Estimated reading time: 10 minutes
If you’ve ever wondered if you’ve got enough time or money to start a business, you might want to consider ecommerce dropshipping. It’s the business model fit for entrepreneurs, 9to5ers and even those anxious of losing money to another online gold rush where time and effort is laid to waste.
So why is that the case?
For one, ecommerce is location dependent and time flexible. You can have your day job, get home, do laundry, have dinner with family and spend the rest of the evening listing products on your site. Or listen to podcasts about marketing and SEO strategies on your commute to work.
Many successful dropshippers have day jobs and others work full time. Whatever way you want your life to look like is possible. As for risks, nothing is risk proof. But dropshipping as a business model, takes away product and inventory commitments that make running a business capital and time intensive so that you can focus on finding customers online.
But before we explore more into this business model, let’s look at the definition of dropshipping…
What Is dropshipping? How Does It Work?
It’s simply a business model where the store owner is in charge of marketing products and building customer relationships. Product development and fulfillment are left to manufacturers and wholesalers. The store owner only orders a product when it’s bought and keeps profit. Everything else is handled by other players in the value chain.
So now we have an idea of what dropshipping is, how does it work?
1. The product is first produced by the manufacturer after which it’s sold to the supplier or wholesaler. The manufacturer is highly motivated to sell as many units as they can manage because profits lie in selling at scale.
2. Then suppliers and wholesalers, motivated by ebb and flow of demand and supply, usually buy a wide range of products at a reduced cost to offer said products to retail store owners. The goal is to sell to a large number of retailers who represent the demand and supply of the actual market.
3. Retailers, or in this case dropshippers, buy from suppliers and wholesalers who help them satisfy the customers with whom they build business relationships. They only buy when there’s demand and don’t take product development or inventory risks. Instead, as online store owners, they’re focused on studying their markets and finding ways to generate traffic, leads and eventually customers.
Now we have an idea of what dropshipping is and how it works, let’s look at what you can expect from this business model.
Main Assumptions of Dropshipping? How Can You Earn Money On It?
Many newbies to the e-commerce game tend to think that dropshipping is some kind of get-rich-quick scheme. And sometimes I can’t blame them when we have gurus on the internet saying that e-commerce dropshipping is the ticket to ridiculous wealth.
That’s like telling you that if you follow my step-by-step lesson plan, you’ll take the SATs and not just go to college, but go to Stanford/MIT and graduate top of your class.
But it doesn’t just work that way.
Now if you give it your all, your SATs scores might be good for college. Anything extra is a combination of the basics like a) hard work, b) learning mindset and uncontrollable factors like c) luck, d) talent (IQ).
It’s the same with business but the good news is that you don’t need to be an A student to make a living dropshipping.
Just 0.0001% of a $159 billion ecommerce pie is still over $1.5 million.
Yes, according to Statista, the ecommerce dropshipping market has hit $159 billion in 2021and is projected to reach nearly half a trillion dollars by 2026. If there are thousands of e-commerce merchants making a living dropshipping, you can as well.
Having addressed the easy money assumption, let’s look at what the day to day job descriptions of a dropshipping store owner looks like. A dropshipper is in charge of 3 important aspects of the dropshipping business. They’re…
- Markets – where they find high demand and limited supply situations to serve.
- Relationships – where they help provide the best experiences for prospects who want to buy their products.
- Sources – where they find competent and trustworthy suppliers and manufacturers to buy products when an order comes in.
Note: At Droplo, we offer a fully integrated, real-time data synchronization platform service to connect as many dropshippers and store owners with as many suppliers, manufacturers and wholesalers. Sign up here to begin.
There are 2 sides to this business model. There is the front-facing delivery of the buyer experience and then there’s the back-store building process where the buyer experience is made.
On the front end, let’s assume you own a one-product dropshipping online store where you sell bicycle pumps.
This is what the buyer experience looks like from the customer’s view…
I. A customer wants a bicycle pump. So they search on google or bing to find your e-commerce site. Or they see a social media ad or influencer endorsement and so they go to your site.
II. They’re convinced by your website copy and product pictures/videos that your site sells bicycle pumps, so they order.
III. A few moments later, they get a notification that their bicycle pump has been shipped and will arrive at a certain date. To keep them engaged, a tracking number is attached to monitor shipping progress from the warehouse to their home.
IV. At said date, which isn’t ridiculously far away like 2 months later etc, the customer receives their bicycle pump and it works well! They’re happy and satisfied.
V. A notification comes in enquiring on their experience with their bicycle with a suggestion to a blog, podcast or YouTube videos about biking and bike maintenance. They happily oblige.
From this sequence of experiences we can say that the customer feels in charge of their buyer process and your service and product have been validated by the choices they’ve made.
They don’t know about your supplier, they don’t have to wait too long for delivery and they’re happy to open another communication path with your store. It’s an opportunity to strengthen customer relationships.
