dropshipping business guide

The 2019 Ultimate Dropshipping Business Guide for Beginners

Total
786
Shares

The 2019 Ultimate Dropshipping Business Guide for Beginners

Running a lucrative online business doesn’t have to be complicated.

If you’ve been mulling over the idea of launching a dropshipping business, then you’ve come to the right place.

Whether you’re just starting out with your online store, or you’re a 10-year veteran looking to add to your current business model, we’ve created the ultimate dropshipping resource for online stores and dropship businesses alike.

In this guide, we’re going to show you absolutely everything you need to start and successfully run a drop shipping business.

From finding dropship suppliers and picking the perfect platform to delivering customer support and marketing, here’s what you need to know!

What Is Dropshipping?

With a plethora of voices piping in to define dropshipping, understanding what it actually is can be a bit complicated.

Here’s the truth, and nothing but the truth:

The Definition of Dropshipping

According to the definition, dropshipping is a retail fulfillment method.

The online retailer in no moment fulfills the orders themselves. Online stores with a dropshipping model hold no stock of their own.

The online stores collect customer orders and transfer the order and shipping details to manufacturers who then directly send the products to customers.

dropshipping

This means that you can avoid overhead costs like storage.

However, eCommerce stores do display products in some way to allow customers to pick which products they want to buy.

In today’s eCommerce world, online stores have replaced brick and mortar storefronts.

Online business owners don’t have to have a single physical product.

They just have to display it and its characteristics online, which also allows them to reach more people across the world, which would’ve been impossible with a brick and mortar store.

And when customers buy the products, only then do the online stores order them from the wholesaler (suppliers) and ask for it to be shipped to the customer’s location.

So how do you make money with dropshipping? By finding the profit margin in the difference between the wholesale and retail price.

You buy a product for $5 from the dropshipping supplier (since the majority of them offer quantity discounts) and sell it at a market price.

Some eCommerce stores also agree on being paid a commission percentage from the wholesaler for each product sold, in which case it’s a dropshipping-affiliate marketing fusion.

Dropshipping: The Pros

dropshipping business costs

Reduced Overhead and Startup Costs

If you don’t have to buy hundreds or thousands of products to sell upfront, you don’t need big startup capital.

You only pay for products to sell when the customers have ordered them.

And since you don’t have to warehouse those products either, you’re avoiding warehouse costs.

Finally, it’s much easier to have a digital storefront than renting out a brick and mortar store.

You can run your entire drop ship business from home.

Flexibility

If you decide overnight that you no longer want to stock one product but opt for another, you can do it.

If you decide to move across the world, you can. Your business won’t suffer for it.

You can choose your own hours, strategies, and plans. And with today’s automation technology, you can almost passively run your dropshipping business.

Scalability

If you want to scale your business, all you need to do is invest in marketing and sales.

And because you can do the majority of work on your own, you don’t have to hire people, rent a bigger store, or pay for more warehouse room.

You just need to set up an ad or two.

Simplicity

You don’t have to have an MBA to start or run a dropshipping business.

You can find everything you need online and get started in a few days.

After all, you don’t have to worry about anything except for selling your products. Stocking, shipping… All of that is someone else’s worry.

You just process the payments and take your cut.

Dropshipping: The Cons

Now, dropshipping has plenty of advantages but there are a few disadvantages:

Low margins

Depending on which products you sell online, your margins could be slim.

However, dropshipping is a game of quantity. If you take $1 from every sale, you’ll have $100 if 100 people buy a product.

It’s the compound effect.

Additionally, you can stock a variety of products and items to sell. You don’t have to stick to one niche or one type of inventory for dropshipping.

For example, if you sell dog grooming kits, you could also sell leashes, dog toys, and much more.

Hidden costs

You could face a few problems with shipping if a customer orders two products from two different wholesalers or dropshippers. You’ll need to calculate the shipping costs for each.

Inventory management

Inventory management can get complicated if you’re working with multiple dropshippers, as their inventory changes often. 

