What Is Dropshipping?
Dropshipping is an order fulfillment business model. According to Grandview Research, the global dropshipping industry is worth over $225.99 billion. Dropshippers don't own inventory or house products. Instead, when a customer orders an item, a third party supplier packages, ships, and delivers the product. So your drop ship supplier handles all of the heavy lifting. Your only job is to sell products people want to buy right now. Then provide the best customer journey possible.
Dropshipping as an adjective: Drop shipping products have the highest profit margins for eCommerce retailers.
Drop shipping used as a noun: Walmart sells numerous drop shipping products under its brand.
Dropshipping as a verb: His company makes impressive revenue by drop shipping inventory.
A simple definition of drop shipping is a retail business model that leverages third-party suppliers to package and ship products directly to a customer.
What Is A Dropshipper?
Drop shippers sell products owned and stocked by a third-party supplier. First, the dropshipper receives an order from the customer. Then they forward the necessary information (like the product, customer contact info, etc.) to a dropship supplier. The supplier then handles the order fulfillment, including the packaging, shipping, and delivery to the consumer.
How Does Dropshipping Work?
Dropshipping is a three-way relationship between your website, your dropshipping supplier, and a potential customer. First, the customer purchases products from your website. Then your website automatically notifies your dropshipping wholesale supplier. The supplier picks, packages, and ships the stock. Then they charge you the product cost and labor, and you keep the profit margin you added on top when your customer orders from your site.
The dropshipping model is simple, but it's far from easy, and it takes time to build an online store. However, the dropshipping business model is an attractive and low-upfront cost way to own a business. You can sell physical products without touching inventory. Instead, define a narrow and clear niche of target customers and service that audience with items you can easily convey the benefits when you advertise your dropshipping store.
The idea is that at a glance at your ads, your customers get hooked. Then they feel compelled to learn more when quickly scrolling through their social media feed. Of course, not every product is a winner. So take the time to do market research and know how to separate the winning products from the bad.
What Is An Example Of Dropshipping?
Nutty Buzzy is an example of drop shipping. Their website is for beauty and cosmetics, and they're dropshippers who offer a wide range of products from wholesale suppliers. Again, dropshippers source inventory from third-party retailers. Then they resell the products for a markup. But this is one reason dropshipping is still profitable as a business model. The idea is to find products that are trending now or items that people want to buy. Consider things like:
- How can I provide value to a person's life?
- What products are hard to find?
- How can I provide the best customer journey?
But be ready to test, fail, and test again before you find a winner. The dropshipping model is about proof of concept. But you can test products for minimal cost because you don't own any inventory. When you know a dropshipping item will sell well, develop your marketing strategy. Then focus on increasing the perceived value of your product. The key is to give people reasons to make a purchase right now. So offer things like bundles, free shipping, or a limited-time offer.
How Much Money Do You Need To Start Dropshipping?
To start drop shipping, you need a minimum of $200 to cover the cost of things like:
The dropshipping model is competitive. Shopify reports that there are almost 24 million eCommerce stores worldwide, many of which are dropshipping websites. Of course, it's not too late to start dropshipping. But you need a budget because this online business model is about testing products and validating items until you find one with profit potential.
Plan on a minimum of $200/product to cover the cost of paid ads because they come with a price tag. So $200 might not cut it. In 2024, you need a budget of $500-$800. (If you plan to work with a mentor or leverage a Shopify dropshipping course). Or $3000-$5000. (If you're learning by yourself). But then you improve your chances of long-term success with the dropshipping process.
How To Find Winning Products For Dropshipping
To find winning products for drop shipping, leverage one of the best dropshipping product research tools like eCommHunt, and see what's selling now. Or check out what your competition is selling, how much they're pricing items, and what kind of ads they're using with software like Adspy, PowerAdSpy, and PiPiAds.
Of course, you can also use free methods like looking on Amazon in the 'New Release' section to see what items are trending. Then go to a site like AliExpress and see how many orders the product has. (The ideal is under 1000). Another option is to check out TikTok and look at hashtags like:
- #amazonfinds
- #tiktokmademebuyit
- #beauty hacks
Find videos that have a ton of likes and positive reviews. A winning drop shipping product should have a WOW factor. Focus on things that are unique, have shock value, or offer product differentiation. Then target items that are hard to find, fill a gap in the market or tap into emotional buys. A few other things to consider when choosing your winning product include:
The end goal is to get people to buy from you instead of the competition.
Where To Source Reliable Dropshipping Suppliers
You can source reliable dropshipping suppliers at tradeshows or on directories like SaleHoo or CJ Dropshipping or platforms like Doba and Inventory Source. Another option is a Google search. Just enter + dropshipping supplier into the search bar to find suppliers that provide the products you want to sell.
