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I am sure you will agree with me that starting a business with limited capital is difficult. The cost of inventories, labor, equipment and marketing materials can break your pocket.
What if I told you that starting a business does not need to be hard and expensive? It sounds beautiful, right?
This business model I am talking about has been gaining popularity on the internet. Many are making money online using this model.
However, I warn you. It is not a quick rich scheme.
In this article, you will learn about dropshipping business which allows you to sell goods around the world without even touching or owning the items.
So, keep reading.
Table of Contents
What is Dropshipping
Before we dig deeper into the details of this concept, let us have a brief background in dropshipping business.
Dropshipping is a retail method that allows store owners to sell merchandise to their customers without stocking the items themselves.
When a customer orders a product from you, you send the details of the order to your supplier. Then, the supplier will ship the product directly to your customer.
In dropshipping, you will not worry about storing inventories, shipping costs, and logistics.
What are the Advantages and Disadvantages of Dropshipping
Advantages of Dropshipping
1. Easy to start. You can set-up an online store quickly. Find a supplier. Put the products in your shop and start drop shipping.
2. Less capital requirement. You do not need to buy inventories, rent a space nor purchase Just find suppliers who drop ship their products and start selling. Most suppliers do not need a minimum order.
3. Less overhead expenses. With dropshipping, you have forgone the costs of carrying inventory, packaging, equipment, and shipments.
4. Location of business not needed. Dropshipping does not entail you to set up an office in a specific place. Managing your business needs only a laptop and internet
5. You can sell anywhere in the world. Some suppliers dropship to nearly all countries. Hence, your business is not limited to a specific place.
6. Scale your business easily. Scaling your dropshipping business will not need more working capital compared to the traditional business model. Since no money is tied to inventory, the bulk of your expenses will be on marketing and other operating expenses.
7. Test and validate a product quickly. If you want to test and confirm a product you can immediately put it in your shop and start marketing. If it is not saleable, then find another one. Costs are lesser compared to conventional business.
Disadvantages of Dropshipping
1. Returns are difficult to handle. Returning a drop-shipped product involves three parties. Times get rough when a customer decided to return the product to you and take charge of the process yourself. The procedure may take more time since you must communicate with your supplier. In situations like this, your reputation is at stake
2. Lack of product quality control. Your customer’s satisfaction depends on your supplier. Unlike the traditional business approach, drop shipping allows you to sell a product without inspecting it. Your brand’s reputation is at risk when a customer receives a low-quality item.
3. Low-profit margins. The barrier to starting a dropshipping business is low. Thus, expect a stiff competition in the market. To compete with other drop shippers, you might be forced to lower your markup.
4. High shipping costs are charged to customers. Charging high shipping cost arises when a drop shipper has multiple suppliers. Each supplier will be shipping separately the products ordered by a single customer. A customer is charged a shipping fee for each merchandise. This problem will not happen when you store inventories and ship the products yourself.
5. Logistics can be a problem. Dropshipping with different suppliers means dealing with multiple shipping policies and methods. You should know all those things because you need to answer all the questions from your customers. For instance, when the customer orders two products in two suppliers, each item may be delivered at different times.
6. Customer service is out of control. When returns are difficult to handle, products are of low quality, and shipments do not arrive on time, your business image will suffer. These happen because you outsourced most of the critical aspects of your business. In drop shipping, you have little or no control of customer service.
Have you weighed in the advantages and disadvantages of dropshipping? Is dropshipping for you? Do you want to learn more about drop shipping?
If you want to start a dropshipping business, then the next section is worth reading.
How to Start a Drop Shipping Business in 3 Steps
1. Selecting a Niche
Selecting a niche is a crucial step before you launch your dropshipping business. Brainstorm niche ideas. Find a niche market where people are passionate or have problems that need to be solved. Then figure out what you know about the niche. Evaluate its profitability. Test and evaluate your niche.
2. Find suppliers
Start finding suppliers locally. Local suppliers are easier to manage. You can even visit them to inspect and test their products.
Some dropship suppliers are available online. Oberlo, Worldwide Brands, Doba, Alibaba, Aliexpress, Salehoo and Wholesale 2B have an extensive database of suppliers.
Oberlo and Aliexpress have suppliers of millions of products that you can drop ship when your Shopify store is ready.
Do a background check of a supplier. Check for reviews to know if a supplier is reliable or not. Some dropshipping suppliers charged ongoing fees. Others have minimum order requirement.
3. Set-up a Dropshipping Website
You can set-up a dropshipping website on different platforms. Dropshippers popularly use Shopify. Using Oberlo app, you can import the products directly in Aliexpress directly to your Shopify store. Check this guide in setting up a Shopify with Oberlo and Aliexpress dropshipping shop. The process only takes less than an hour. Shopify offers a 14-day period, and Oberlo is free to use up to 500 products and 50 orders per month.
For beginners who have no experience in web development, Shopify is the best platform to use. It is newbie friendly. There is no coding knowledge needed to set up an online shop.
You can also set-up an online store using WordPress plus WooCommerce. You must have a self-hosted WordPress site already set-up. Check my tutorial in starting a self-hosted WordPress site. After that, install the WooCommerce free plugin. If you want to drop ship products in Aliexpress, then the Alidropship Plugin is a good solution. Drop shippers voted it as the No. 1 plugin for WordPress in dropshipping. Read my review of Alidropship Plugin.
Alidropship also offers a custom store. The custom store is built to your specific requirements. They will deliver the shop ready to make its first sale.
Dropshipping is an easy way to start a business with a limited amount of capital. You do not need to buy inventories, rent a space nor buy any equipment.
Expenses are lesser compared to the traditional model. You can work anywhere because it does not require any location to function.
You can effortlessly scale your business or test a product quickly without spending too much on operating or product expenses.
However, dropshipping business has several disadvantages. In dropshipping, sometimes returns are difficult to handle.
You do not have quality controls on the product because you do not manufacture and inspect it. Logistics can also be complicated. Customer service may also suffer because you outsourced the significant parts of your business.
Contrary to what others are saying, dropshipping does not mean quick money. In fact, most people failed in dropshipping because of this mindset. You must weigh the pros and cons of this type of business.
Setting a dropshipping website can be done in 3 steps.
First, you need to select a niche. It is an essential step in drop shipping business, so you need to spend enough time to find a good one.
Second, find a supplier. You can find suppliers in your local place or look for them online.
Third, choose a platform for your online shop. Popular platforms are Shopify and WordPress.
Starting an online shop is not that complicated. With Shopify and Oberlo you can do it in less than an hour.
Have you started a dropshipping business? Share your experience in the comment section.