A good workaround is getting a tool that integrates the suppliers’ quantity information with your sales systems so you can automatically mark which products are out of stock.

Finally, you’ll be responsible for any supplier errors, which is why it’s always good to work with reputable suppliers.

We’ll show you how to find them later on in the guide.

Key Terms

When you start your eCommerce business with a dropship inventory model, you’ll often encounter some of these terms:

  • Address verification system – ATS is used to verify that the address buyer provided matches the address of the card to prevent fraud.
  • Chargeback – Forcibly issued refund from your customer’s bank. If you have a high volume of chargebacks, it can increase your operating costs.
  • Distributor/supplier – Middlemen businesses who stock certain manufacturers’ products. They’re typically faster to work with than actual manufacturers.
  • Gross profit – Product sold – Cost of product = Gross profit
  • Manufacturer’s suggested retail price (MSRP) – The price at which the manufacturer thinks a product should be sold. It’s not obligatory to sell it at that price.
  • Minimum advertised price (MAP) – The lowest price at which a retailer can advertise the product.
  • Minimum order size – The lowest number of products you have to order for the distributor or manufacturer to ship them.
  • Multi-channel eCommerce – An eCommerce business that uses multiple sales channels (e.g. Shopify store and Amazon listings).
  • Net profit  – Product sold – Cost of product – Operating costs = Net profit
  • Per-order fee – Some manufacturers and distributors charge a fee for handling and shipping the order for the retailer.
  • Restocking fee – The fee charged to customers when they return a product.
  • Wholesaler – Distributor or manufacturer who offers bulk discounts for ordering large quantities of product.

How to Start a Dropshipping Business

Even though it isn’t hard to start a dropshipping business, there are a few things you should pay particular attention to:

Business Structure of Your Dropshipping Store

Every professional manufacturer or distributor will ask you for proof that you’re a real retailer before they consider doing business with you.

They’ve spent a lot of time negotiating with people who ultimately decided that dropshipping isn’t for them, so nowadays you won’t get further than a quick reply unless you can prove you’ve established a business.

Additionally, once you get the ball rolling, you won’t have the time to think about defining your legal structure.

When you’ve committed to starting a dropshipping business, the first thing you need to do is set up a business entity.

The majority of dropshipping entrepreneurs and internet business owners in the US use one of the following two business structures:

Sole proprietorship – The simplest business structure with a minimal amount of paperwork. However, when you set up a sole proprietorship, you are your business. You only file your own taxes. The main downside of this is that you guarantee for your business with your personal assets.

Limited Liability Company (LLC) – A LLC is the best way to protect your assets. For all intents and purposes, a LLC is treated as a separate entity, which means you get a lot more liability protection. You will have to pay additional taxes and fees, and the LLC will be subject to different filing requirements.

Calculating the Costs of Starting a Drop shipping Business

Even though dropshipping is one of the most affordable, cost-effective ways to start a profitable internet business, that doesn’t mean it comes without costs.

Startup costs

The first thing you’re going to need to start a dropshipping business is an online store.

Now, you could opt for a platform like Shopify or Wix, but you’ll still face some costs.

Some platforms charge per sale, while others charge a flat fee.

If you want a separate website, you’ll also have to handle hosting costs. You’ll need a domain in any case. Fortunately, the whole store setup won’t cost you more than $100-200.

Finally, depending on the type of legal structure you choose, you may have to pay set-up fees and/or any business licenses you may need.

It’s best to consult a lawyer for a detailed breakdown.

Marketing

The majority of your investments will go toward marketing your dropshipping business.

You can create estimates of the costs, although you will only know the real figure once you start selling.

Product samples

Even though you can absolutely run a profitable dropshipping store without ever touching the products you sell, that doesn’t mean you should.

It’s always a good idea to order product samples so you know what kind of quality your customers can expect from your products.

This can also greatly inform your pricing structure.

Upgrades

As you scale your online business, you’re going to need bigger plans for eCommerce and wholesale platforms, as well as a few enhancements of your store.

