers. Over 500,000 products. Items are prepped and shipped directly to your Amazon Seller Account. Amazon’s FBA program then ships the items to buyers.
  • Via Trading – Wholesale liquidation lots. Shipping within 24-48 hours. A+ rating with BBB. Can drop ship / blind ship any order. California-based. Warehouse/product inspection welcomed.

Dropshipping FAQ



What Types of Dropshipping Suppliers Are There?

There are three main types of dropshipping suppliers:

  1. Wholesale suppliers
  2. Liquidation suppliers
  3. Retail businesses who advertise themselves as dropshipping suppliers

Wholesalers and liquidation suppliers will get you the best prices. Not all wholesalers offer dropshipping, though. Look for a wholesaler or liquidation supplier who provides dropshipping.

Avoid retail businesses who advertise themselves as dropshipping suppliers. These are middlemen looking to cash in on the popularity of dropshipping.

What is a Dropshipping Directory?

A dropshipping directory is an online, searchable listing of dropship suppliers. The value of a directory is that it typically only lists suppliers that have been screened and vetted. That takes the burden off of you for finding a trustworthy supplier.

Some dropshipping directories also provide software that enables you to sync your website with a supplier’s product feed. That allows you to easily import product images and descriptions and updates to your e-commerce website. There is typically a recurring fee for this service.

How Do I Choose a Dropshipping Supplier?

Before choosing a supplier you should consider the price of their goods and the quality of their goods. To determine quality, you can consult their customer reviews (if they have some available) or order samples.

Also, consider their shipping times. Some suppliers like DropShipTown and Via Trading have very fast shipping times, whereas some (not all) suppliers on AliExpress take up to 20 days to ship, not including the order processing.

Consider the supplier’s reputation. Do they have reviews or testimonials on their site? Find out how returns are to be handled. Lastly, you will want to find out how quickly they respond to communications. Test this out by contacting them.

How Do I Find Suppliers With the Best Prices For Dropshipping Products?

To find the best prices for dropshipping products, use a wholesale or liquidation supplier who offers dropshipping.

Avoid dropshipping suppliers that are marking up their products before selling them to dropshippers.

You can identify these “middleman” businesses by the following:

  • Recurring fees: legitimate wholesalers typically do not assess recurring fees. The only time you should pay a wholesaler is when you purchase goods from them.
  • Sales to the general public: The point of wholesale purchases is that you get discounts in exchange for volume purchases. Legitimate wholesalers will, therefore, require its customers to have a business account and will generally not sell directly to the public.

Note: Dropshipping directories are legitimate and some charge a recurring fee.

How Do I Find Good Dropshipping Suppliers on AliExpress?


AliExpress, China’s equivalent of Amazon, is an online retail marketplace that also functions as a dropshipper due to its low prices.

Not all sellers on AliExpress are equal though. You’ll want to only work with sellers that have good reputations and who meet your shipping expectations.

To find those suppliers go to the AliExpress website and do a search for a type of product you’re interested in, like “backpacks.” Then click on a backpack you’re interested in.

You’ll see that in this example (above), you can choose to have the product shipped from China or from the United States.

You’ll want to check to see how many reviews the product has. Look for products that have 100 or more reviews and a high review rating. In the example above, the backpack has 228 reviews and a 4.5 star rating.

Next, browse some of the reviews. Scan for customer images of the backpack, how customers assess the quality, and comments regarding how fast (or slow) the shipping was.

Next, view the sellers’ rating. You can find the seller’s name and rating below the product images, at left.

In this case below, the seller has a 95.4% positive rating

See if that product you’re interested in is sold by another seller on AliExpress. Then you can compare seller reputations.

Note: AliExpress now has a “Top Brand” designation for sellers with the highest feedback scores. On the seller’s store page you’ll see 3 other scores which you’ll want to take into consideration, including shipping speed.

Lastly, contact the seller to see how quickly they respond. You may also want to order samples of products you want to sell, to ensure quality.

How Do I Find AliExpress Suppliers With Good Shipping Times?

Finding a good dropshipping supplier on AliExpress is made easier if you use the Oberlo Chrome extension. This will automatically indicate which products are available for shipping via “ePacket.”

ePacket is the fastest available shipping from China: it provides tracking and ensures packages arrive between 10-20 days on average.