Your supplier is pivotal to your online business; choosing the wrong one or having a subpar supplier is why a lot of people quit dropshipping. The key is to do your market research. Look for a retailer who offers the following:
- Value for money
- High-quality products
- Affordable per-order fee
- Fast shipping times
- Positive reviews
- Order quantities
- Fair return policy
Find a few that meet your criteria and contact them directly either via email or telephone and ask the right questions like:
Then order a sample so you can experience your customer's journey. For example, Is the quality of the product good? Does the packaging look professional? How fast was their shipping? A lot of dropshippers still use suppliers based in China. But remember that goods can take 3-6 weeks to ship from China.
So advise your customers of the long wait times and maintain contact to ensure you're not faced with unhappy buyers or negative reviews. Another option is to source your inventory from a US dropshipping supplier. You'll get faster shipping times and won't have to worry about language barriers or time differences.
What Are The Best Platforms To Sell Dropship Products?
The best platforms to sell dropship products offer tiered pricing options and customization. In addition, they provide integration with required dropship plugins and stellar customer service. But they also need to boast ease of use and marketing performance indicators.
Consider that a dropshipping platform is where you create your dropshipping website. It's also where you sell your products. But finding the ideal platform takes research. And a readiness to invest the time to source the best choice for your long-term goals. A few top options in 2024 include:
Shopify has been around since 2004 and is one of the OG for dropshippers. Demand Sage states that in 2023, Shopify merchants will have over 700 million buyers. With Shopify, you can create a fully customizable website without technical skills. Instead, build a high-converting and professional website that looks like a legit business.
And unlike a marketplace that keeps the consumer's contact information, all your customers belong to you. But this is invaluable data. It allows you to use email marketing and other strategies to build a relationship and create trust with your customers. So Shopify dropshipping is worth it based on the platform's reputation and easy integration features.
WooCommerce is a free plugin for WordPress that allows you to create an online store easily. It offers ease of use and is one of the most popular eCommerce platforms.
Magento by Adobe allows drop shippers to create a fully customizable online store. Magneto offers SEO-friendly enhancements to rank better in Google and provides mobile device optimization. It also provides multiple plugins. Magento is free to use. But it's an advanced platform. So it's best suited for people with some tech skills or previous experience.
BigCommerce is another free WordPress plugin. Build customized dropshipping websites with numerous integrations like SEO-responsive pages. BigCommerce has a simple user interface and is easy to set up. It's a popular option for smaller online businesses. Plus, it's less expensive than Shopify. There are no transaction fees, and it offers unlimited staff accounts.
Another option is to leverage third-party platforms and take advantage of a ready-made audience. Then you're where the customer is already and, as a result, get free organic traffic. A few top contenders include sites like:
TikTok has over 1.53 billion users as of 2023. Plus, it's the world's sixth most popular social media platform. But TikTok dropshipping is a macrotrend. Yes, it's the hottest new craze right now. But the key is to jump on this trend right now. TikTok is a content creator site; viewers love raw footage and uncut reels. Fast-paced, and the newer, the better.
The goal is to create a video or post with virality potential. You want to WOW your audience and get them to make a purchase. According to Insider Intelligence, 20.6% of customers who buy products on social media say they do it all the time on TikTok. In addition, the site has the highest percentage of frequent social shoppers.
Facebook Marketplace is a trending platform super popular with dropshippers. DataReportal shows Facebook had 2.963 billion monthly active users in January 2023. There's no limit to your selling potential, and all you need is a US IP address. In addition, the platform automates and integrates with tools like AutoDS so you can scale quickly. But it's uber-competitive. So Facebook ads are the best way to drive traffic to your store.
But ad costs are rising. Advertising Week reports that Facebook CPMs could increase by as much as 60% by the end of 2022 compared to where they were in November. So be ready to spend. Dial in on your marketing and post eye-catching images or videos that evoke an emotional response from the viewer and get people to stop scrolling through their feeds and take action on your offer.
Amazon dropshipping is a quick way to get in front of an audience of people looking to buy. According to AMZScout, Amazon has over 300 million active users. In addition, 65% of the US visits the platform at least once a month to make a purchase. But Amazon drop shipping is competitive, and there are nearly 2 million third-party sellers. So have a reliable supplier and sell items with solid profit margins. Then be ready to do some hard work to drive traffic to your site.
But you're not limited to the things you sell. Plus, you don't pay the same order fulfillment-related fees as FBA (Fulfillment By Amazon) sellers. But make sure you can meet shipping deadlines. Amazon takes care of its customers, and the bar is set high with Amazon Prime as an option. So shipping products from China with 3-6 weeks wait times won't cut it on this platform.
eBay dropshipping is profitable and allows you to leverage a trusted platform with an extensive user base. According to Fundera, there are 182 million eBay users worldwide. And 62.15 million people use the eBay mobile shopping app each month. But eBay is an ideal option for beginners starting a drop shipping business because you can access customers with purchase intent.
Plus, the platform is easy to start and user-friendly. eBay is an arbitrage-style business model, so be ready to hustle and know how to find the best deals. Then get as many listings on the site as possible. Do your research and check out the following:
You're trading time for money. But eBay's drop shipping profit margins sit at 10%-60%.