Of course, that depends on the platform you choose so keep reading to find out what the best ones are.

Ecommerce Platforms Top Dropshipping Websites Use

Tech has come very far.

And instead of having to spend hours upon hours on manually setting up your dropshipping website, you can do everything with a few clicks if you opt for one of the most popular ecommerce platforms today.

We’ll show you a quick breakdown of each, as well as their pricing structure.

Shopify for Dropshipping

Shopify is one of the most widely used platforms for dropshipping and eCommerce. 

It’s simple, and it’s affordable.

It has integrations for most major dropshipping integrations (including Modalyst) so you can automate the majority of tasks.

You don’t have to manually send orders to your manufacturer as the integration takes care of that.

And you’re only a few clicks away from importing products from the dropshippers’ profiles.

Shopify as an eCommerce Platform

Additionally, Shopify also has features for:

  • Payments
  • Sales
  • Marketing

Some add-ons aren’t free (for example, bulk sale processing), but they’re well worth the money ($10-$50).

You can also set up manual or automatic collections, which is a good idea if you’re selling different products.

Finally, Shopify also has handy SEO features (e.g. meta descriptions) to help you reach more people with your store and Shopify Lite which lets you sell through Facebook Messenger.

Shopify Pricing

Shopify comes with a 14-day free trial, after which you can choose one of the following plans:

1. $29/month plan – This plan comes with an additional 2.9% + 30¢ online credit card fee per each sale, which is something you may want to calculate into your net profit calculations. 

2. $79/month plan – This plan comes with gift cards enabled, as well as professional reports. The online credit card fee is lower – 2.6% + 30¢.

3. $299/month plan – Finally, Shopify’s most expensive plan comes with a great dropshipping features: third-party calculated shipping rates. Additionally, this plan includes only 2.4% + 30¢ online credit card fees.

Wix for Dropshipping

Millions of people around the world use Wix to power their websites and eCommerce stores.

Wix is used by over 100 million people across 190 different countries.

It’s an affordable, easy and hassle-free way of creating your own website in a matter of minutes.

Wix and Modalyst just launched an app for dropshipping on Wix. It is available in the Wix App Market or directly on Modalyst. Even though the dropshipping app is still relatively new to the market, it already has some positive reviews. We encourage you to check it out!

Wix as an Ecommerce Platform

Wix is super easy to customize.

Just have a look at these top Wix websites. They’re simply beautiful and optimized for eCommerce to jumpstart your Wix dropshipping experience.

You can do pretty much everything just by dragging and dropping features and widgets you want to see. If you want to manually add code, that’s possible, as well.

You can choose between a few product listing templates, as well as:

  • Track your orders
  • Process payments
  • Promote sales
  • Manage tax (and shipping)

Wix Pricing

Wix does come with a free plan but if you really want to accept payments, you’re going to need one of the following premium plans:

1. $17/month plan – You’ll be able to accept payments, and Wix won’t charge a commission other platforms typically charge.

2. $25/month plan – You get up to 35GB of storage, as well as a logo.

3. $35/month plan – 50GB storage, and priority support.

BigCommerce for Dropshipping

Even though it’s not mentioned as often as Shopify or Wix, BigCommerce is a pretty powerful ecommerce platform for dropshipping websites.

It supports integrations for dropshipping companies. Modalyst was actually one of their first integrations for dropshipping.

Learn more about the dropshipping with Modalyst and BigCommerce here.

BigCommerce as an eCommerce platform

It’s a full-fledged content management system, created specifically for eCommerce.

And while dropshipping technically falls under that domain, it’s not always easy to find a platform that’s going to allow you to automate 99% of your dropshipping work.

Fortunately, BigCommerce has great features.

It offers app integrations with major dropshipping companies, as well as other apps that simplify order fulfillment and inventory management.

BigCommerce also supports multi-channel retailing.

And because of their partnerships with Facebook, Amazon, Google, PayPal and Square, BigCommerce users get to experience new sales features first.

