dropshipping business is e-commerce

Why is Dropshipping Business Tempting [2021 Updated Guide]

This article was written to satisfy my own craving to start a dropshipping business successfully.

Here you can find more facts about dropshipping, and useful information on how to start your dropshipping business. I have compiled all the tips, tricks, pros, and cons that can help you on your journey to building a successful dropshipping business.

Some say we are living at the dawn of the 4th Industrial Revolution. It is actually a Technological Revolution because the advances in technologies (Internet, bio, robotics, etc.) lead to a mix of the physical world, people, and the digital world. It also lead us to new ways we can make money.

You can make money online in more ways than ever. Just like in the real world. Unless you’re on hiatus, anyway.

Don’t be just another one of those people who only talk about starting a business online and making it big.

Do it.

Start small, see how it goes, then set higher goals, work your a*# off, and live to tell the tale.

Just do it.

You can aim for a small passive income to supplement your traditional earnings. Or, you can work towards an online empire. It’s completely up to you.

E-commerce is dominating right now. One way stands out — Dropshipping business.

Dropshipping is easy money, right? No work and steady passive income?

Well, where do I sign up?

Let’s back up a little. Think about it. With the obvious advantages come hidden dangers.

Let’s go over the facts together and then decide.

What is dropshipping anyway?

Dropshipping is a form of e-commerce where you sell other people’s products in your online store for a fee. You take orders for products that you don’t have in storage, you didn’t make, you don’t own and you don’t ship to customers. A dropshipper doesn’t come in contact with the product. When a customer buys online a product from you (a dropshipper), that product is sent to him directly from the supplier.

A dropshipper is a middle man between a buyer and a manufacturer.

If you are interested in online business models, dropshipping is a great solution: you can make money, the suppliers make money and the customers get what they want. Win-win-win.

Dropshipping business is efficient because it delivers what everybody wants. With very little interaction between a buyer and seller, a product is ordered online, shipped, and sent to the buyer’s address without fail.

Dropshipping business can be very lucrative, depending on the chosen niche of course. But, it is obvious that the mere absence of the usual costs involved with a brick-and-mortar store, like salaries and rent, make every dropshipping business a likely candidate for success.

Before you start thinking that this is easy money, and I agree, it may seem easy, you need a very good knowledge of marketing, social trends, and human psychology. It also helps if you’re a natural salesman with a feel for people and their passions.

“Always deliver more than expected.”

Larry Page

Why start a Dropshipping business

According to statistics reported on Shopify, e-commerce is on a steep rise with the anticipated 276.9% increase in worldwide e-commerce sales.

Shopify’s statistics continue to baffle — in 2021 e-commerce sales value is expected to be $4.9T. If you’re still thinking about it, that’s a slice of a 4.9 trillion dollar cake that you can enjoy.

According to 3dcart Amazon uses dropshipping too. 34% of sales come from dropshipping, and that number is only increasing.

How Dropshipping Works?

In short, the dropshipping business model works like this:

  1. You set up your own online store where you advertise and sell different products, or even just one. You are not a manufacturer of the items you sell, nor do you have any of those items in stock. You never physically touch the goods you are selling. The goods and stock are owned by someone else (usually in China, but can also be local).
  2. You are exclusively involved in marketing – bringing people to the site, conversion optimization, etc.
  3. A customer sees a product they like in your online store and buys it from you for a retail price.
  4. You forward the order to your supplier and pay them the wholesale price. You must also send them the buyer’s details (name, address).
  5. The manufacturer/supplier is engaged in production and receives your orders each day. The supplier also packages and sends out the products to the people who ordered from you.
  6. For your work as a middleman between a buyer and a supplier (manufacturer), you earn a commission which is the difference between the retail price and the wholesale price.

For example, there is a factory in China that sells a product for $1. A dropshipper can sell that product for $10 on his online store. He will make a profit of $9 solely by doing advertising without ever being in contact with the product, manufacturer, or buyer.

Start Dropshipping business on Shopify
Photo by Roberto Cortese on Unsplash

How to set up a dropshipping business?