Once you install the Chrome extension, you can view each product and see what the exact shipping window is for it. Note: shipping time doesn’t include “processing time” – which is the time the supplier takes to fill the order. It’s not advisable to use suppliers that take more than a week to fill an order.

Also, note that some products on AliExpress are available for shipping from China or the U.S. Typically, the price for the item being shipped from the U.S. will be higher.

How Do I Find Good Dropshipping Suppliers on Alibaba?

Alibaba is the world’s largest online B2B marketplace. Like AliExpress, you’ll want to vet suppliers according to their reputation. You can do this by filtering search results by:

  • Trade Assurance” – a program that provides a transaction guarantee
  • Onsite Checked” – described as “Onsite operations checked by Alibaba.com and legal existence confirmed by third-party verification service.”

You can also opt to choose suppliers who are designated as “Gold Suppliers. Gold Suppliers support Onsite Checks and Trade Assurance.  (See example below.)

Note: Alibaba is a wholesale marketplace and not all of its suppliers are dropshippers. You can use the search term “dropship” to find available products. Or you can purchase by minimum order size and ship to Amazon FBA. Then when buyers purchase the product on Amazon, Amazon will dropship it for you.

Is Dropshipping Profitable?

Dropshipping can be a profitable business model. One of the primary reasons for this is the low overhead. You’ll have no warehouses, offices, brick-and-mortar stores, employees, or payroll to handle.

The dropshipping business model tends to favor goods with lower profit margins. This limitation means that you will have to sell a larger quantity of goods to turn a reasonable profit for your business.

How Do I Become a Dropshipper?

There are several steps to becoming a dropshipper. They include:

  • Select a business niche and identify your target audience
  • Decide what types of goods you are going to sell
  • Research and choose your dropshipping supplier(s)
  • Create your online store using a platform like Shopify or BigCommerce
  • Populate your store with products
  • Create a return policy and publish it on your website
  • Research the basics of digital marketing
  • Make a plan for acquiring traffic and customers
  • Market your goods and track progress

Can I Start Dropshipping With No Money?

It is possible to start dropshipping with no money, but it will be difficult. You could code your own website and shopping cart and find free hosting, but this would be time-intensive.

Domain name registrations and subscriptions to e-commerce platforms aren’t that expensive, and they’re fast to set up. To be successful you should also plan on spending money on marketing and advertising.

How Do I Pick a Niche for Dropshipping?

The best niche for dropshipping is one that is fairly narrow. Not only does this make it easier to market your products, but you will also face fewer competitors.

When choosing your niche:

  • Be specific
  • Look for something that you are passionate about
  • Check to see if your idea will see steady sales in the long-run
  • Conduct research (e.g., review what social media influences are interested in)
  • Choose something that isn’t expensive, since high-value goods extend the length of the sales funnel

Can I Dropship on Amazon?

Yes, you can dropship on Amazon using Amazon FBA (FBA stands for “Fulfillment By Amazon). There’s an extra step involved in this form of dropshipping.

You need to first purchase products from a wholesaler. Suppliers like FBAFox will ship your products directly to an Amazon warehouse and make sure they’re accredited to your Amazon Seller account.

When an Amazon customer buys one of your products, Amazon will fill the order and ship it for you.

Be sure to familiarize yourself with Amazon FBA’s rules and how returns are handled.

Disadvantages of dropshipping

All the benefits we mentioned make dropshipping a very attractive model for anyone getting started with an online store, or for those looking to expand their existing product offerings. But like all approaches, dropshipping has its downsides, too. Generally speaking, convenience and flexibility come at a price. Here are a few shortcomings to consider.

1. Low margins; 

Low margins are the biggest disadvantage to operating in a highly competitive dropshipping vertical. Because it’s so easy to get started, and the overhead costs are so minimal, many competing stores will set up shop and sell items at rock-bottom prices in an attempt to grow revenue. Since they’ve invested so little in getting the business started, they can afford to operate on minuscule margins. Typically, these sellers will have low-quality websites and poor (if any) customer service, which you can use to differentiate your business. But that won’t stop customers from comparing their prices to yours. This increase in fierce competition will quickly hurt the potential profit margins in a niche. Fortunately, you can do a lot to mitigate this problem by selecting a niche/vertical that’s well suited for dropshipping. 