And if you want to convert visitors without giving them huge discounts, BigCommerce has features for that!

All in all, it’s a powerful platform to fuel your drop shipping business. Especially if you plan on growing it.

BigCommerce Pricing

BigCommerce comes with a 15-day free trial.

1. $30/month plan – Unlimited storage, but few marketing features. You can also have only $50k in annual sales before you have to upgrade. No transaction fees if you use payment gateways. If you process credit card payments, the fee is 2.9% + $0.30¢ per transaction.

2. $72/month plan – Marketing features like customer groups and abandoned cart saver are available with this plan. You can process up to $150k annually before you need to upgrade and the transaction fee for credit card payments is 2.5% + $0.30¢.

3. $225/month plan – Google review integration, custom SSL certificate, up to $400k in annual sales, and a 2.2% + $0.30¢ credit card fee.

Other Options for Setting up a Dropshipping Website

If you don’t want to set up your dropshipping store on any of the major platforms, you could always get a custom website and then add payment and marketing integrations.

For example, if you have a WordPress website, you can get a WooCommerce plugin that will allow you to process payments without switching to an entirely different eCommerce platform.

It’s all a matter of what you need. However, going with an out of the box solution or cloud hosted platform is usually simpler and more affordable.

How to Find the Best Dropshippers

When you’ve decided on a dropshipping platform, you’re going to need the main thing: products to sell online.

Now, as an online store, you’re not going to have or store any dropship products on your own.

And that’s exactly why you need to make sure you’re working with reliable dropshippers who aren’t going to botch up orders and ruin your business’ reputation.

Methods of Finding Dropshipping Suppliers

As a rule of thumb, manufacturers don’t know the first thing about marketing.

Let’s be real: if they’re still in business without marketing knowledge, that means their products are definitely something special.

However, that means it may be harder to find them.

It’s usually easier to find wholesale distributors but as always, be careful. There are plenty of middlemen presenting themselves as dropshippers so you could lose out on profits by accepting their price.

In addition to directly getting in touch with manufacturers and asking them about distributors, you can also find suppliers by:

Using dropshipping platforms

Dropshipping platforms like Modalyst, Oberlo and AliExpress are a treasure trove of all kinds of dropshipping suppliers (manufacturers, distributors, middlemen).

If you want to sell imported products, you can also find exporters and importers.

The majority of dropshipping solutions offer integrations with eCommerce platforms, as well, so you can fully automate your operations.

Googling your way to success

Some dropship manufacturers are extremely hard to find.

They’re usually buried on the twentieth page of Google so you’re going to need patience and the right keywords to find them.

If you’re looking to import a product, try using Google Translate and searching with native language keywords.

Trade shows, directories, and competition

You’ll usually have to pay for access to directories and going to trade shows, but ordering from the competition can be a good trick if your competition has a significantly lower price.

Find Dropshippers on Modalyst

Modalyst is one of the most powerful dropshipping platforms.

If you sign up for it, you won’t just get access to millions of trending products to sell online. You’ll also be able to integrate the products with your store, syncing all product data and orders.

Everything is streamlined so you can focus on the important things – marketing and selling the best products.

Product sourcing is fast and easy on Modalyst.

It only takes one-click to add a product to your store, and Modalyst takes care of everything else.

Dropshippers in the USA

Modalyst handpicks the dropshippers on their platform, and these dropshippers are primarily from the USA. Having US dropshipping suppliers is especially important since these vendors offer so many benefits that Chinese wholesalers or foreign dropshippers do not.

Modalyst products are different from what you can find on AliExpress and Oberlo. The focus is placed on the quality of the product and how fast it ships. Modalyst believes that these attributes will keep your customers coming back from more.

You can also find plenty of niche products to sell online in the Modalyst marketplace. Access to these niche items means you don’t have to struggle for profits in a highly-saturated industry.