  1. Set up an email address (on Google it’s still free), a PayPal account, and social media accounts (Facebook and Instagram to start). Payment options vary, with PayPal being predominantly used and a couple of other payment processing options like 2checkout and Stripe.   
  2. Set up an online store. Most people use Shopify because it is easy to use. Shopify’s Basic plan starts at $29/month, and you can also use their 14-day free trial to try it out. There are a lot of applications that can help you start selling faster, like Oberlo. Oberlo’s Starter plan is forever free. It only deals with AliExpress. There are other options like Magento, Woocommerce (a WordPress plugin), and PrestaShop, but require more time and expertise to set up.
  3. Shopify deals with setting up a website and hosting, but you have to register a domain. Pick a catchy name, preferably connected to your niche.
  4. Find the best things to sell. Look at what’s trendy, find a niche. There’s a lot of competition, so you have to find products that somehow stand out. Be original, unique, and bring something new to the table. Order one product and test it. You can take your own photos.
  5. Find a reliable supplier. The choice of a manufacturer can make or break your dropshipping business. Chinese manufacturers are already familiar with the dropshipping procedure. Just contact them, say: Hi, I’m a dropshipper, and they will know what to do next. The products should be of high-quality, delivered undamaged, and within a short period of time.
  6. As a middle man, your dropshipping business can’t control the production or the delivery period. But, you can choose your business partners. A lot of problems can be avoided and the whole dropshipping process can be done smoothly with the right supplier.
  7. Fill your online store with products. Oberlo can help you because it easily adds things to your Shopify store. Their starter pack is free to use, but you can always upgrade. You will need a Shopify account in order to create your store. From there, you can browse products on AliExpress and use the function Import product by url to add them to the Oberlo account.
  8. Set a price. You do this from Shopify. You should start with a wholesale price, add the shipping cost, and then double it. So, if an item costs you $1, and the shipping is $1, you should charge at least $4 to make money.
  9. Take orders, forward them, and keep your eye on the trends.

It literally takes about 10 minutes to set up your dropshipping business using Shopify. I expected headaches, but no. The process is simple, easy, straightforward, and fast.

Other Examples of Dropshipping business

Print dropshipping business

You can order cheaply a ton of t-shirts on AliExpress and then customize them with your original prints and sell. Printful offers a full extremely convenient print-on-demand and shipping service.

It helps if you have a brand, so your dropshipping business can sell T-shirts with your logo, for example. But, you can do a theme online shop dedicated to one thing, like unicorns, fruits, famous sayings, etc.

Examples of profitable products

Speaking of the products – there are no rules. It all depends on your marketing skills, or more accurately on your ability to present an interesting product to the right audience. Products in your dropshipping business should be cheap, quality, interesting, and useful.

It is good to focus on products that people need, products that can help people in something, and yet that these products are not in local stores, or can’t be found on every corner.

Your dropshipping business can focus on selling products that you like and are familiar with. It helps if you already have a hobby that you can turn into a business.

Shopify published Nielsen’s report that shows the most lucrative product categories for online purchasing by region. In North America, it’s video gaming. In Western Europe, it’s personal care, and furniture, while Eastern Europeans mostly make fashion, event tickets, and travel purchases.

In general, toys, gadgets, and cosmetics are top sellers. Products related to pets, kitchen gadgets, and outdoor activities always go well.

Your dropshipping business should stay away from clothes because of various size standards all over the world. You should be careful with expensive technology due to possible shipping problems. Also, don’t deal with fake brand names for many different reasons.

Here is a great example of a profitable product. Fairy lights are a gadget (useful), they are decoration (interesting and pretty), and there is always a need for them (parties, events, holidays). They are cheap (and come with free shipping) and always trendy.

Screenshot of Aliexpress page
Screenshot of Aliexpress product page

To start, it is best to have a non-specialized store where you can test various niches. When you see that you have several products from the same niche that sell well, then you can build a specialized webshop just for that niche.

Over time, your dropshipping business should focus on becoming your own brand. Investing in building a brand name that can stand for quality products means potential big bucks in the future. That’s what influencers do.

offer sale with dropshipping
Photo by Markus Spiske on Unsplash

How to attract customers

Your dropshipping business is based on marketing. Quality marketing is the backbone of everything. Your marketing skills determine how successful your dropshipping business will be.

