To succeed in your Drop Shipping business, first, you need to fully understand exactly what drop shipping is and the processes behind it. That’s why we made this; your guide to drop shipping.
So, what is drop shipping? In its simplest, drop shipping is the process of shipping goods from a third-party supplier directly to your customers, without any intermediary steps such as storing goods at a physical location. Instead of ordering X amount of X product and storing them until a customer comes to your shop looking to buy one, you’ll only need to pay for items that have already been bought by customers. This is a really attractive option for those who don’t want to risk purchasing stock that won’t necessarily sell.
Drop shipping is becoming more and more popular as your investment costs will be minimal but you can still reap similar benefits as the more traditional retail stores. This is fantastic; however, it means that the market is becoming more and more populated as the number of people starting their own drop shipping business is growing exponentially. This means you’re going to need a large amount of knowledge, commitment and motivation to make your company stand out from the crowd.
Other than a positive attitude and a good work ethic, there are only a few necessities required to start your drop shipping business. You’ll need;
– A product / products to sell
– A supplier / suppliers of that product
– A platform to sell on
– A sales tax ID
You’ll need to decide on your niche before you start to build your business. Once you’ve made your decision, you’ll be able to gauge what sort of products you can sell and what products you want to sell. This will narrow down what suppliers you should look into and will make it easier to find which one is right for you.
There are a number of things that you should be looking for within your supplier such as; fast shipping, high quality products and the ability to provide you with referrals on request. A good supplier should willingly connect with businesses that can verify their service.
It’s fairly normal for suppliers to want to charge a fee for their service because they are the ones with higher costs, including that of storage and packaging. However, these fees shouldn’t be more than a few pounds/dollars. If a supplier wants to charge you a high service fee, you should probably move on and find other suppliers to work with.
You should also steer towards supplier(s) that have experience with drop shippers. Taking on a drop shipping company can give a lot of responsibility to the supplier, so you’ll need to ensure they’re reliable and you can count on them. If the representative you speak to seems well-informed and can help with your queries, you should be alright. However, if you suspect they don’t have much or any experience with drop shipping, you should continue looking.
Your Sales Tax ID is very important, as it gives you the legality to operate your business. Your Tax Identification Number (TIN) is, as you can probably guess, used for tax purposes. TIN’s are different in every country, so you’ll need to do your research to find out what the rules and regulations are where you are based. People, such as your supplier(s), may need your TIN at some point, so it’s important that you either know what it is or are able to get the information quickly and securely.
Once you’ve decided on your products, supplier and got your TIN, you’ll need to begin looking for a place to start selling and making money. Choosing the right marketplace or platform is crucial to the success of your company. Your first step here will be choosing between selling on an already established platform OR starting your own, independent online store.
Most drop shippers use a well-established online market such as eBay or Amazon, especially when they’re just starting out. It’s easy to set up an account and start selling, customers trust these platforms and they already attract huge quantities of traffic. However, there are a few downsides to go with it. You’ll have limited control over things such as customer service and branding, you will be charge fees for every sale you make and you’re in direct competition with sellers on the same platform. For some, the cons are well worth it for the benefits that can be reaped, but for others creating their own online store is the only way to go.
Although it requires more upfront investment, creating your own store is perfect for long-term plans to make money and build a business. There are plenty of online tools that make it really easy to get started. Not only do you have complete control over your branding, designs, layout etc., you’ll also have no fees, giving you a higher profit margin, and no direct competition from other sellers on the same platform. With this option, you’ll have much higher investment costs as you will need to design your website from scratch. You will also miss out on the guaranteed traffic that comes with the established platforms and have to either wait a long time or pay to come up near the top of a search.
One last tool I’m yet to mention is Shopify. Shopify is a platform that lets you start and easily manage your business. From the creation and customisation of an online store to selling over multiple platforms (e.g. web, mobile, social media, online marketplaces, pop up shops etc…), this can be a very useful tool for drop shipping businesses. Another major benefit of using the site is that you don’t have to worry about downloading, upgrading or maintaining software to keep on top of your business. It allows you the flexibility you need to run your business from absolutely anywhere; all you need is internet! With our new Shopify integration, you can manage your store directly through us, which makes your job a lot easier! However, just like all things in life, there are a few cons to level out the pro’s… For a start, it can be very expensive. Although the lowest form of membership is only $9 per month, you are only able to sell through social media. This means you won’t be able to create your own store and will be extremely limited as to where you can sell and, consequently, how much your business can grow. For the advanced package, you’re looking at $299 per month or up to $2,000 for their “Plus” package. Another inconvenience is that your content won’t automatically reformat if / when you switch to a different theme, meaning you’ll have to put a lot of time and effort into reconfiguring your site and getting back up to your professional standards. It can be an awfully lot more expensive route than that of Amazon or eBay, however your options of customisation, management of inventory and reliability can have major benefits for your business, and for most people, Shopify is a great option to easily run their Drop Shipping business.
If you have the time, money and commitment to invest in your business and have plans to continue for the long term, then starting your store is probably the right option to you, especially with established platforms becoming more and more saturated. But, if you really can’t wait to start selling, you could consider setting up on an established market place whilst you invest in, design and bring to life your independent store.