Other Modalyst features for dropshipping that will help you earn more:

  • It’s free to add 25 products to sell to your site
  • Product detail customization
  • You can set pricing and shipping rules to profit no matter what
  • Shipping status updates
  • Order management
  • Shopify, Wix, and BigCommerce APIs
  • Inventory level notifications
  • Set-up services

 

Why Dropship From the US?

The conventional formula most online entrepreneurs use to find suppliers is as follows: find cheap products from Chinese dropshippers and sell the products for massive profits.

This formula still works today. However, it’s becoming less effective and less profitable as more and more online shops use the same product sourcing strategy. 

While more Chinese products flood the market, the more competitive pricing becomes, making it more difficult to reap a profit on the sale of an item and differentiate your business from others.

This is not necessarily a bad thing, though. It has helped create interest in a new market: USA dropshipping suppliers.

One way that you can differentiate your online shop is by working with suppliers who are based in the United States.

You don’t have to be located in the US for this to be a viable option.

So long as you have a strong customer base in the USA, or you’re looking to break into the American market, then using US dropshippers makes a lot of sense.

What to Look for in USA Dropshipping Suppliers

There are thousands of wholesalers and manufacturers in the United States.

While partnering with American dropshippers is compelling, you still have to do your due diligence.

A dropshipping company in the USA isn’t automatically qualified just because they are based in the United States. These dropshipping companies need to be vetted, just like any other supplier you want to work with.

You should follow the same process that you would when vetting any supplier. After all, your supplier is one of your most important business partners. You want to choose the best one.

Modalyst Pricing for Access to US Suppliers

1. Hobby Plan – Free – Up to 25 products, 5% transaction fee

2. Start-Up Plan – $35/month – 250 product limit, 5% transaction fee

3. Pro Plan – $90/month – Unlimited product limit, 5% transaction fee

Sign up for Modalyst here.

Choosing the Best Dropship Suppliers

In addition to finding the best dropship wholesale suppliers in the first place, you also have to be careful when choosing them.

You’ll usually spot a scam if:

  1. They want monthly fees – Dropship wholesalers don’t charge subscriptions just so you could do business with them. They charge per product. Anyone else who wants to charge ongoing fees is a con artist.
  2. They sell to everyone – If these dropship companies sell to private individuals, they’re not wholesalers and you won’t be able to profit off their products.

However, legit suppliers do work on certain principles:

  1. Per-order fees – These fees usually cover the costs of packaging and shipping which are different when you order a single product (as opposed to multiple products).
  2. Minimum order size – This is completely legitimate. Some drop ship companies just don’t think it’s profitable to ship below a certain order size so make sure it fits your needs. If you really love their products, get in touch with them and see if you can negotiate special treatment.

And when it comes to dropshipping, the reliability of your suppliers is everything.

That’s why you should make sure that your suppliers are:

  • Organized – If it takes a dropship wholesaler ages to respond to your query, they probably don’t even know their inventory
  • Capable of receiving and processing orders through email or platform
  • Efficient
  • Professional

Errors can always happen and in a business where so much of your revenue depends on the suppliers, you want professionals capable of resolving problems. Not amateurs who will say they can’t help you.

Communicating with Drop ship Suppliers

As with anything related to your business: be professional and clear about what you want.

This is especially important if you have a special request that they don’t normally fulfill.

Keep in mind that many suppliers will ask you for proof of business, as they’ve communicated with a lot of reluctant online stores who ended up forgoing the idea.

While you will often communicate with dropshipping wholesale suppliers through platforms (especially if you use Modalyst) and email, don’t be afraid to get in touch with them by phone. Especially if they’re smaller suppliers of niche products.

It always pays to be polite and undemanding. Don’t ask for discounts from the get-go as the dropshipper has no idea if you’re serious at the moment.

However, as you build your relationship with the suppliers, they’ll be more likely to grant your requests and help you out in any way they can.

Additionally, double-check the shipping time. It should be like the dropshipping company claims.

If they claim that the product will be with you within a week and it arrives a month later, steer clear. Speed is a priority.

Payment

Your first option is paying suppliers by credit card. Some wholesale platforms also offer options of processing payments for you.