There is no use in having an online store nobody can find.

For beginners in dropshipping business, it is best to start with a combination of SEO and PPC marketing, because paid ads can be expensive in the beginning. A lot of sellers base their campaigns on email marketing, which is a more personalized approach meant to increase sales and build a lasting relationship with clients.

If you are new to marketing, you should study your competition and mimic their dropshipping business tactics.

You can start by using only Facebook. You should become a master of Facebook advertising (Facebook Pixel) and then move on to other social media platforms like Instagram and YouTube.

Related post: Become Expert Social Media Manager [Conquer 2021]

It is important to take great photos or a video for the product you want to advertise. It is a good idea to order the products you want to sell and take your own high-quality photos. Your photos and video should be of much better quality than the ones appearing on AliExpress.

Put the prepared video on your Facebook page and then advertise that post.

Aside from great visual representation, you should write useful product descriptions. They help your customers but also with Google search. Using keywords in descriptions is how new customers can find you on Google. Well-written descriptions can turn customers into fans which is beneficial in the long run.

You should learn to analyze the statistics and decide whether an advertisement is effective or not. Based on the statistics, you determine the next steps in advertising.

Another way you can attract customers is Instagram giveaways. You can attract hundreds of people to your dropshipping business website and only have to give away one product in return.

You can offer Bonus offers for free. You could include Shipping for free. Think about what attracts customers best.

My point is, there are no specific rules and that’s why it’s important to test as many options as possible until you find the right one for your dropshipping business.

“All you have in business is your reputation, so it’s very important that you keep your word.”

Richard Branson

Dropshipping suppliers

As far as suppliers are concerned, AliExpress is used the most by far — due to the variety of products, but also because of the price of products.

AliExpress statistics are truly impressive. Connectivasystems reports that:

In 2018, AliExpress had more than 150 million cross-border buyers.

AliExpress has around 150 million active buyers with more than 200 million visits.

There are more than 10,000 sellers on AliExpress.

There are more than 100 million products available on AliExpress. Its competitor Amazon has 560 million products.

The iPhone tempered glass is the most sold product on AliExpress. They have sold over 89,000 units.

Just like Amazon’s Prime Day sale, AliExpress holds a Single’s Day Sale every year on 11 November.

For more mouthwatering statistics, read Shopify’s global e-commerce trends report.

There are plenty of extensions and programs that allow you to easily bring products from AliExpress to your webshop. One of them is Dropified.

Dropified automatically orders the products, so you can focus on analyzing new products, trends, and marketing strategy.

Dropshipping vs Affiliate Marketing

Dropshipping is not affiliate marketing — it is incomparably better than that because you are developing your brand.

At first glance, it seems like this is some kind of resale of goods, but it is not — this is more sophisticated, and even allows you to develop your own global brand, a thing that was not so easily possible until recently.

Related post: Best Ways to Start Affiliate Marketing in 2020 [Easy Guide for Complete Beginners]

making money online with dropshipping business
Photo by rupixen.com on Unsplash

How much money can you make from a dropshipping business

It should be noted that dropshipping is not a business where large profits and earnings can be made overnight. It takes a lot of learning, sacrifice, and work, but this is certainly more profitable than most other businesses.

Earnings in the dropshipping business come from the difference in price between the product that the customer orders and the price that needs to be paid to the supplier. It is, therefore, necessary to be wise and determine how much profit you want to have, without driving the customer away at too high a price.

But, how to determine the fair price of a product?

You determine the price of the product, but you should also look at the prices of the competition. It is not desirable to be much more expensive or much cheaper than the competition, and yet you need to include the marketing and purchase price of the product at the price.

An incentive to start your dropshipping business could be Irwin Dominguez’s success story. He earned $1M in a year as a beginner.

Hidden costs

Money invested in marketing can give immediate results, but this happens very rarely. It takes a little time to figure out how it all works together. Net profit, in reality, comes much later.

You shouldn’t forget about other costs: checking account maintenance fees, provisions, currency conversions, and possible returns of damaged goods. Higher costs can appear if an unsatisfied customer demands a refund.

Dropshipping pros

Dropshipping pros are convenience, freedom, low cost, and high earnings.