2. Inventory issues: 

If you stock all your own products, it’s relatively simple to keep track of which items are in and out of stock. But when you’re sourcing from multiple warehouses, which are also fulfilling orders for other merchants, inventory can change on a daily basis. Fortunately, these days, there are a handful of apps that let you sync with suppliers. So dropshippers can “pass along” orders to a supplier with a click or two and should be able to see in real-time how much inventory the supplier has.

Oberlo also lets merchants take automated actions when a supplier’s stock hits zero. For example, when a product is no longer available, you can automatically unpublish the product, or keep it published but automatically set the quantity to zero.

3. Shipping complexities; If you work with multiple suppliers—as most dropshippers do—the products on your online store will be sourced through a number of different dropshippers. This complicates your shipping costs.

Let’s say a customer places an order for three items, all of which are available only from separate suppliers. You’ll incur three separate shipping charges for sending each item to the customer, but it’s probably not wise to pass this charge along to the customer. And even when it does make sense to include these charges, automating these calculations can be difficult.

4. Supplier errors: Have you ever been blamed for something that wasn’t your fault, but you had to accept responsibility for the mistake anyway?

Even the best dropshipping suppliers make mistakes fulfilling orders—mistakes for which you have to take responsibility and apologize. And mediocre and low-quality suppliers will cause endless frustration with missing items, botched shipments, and low-quality packing, which can damage your business’s reputation.

5. Limited customization and branding; Unlike custom-made products or print on demand, dropshipping doesn’t give you a lot of control over the product itself. Usually, the product dropshipped is designed and branded by the supplier.

Some suppliers can accommodate your business’s product changes, but even then, the supplier has the most control over the product itself. Any changes or additions to the product itself usually require a minimum order quantity to make it viable and affordable for the manufacturer.

How To Start An Online Dropshipping Business?

As we have already recommended, Shopify is one of the leaders when it comes to dropshipping. It has so many applications that are perfect for eCommerce dropshipping business.

1. Register First: Example: Create a store from Shopify 

First and the logical step is to register yourself with Shopify. Now, Shopify offers 14 days free trial and then you have to pick one of its three plans. After using Shopify for 14 days, you’ll pretty much understand everything, hence you can land on a decision to purchase a particular plan.

2. Buy The Domain:

The next step is to buy the domain that you have decided. Buying a domain costs around $13/year, so compromising in this area is a no-brainer. Plus, if you’ve landed on a great domain name, there’s a risk of other people buying it.

3. Choose A Theme For Your Shopify Store

Shopify makes creative and minimal themes for every kind of business out there. There are a bunch of free as well as paid themes available. Paid themes are usually around $160-$180.

CHECK OUT SHOPIFY THEMES

VISIT THEME STORE

You can also take external help in setting up your online store, as well as adding extra features.

4. Add Important Pages To Your Dropshipping Store

Shopify doesn’t know what kind of business you’re actually setting, so your Shopify theme may have all the basic features. Although adding and editing pages in Shopify is very easy, so you’ll learn it in the blink of an eye. Here are some very essential pages you must have on your eCommerce dropshipping store.

·         An attractive ‘Homepage’

·         Informative ‘About Us’ page

·         In-depth ‘Product Pages’

·         ‘Shipping & Return’ information page

·         ‘Contact Us’ page

5. Add Products On Your Online Store

This is the part where you start adding products to your online store. Shopify will not ruin your excitement here, as it is very easy to add products to your store. Here, there are a couple of things that you should keep in mind, check out:

·         Create title of the product that is search engine friendly.

·         Add an informative and search engine friendly product description.

·         Add high-quality images, period.

·         Set up pricing.

6. Set Up Email

This is a very small change, but it can create a disaster. When you start with Shopify, it pins your signup email as your default email ID. That means if a customer contacts you using ‘Contact Us’ page, the inquiry drops in that particular ID which may not be a good option for many stores.

You can change this setting by the following path:

Online Store > Domains > Manage Domains > Select Your Domain > Email Forwarding

Here, you can set up the email of your choice.

7. Check The Store & Go Live!

Check the entire store to make a crosscheck. If anything needs editing, go ahead and do it before going live.

Summary Section

Dropshipping is increasing in popularity. However, the competition is stiff.

Stand out from the crowd by selecting a niche and offering quality products. Work only with high-quality suppliers.

Many people have obtained success as dropshippers. With hard work and partnerships with the right people, you can be successful too. Buy a dropshipping Business.

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