The other, different type of payment is net terms.

This is a form of delayed payment. For example, you purchase a product and the supplier gives you a certain timeframe in which you have to pay them for that product.

If the supplier offers this option, they may ask you for credit references because they’re essentially trusting your word that you’ll pay them.

How to Pick the Best Dropshipping Products

Your dropshipping products are, quite literally, your bread and butter.

And if you’re not going into business with a clear, validated idea of what you want to sell online, you’re going to need to conduct extensive research.

Fortunately, even if a product doesn’t sell, you won’t be losing much but time. That’s the charm of starting a dropshipping business!

However, selecting a good product is the best way to start earning as soon as possible.

best dropshipping products

Market Research

Market research is a must before you start any kind of business, but even more so when you start a website for dropshipping.

If a product isn’t in demand, you’ll have a very hard time selling it. You’ll incur marketing costs without ever getting your return on investment.

Now, the trick is in actually performing market research.

First comes ideation.

In order to get inspired, you can turn to social media and sites like Wish and Amazon. If you already have a product idea, it’s time to validate it.

The simplest way to do it is with Google.

You can use the oldest trick in the SEO book, the Google Keyword Planner.

It’ll show you the monthly search volume and competition for a certain keyword. Just make sure you focus on the right location, and don’t forget about long-tail keywords and synonyms.

You can also use Google Trends to evaluate interest over time and the seasonality of a product.

For example, a new product might have appeared on the market two months ago, and now the demand for it is steadily growing. It could be a great opportunity for your dropshipping business.

At this point, you should also stake out the competition.

First, you should define the volume of the competition.

How big is the market? Plenty of competitors could undercut your ability to run a profitable business. Too few competitors may mean a niche that looks profitable but isn’t.

At the same time, evaluate your competitors’ pricing.

As a rule of thumb, the best way to start a dropship business is by offering something at a reduced price.

However, it can be a race to the bottom if you can’t get decent margins.

Markup Opportunities and Sales Potential

Here’s the thing – running a successful eCommerce store for dropshipping isn’t nuclear physics. There are a few formulas that always work:

set up pricing for dropshipping business

Reduced price

If you can offer people something at a reduced price (while still getting decent profit margins), they will buy.

However, the scenarios in which this doesn’t mean a race to the bottom is very rare. You’re competing with small businesses and huge corporations alike. Amazon carries pretty much every product. Plus, once you start lowering the price, so will everyone else.

Even if they’re not making money.

Exclusive access

This is where it really pays off to dig deep, all the way to page 57 of Google.

If you can find a manufacturer you can strike an exclusive deal with, a manufacturer who produces something customers sorely need but can’t get, you’ll be golden.

The most realistic scenario is to drop ship a product that’s not easily available in a certain area or country.

Better quality

Offering high-quality products is one of the most long-term sustainable ways to run a profitable online business.

The quality of your products will be there for you even when you can’t reduce the price to match your competitors.

And it will make people refer their friends to you, giving you more customers and profits.

Offering value with your service

Information is the key to success.

Plenty of businesses sell products, but only some of them are able to inform their customers about which products are best suited to their needs.

This is especially true for complicated products. For example, products with a lot of components or products that aren’t universal fit.

Low competition

If you don’t have competition but there is a demand in the market, you can swoop in and satisfy it. However, keep in mind that this is only short-term success. As soon as potential competitors see you’re running a profitable business, they’ll do the same thing, too.

Niche Products for Dropship Businesses

The money is in the niche – or so they say.

Generally, the narrower you can go with your target audience, the better. This is as true in sales as it is in marketing.

When you run a generalized dropshipping store, you’ll be able to serve all kinds of people. However, ultimately you may serve no one.

Conversely, if you run a dropshipping website that offers products specific to a niche, you’ll be able to personalize more and target people more accurately.

 

dropshipping watches online

For example, when you sell generic clothes, you’ll be targeting humans. That’s all you know about them.