Pros
A pro of drop shipping is that it's easy to start. Plus, it doesn't require a ton of upfront capital or high overhead costs.
Another drop shipping pro is that you can test multiple products without needing physical inventory so that you can scale your business quickly with your new product.
A pro of drop shipping is the ability to sell in any market you want anywhere in the world.
Cons
A reason why dropshipping is a bad idea is that you have zero control over key aspects of your business, like supply chain issues, shipping costs, product quality, and packaging.
Another con of drop shipping is low-profit margins (as little as 10%-30%)
Disadvantages and risks of dropshipping include high levels of competition. Drop shipping is a low-barrier-to-entry business model, and a ton of new players continue to enter the market.
Why Do Most Dropshippers Fail?
90% of dropshippers fail because they don't focus on providing the best customer journey possible. According to Forbes, 96% of people stop buying because of a bad customer experience. In 2024, it's all about the customer. From the products you sell to your shipping times and the level of customer service you provide. So focus on adding value to a person's life and sell things that are trending. Or items that are hard to find, save time, or solve a problem. Other dropshipping mistakes can shut down your online store, like:
You don't reinvent the wheel. See where the competition is lacking. How can you do better? What pain point can you focus on to invoke impulse buys? Concentrate on the benefits of your product instead of the features. Then you can increase your dropshipping success rate.
Tips To Increase Your Dropshipping Revenue
Choose products in a profitable niche that pay out:
The best dropshipping niches are evergreen and have a ton of options around dropshipping products. Use tools like Google Trends and Keywords Everywhere to see what people are searching for online. Then, check out platforms like TikTok and Facebook to see what's trending. What can you sell on your eCommerce platform that meets a demand or fills a gap in the market?
Create a website that looks like a real business:
Optimize your dropshipping site with professional-level images, FAQs, chatbots, etc. Prioritize content creation and SEO. Then include customized product descriptions, customer reviews, and social proof to build trust.
Develop a digital marketing strategy:
It takes attention-grabbing videos with a scroll-stopping hook to sell dropship products. According to HubSpot, you only have 15 seconds to grab the attention of your visitors. So tap into consumer psychology. Highlight how your item can improve their lives and get creative around your marketing angles. Of course, if you don't have the skills to deliver high-converting reels, consider investing in a dropshipping video ad service to do it for you.
Get active on social media:
Take advantage of influencers or share tips on YouTube and post pictures on Instagram. Squeeze Growth reports that online stores with a social media presence have up to 32% more sales. So create a buzz around your dropshipping store to stay competitive. The goal is to expand your online reach and connect with new customers.
Diversify your websites:
Both from the sites that you source from and the websites you list. But by sourcing from different places, you can find products that only a few people sell and make profits longer. Also, consider that not everyone always buys from the same site. So by diversifying where you list your products, you can increase the likelihood of making more sales.
Offer quantity breaks & upsells:
Sell the same product but bundle them. For example, instead of selling one, offer three with a small discount. Then utilize upsells (products that go along with the main product you sell). Pick other products a person might need. One that gels with your primary item they can add to their customer order to increase your dropshipping revenue.
Mimic what's already working:
For example, What products are other dropshippers selling well? What types of marketing are they doing? To increase how much dropshippers make, stop guessing. Instead, implement strategies that are working right now. Keep an eye on the competitors selling the same or similar products as you. For example, if their prices go up, raise yours.
Get a resellers permit:
A resellers permit means you become tax-exempt on your suppliers. First, contact your state tax department and ensure you have your sales tax ID (or federal EIN). Then, fill out the appropriate application and paperwork to be approved. But a resellers permit means you don't pay sales tax, and it is a great way to increase your profit margins on every sale.
Outsource & leverage automation software:
Take advantage of VAs to streamline your business. Or use dropshipping tools like Spocket or Sellvia to automate inventory management and integration.
How Is Dropshipping Like Local Lead Generation?
Drop shipping is like local lead generation because both the dropshipping business model and local lead generation provide a product or service but don't own inventory. Instead, with both models, you act like the intermediary between a customer and the supplier. Drop shippers sell physical products that they don't own. Local lead generation sells leads they do own.
With drop shipping, you have zero control over key aspects of your business. Local lead generation, on the other hand, gives you total control over every facet of your online business. But the concept is just as easy. Build and rent micro websites that get to the top of Google. Once they're at the top, they're like digital billboards. Then they're considered prime real estate. Your local lead generation sites are front and center for an audience of people actively searching for what you offer.
The difference with lead gen is that you own the website, the tracking number, and the leads. You're like a digital landlord. Rent your sites to small business owners for profit and secure a steady cash flow. Consider that the local lead generation profit margin averages 85%-90% while dropshipping profit margins fall between 10%-30%. Plus, with local lead gen, you can scale fast. Learn the concepts, get your systems in place, and automate most of the process to generate passive income.