It’s an easy process on the side of the buyer because they spent less time, possibly money and energy to buy a bicycle pump than go to a physical store.
Convenience is the main value you bring to your customer.
Nearly 5 billion people use the internet and nearly half of them buy products and services online. The back end of your dropshipping business is structured to help you attract and retain some of those individuals buying goods and services online. Here’s how the process goes…
I. Customer uses a bicycle and either has trouble with his pumps or understands it’ll be a problem sooner or later. For the former who needs a pump right away, they search Google for bicycle pumps and your store pops up in the first page because you’re running paid SEO campaigns and have your website and product description copy SEO optimized. So they click on your website.
They love to watch hiking videos of their favorite content creators on YouTube and Instagram. And because you’ve done your research and struck a sponsor deal with their favorite content creator, they visit your website.
II. Your customer feels comfortable and trusts your website to deliver the bicycle pump so they order. This is because your website is well structured and shows the main value proposition of your product. Its product descriptions link features of the bicycle pump with benefits the customer can relate to. You get their address information, order the product from a great supplier using said address information and your automated software sends them a notification on shipping progress.
This is how the process works and your day to day activities would revolve around keeping this process going.
Biggest Advantages And Disadvantages Of Dropshipping
As with anything, there are pros and cons to ecommerce dropshipping. We’ll go with pros first…
I. Dropshipping as a business model encourages cash flow increase since you don’t have to reinvest money into inventory.
II. Store owners have the freedom to scale up or cut down on products sold because they don’t carry the burden of inventory. It makes store owners nimble enough to take advantage of the ebbs and flows of market demand.
III. E-commerce dropshipping offers you options to increase the lifetime value of customers through the store owner’s ability to offer a wide range of products.
IV. Cost of entry is low. You don’t need an institution to grant you a license or certificate to dropship. Service based businesses require you to learn a skill and get good at it before earning extra income. Dropshipping doesn’t require it. Get a day job and save some money to invest in your store and marketing campaign.
V. It’s location dependent and time flexible. Do it when you can and wherever you see fit. Many successful dropshippers run million dollar businesses off their phones.
Here we go…
I. You don’t have full control of the value chain and the consequences of this can be substantial if not addressed. One of them is a thinner profit margin.
There are ways to get over this, one would be experimenting with value adds for existing customers through other drop shipped products or even offering services.
II. Another would be a buyer experience and customer service that’s dependent on the supplier’s stock or manufacturers capacity.
A good way to counter this is to diversify your product source and build relationships with suppliers and manufacturers.
III. The cost of entry is a double edged sword. It’s a benefit in that it makes it easy to get into the game but it’s side effect is that so many others join as well.
I’ll suggest you don’t bother about the competition. Most of them quit anyway and although the game gets tougher, it only makes you a better merchant only if you stick to it.
Where Can You Find Products For Dropshipping And How Can You Find The Best Ones?
Finding products to sell in your dropshipping store can be a daunting task. But we’ve come up with 3 ways to approach product research and development. They’re…
- Competitor Analysis: One of the fastest ways to find products people would buy is to look at other e-commerce stores. Understand the market those products target and find adjacent needs you can serve in these markets.
- Niche/Market: Another way to find products is to go the industry/niche route. What niche do you have experience with? Who are the prospects and how do they behave online? Whatever are their needs and what product best serves them.
- Trends: The third way to go about product research and sourcing is to ride the coattails of cultural trends to sell products. Fidget spinners come to mind.
There are some extra tips that deserve an honorary mention. Here’s one…
Product videos on social media platforms. They offer insight to a competitor’s approach to solving their customer’s problems. There could be opportunities to sell even more specialized products for that target market. A good example here would be pumps for mountain bikes over normal pumps.
How Can Droplo Help You With Growing Your Business?
Finding a niche/market, sourcing a product, running marketing campaigns and building customer relationships is the day-to-day of a dropshipper. But it doesn’t have to be a one-person journey.
Here at Droplo, we have a tech stack of tools and features to help dropshippers, just like you, learn the trade of dropshipping and general ecommerce skills. We have a library of resources including blog posts, e-books, emails and videos to guide you through the process of building a successful dropshipping business.
Droplo is an innovative tool that enables online data integration and synchronization between wholesalers and online store sales systems. Our product includes the Feed Manager application that helps you submit and update products from any vendor who makes an online offer in an XML file. There’s also online product browsing to compare prices and quality and direct sales on Allegro.
It’s the platform to be if you want to build your e-commerce dropshipping business from scratch.
Creating a dropshipping business that puts a roof over your head and food on the table is possible. Others have done it successfully in the past, at the moment and in the future. We at Droplo have our hands outreached to help you throughout the business-building process. The question now is…
Is this your moment to make it?