But if you sell baby-proofing systems, you’ll know exactly who you’re targeting: new parents. You’ll know what they’re motivated by, and you can easily understand why and when they’ll buy your products.

If you are also interested in your niche, that’s even better!

In the beginning, it’s much easier to stick by what you know. You’ll know how to serve your customers better.

Things to Keep in Mind When Choosing Products

To sum it all up, the ideal dropship product is a product that’s in high demand, but there’s not a lot of competition (or there is competition but there’s not enough supply). And its wholesale price (pre-order fees and operating costs included) is low enough to give you a decent profit margin.

As a rule of thumb, try to price your product at or below $200.

This is especially beneficial if you’re starting out.

You’ll need time to build your credibility, and people are more willing to make spur-of-the-moment purchases of products that are not more expensive than $200. Everything above that will require some convincing (and time).

You should also keep an eye on MAP (minimum advertised price). If the manufacturer doesn’t let you set a price that’s lower than their limit, you should factor that into your calculations.

Finally, be aware of how the size of the product can affect delivery to the locations you’re targeting.

Pricing changes depending on the size, so factor that into your margin calculations to know exactly how much revenue you can expect per product.

How to Run a Dropshipping Website

Once you’ve set everything up, it’s time to actually run the business and make it as lucrative as possible.

woman starting an online store

The Dropshipping Order Process (Behind the Scenes)

So, what can you expect to happen once a customer clicks on “Order”?

The customer places an order on your site.

The main prerequisite for this is to know (or automatically update) if the products you’re advertising are available at the moment.

The majority of dropshipping platforms integrate with wholesale platforms like Modalyst to make sure all of your listings are up to date.

If they’re not, your system will process an invalid order for the customer. You’ll need to either notify them that the product is not in stock, or issue them a refund.

You want to avoid that at all costs.

Your store places an order with the supplier.

If you’re doing it manually, it’s going to get tedious and nerve-wracking soon. However, you can use integrations with dropship platforms like Modalyst to streamline the process.

As soon as the customer places an order and pays for it, your system will “ping” the supplier’s system and the order will be processed on their end, as well.

Dropshipper ships the order to the customer.

Once they receive the order, the suppliers will ship the product to the customer.

Again, it’s good to know how much time it’ll take them to process the order. If it’s shipped within one day, that’s perfect. But if your customers have to wait a week for the order to ship in the first place (and the supplier is thousands of miles away from them), it could become a nightmare.

The customer is notified by the online store.

It’s important for you to know that your business will be handling all customer communication.

Essentially, they shouldn’t be aware that you’re a dropshipping business at all. Your process shouldn’t show it.

You’ll notify them about the processing of their order, about the shipment, and about tracking codes and everything else.

Similarly, if something goes wrong, you’ll be the one who has to handle it so make sure you have reliable suppliers.

Inventory Management

Even though you don’t have physical inventory, you have digital inventory.

And when it comes to any kind of sales, the most important rule is: never go out of stock.

You should always have backup dropship wholesale suppliers in case your main suppliers go out of stock.

And in order to stay updated on their inventory levels, you can use Modalyst and integrate it with your drop shipping website.

You should also understand the dropshippers’ stock rates for the products you want to sell online. Do they carry it consistently, or do they only carry it periodically?

And if you ever get into an “out of stock” situation: don’t panic. Instead, get in touch with the customer and offer them something in return.

Try to preserve the relationship as much as possible.

In most cases, customers won’t mind if you offer them a better substitute, and you’ll save your face.

Be Smart about Routing Orders

Now, you definitely want to have multiple dropshipping suppliers – even if they’re just backup ones.

But as you scale, you’ll need multiple suppliers because of a variety of reasons:

  • Different locations
  • Different price
  • Different availability

And so on.

And in order to avoid having to manually route orders or risk routing orders to the wrong supplier, you can automate the process.

For example, if you’re selling to customers in both Canada and Belgium, and you have suppliers from the US and the Netherlands, you’ll want to route Canadian orders to the US supplier, and Belgian orders to the supplier from the Netherlands.

You can execute the same method for other types of orders, as well.

And it’s completely fine to play favorites – route the majority of your orders to your preferred supplier and keep everyone else on the back burner.

Marketing Your Dropshipping Business

Since running a store with dropship products doesn’t cost a lot in overhead and operating costs, marketing is where you should focus the majority of your investment.

First, know (and understand) your target audience.

This is much simpler if you’re selling niche dropshipping products.

You can create buyer personas for your customers and define what drives them to buy, and which channels they use to get informed.

You should never go in blind.

Second, choose your methods wisely.

The majority of people with the intent to buy will Google what they’re interested in. And since more people click on organic results than paid ads, you should really focus on improving your SEO.

You can use paid social media advertising, but know that you may not always reach the people who are ready to buy.

It’s a long-term advertising strategy.

For immediate results, go with Google Ads.

Third, don’t just attract customers – retain them.

While we all talk about ads the most, you can get plenty of business from referrals of satisfied customers.

Your goal should be to retain customers and maximize their value. The majority of eCommerce platforms offer up-sell and cross-sell add-ons that will help you sell more products to the same people, or sell complementary products.

You should also invest in email marketing to reactivate the people who have already bought from you.

After all, 40% of a store’s revenue comes from repeat customers.

Customer Support

Finally, just because you’re drop shipping doesn’t mean you don’t have to handle customer support.

You’re marketing your online shop like a business, and you should communicate with your customers just like a business does.

Now, when everything’s going great, you can focus on improving the customer experience.

However, when things go wrong, you may wonder if it’s worth it.

It is.

The trick is in staying cool and handling the situation wisely.

First of all, you need customer support tools.

You can use ZenDesk, Help Scout or any of the other tools that allow you to help your customers by phone, email or live chat.

If you’re processing returns, be aware of the process.

Every dropshipping supplier has a different way of processing returns and as an online store, you have to keep both them and the end customer happy.

Make sure you’ve defined the process with the dropship wholesaler so you know what to expect.

For example, some vendors charge a restocking fee.

In some cases, it may not even be profitable to return a product for a few dollars in credit (or no one at all) + shipping fees. It’s much better to send the customer a new product if their previous one wasn’t functioning properly.

If you get a chargeback, respond to it as soon as possible with original documentation.

Sometimes, a customer may just forget that they ordered something. However, chargebacks are typically caused by fraudulent situations.

This is why it’s good to have an ATS (Address Tracking System) that verifies that the address provided is the address on the payment file.

Dropshipping Best Practices

If you’re wondering how to get your eCommerce website off the ground as soon as possible (and make it profitable even sooner), here’s what the majority of successful ecommerce businesses recommend:

Find your niche and build your credibility

If you’re in it for the long run, it pays to specialize and build your credibility.

Things can always happen. You can run out of stock, someone may leave a negative review, and it’s all completely natural. However, once you’ve built up a reputation, you and your customers won’t even notice it.

Now, this is easiest to do if you’re operating within a niche. When you’re a generalist, it’s easy to get lost in the crowd.

Focus on cost-effective marketing

Paid ads can be great, but they’re not sustainable in the long term.

If you’re getting a spike of traffic when you’re advertising your products, and then nothing when you stop running the ads, it’s a problem.

This is why it’s much better to invest in SEO for the long run, as well as email marketing, and use paid ads as a “booster” to your standard methods.

Offer Excellent Customer Service

People buy for the products, yes. But they also buy for the experience.

Even if you have a lot of competition and a higher price, people won’t mind as long as they love the journey.

If you draw them in with useful resources, encourage them to communicate with you, and invite them to recommend your business to their friends, you won’t just be a business to them.

You’ll be someone they can rely on.

And that’s the best way to build a profitable e-Commerce business with dropshipping.

Leave a Reply

Your email address will not be published. Required fields are marked *

Sign Up for Our Dropshipping Newsletter

Just enter your e-mail and get notified whenever we post our latest articles!

You May Also Like