  • Convenience. Having a dropshipping business is extremely convenient because you don’t have to deal with costs and problems normal stores encounter. You basically outsource everything, from the storage to the shipping, not to mention the product itself. The idea of selling products without worrying about stock and shipping is tempting to many.
  • Freedom. Dropshipping is global, international, and borderless. Dropshipping business can be done from any part of the world where you have an Internet connection. You can do business with suppliers in other countries, without ever seeing them in person. Your buyers can be from any corner of the world.
  • Low costs. Dropshipping business is easy to start even for beginners with no money. You don’t have to manufacture anything, keep items in stock, or have a physical store. Everything can be done online. Dropshipper’s main and only focus is on marketing and selling.
  • High earnings. According to statistics from 3dcart, e-commerce retailers who use dropshipping can potentially be 50% more profitable than retailers who deal with an onsite inventory. Dropshippers can sell products at whatever price they see achievable. They first have to pay the suppliers, which is a wholesale price. Then, they can calculate what selling price would be best for them and put the product on the market according to their expectations. High margins are achievable, but require a lot of effort on your part if you’re up for it.
  • Dropshipping is beneficial for manufacturers as well. 3dcart reports that manufacturers who participate in dropshipping are 18.33% more profitable than conventional ones. The biggest factor is not relying on the inventory space of retailers.
Dropshipping thank you note included
Photo by visuals on Unsplash

Dropshipping cons

Dropshipping cons are taxes, cybersecurity issues, unreliable suppliers, long shipping, competition, product issues, and refund cost.

  • Taxes. You can’t avoid the IRS. You are making an income as a self-employed. You should learn about taxes that apply to your country of residence or find a reliable accountant. If you prefer to be self-taught, like me, head over to wholesaleted.com and read their excellent article on Taxes and Dropshipping.
  • Cyber Security. This is the biggest problem and a huge con for starting a dropshipping business. Cybersecurity is one of the main items you need to work on if you are doing a dropshipping business. Due to the data that is exchanged in this way, all parties are in danger: the customer, the dropshipper, and the manufacturer. Although developers of payment platforms are constantly working on their improvement, the danger of cyber incidents is real. Theft and misuse of business and personal data can occur. As a result, there is a loss of profit, and sometimes even a complete shutdown.
  • Solution: Cyber Insurance. No one can be 100% protected from cybercrime, but you can do everything in your power to prevent attacks, or at least not lose money. Cyber ​​insurance can help you with that. It is an insurance solution where you contract coverage in situations where your security or the security and privacy of third party data is compromised.
  • Finding a reliable supplier. This is one of the first obstacles on the way to a successful dropshipping business.
  • Long shipping process. The long waiting process can put off some buyers, especially nowadays when there are other, faster options like Amazon Prime. When a buyer orders something through your website, you can’t immediately ship them the purchased item. The order has to go first to your supplier and after they ship it, it can take a month to reach the buyer. When you calculate in the lengthy refund procedure, to a 21st-century buyer it can seem like forever.
  • Competition. The E-commerce landscape is getting crowded. There are tons of sellers, suppliers, and buyers and more e-commerce platforms are emerging to meet the demand. The key to success is outperforming the competition. Be the best in your field.
  • Products that do not match the description you gave.
  • Damage to products.
  • Delivery problems.
  • The usage of products endangers the health of customers.

Fortunately, you can also protect yourself from such risks with the help of insurance policies such as product liability insurance and product insurance.

In case of negative consequences of using the product, before acquiring insurance, it is important to inquire about the guarantees offered by the manufacturer and to design a product liability insurance policy together with your insurance broker.

“There are only two things certain in life: DEATH and TAXES.”

Benjamin Franklin

Dropshipping Tips

  • Find a profitable niche.
  • Prioritize marketing. Do online advertising and social media: Google ads, Facebook, Instagram.
  • Analyze sales. Use Google Analytics to gain more insight into your international sales. You can see where you are successful and where your advertising efforts need more work.
  • Reputation. You should focus on maintaining a spotless reputation. Customer reviews are everything. A bad review could force you to shut everything down and start all over, under a different name.
  • Study. Before you embark on your dropshipping journey, you should develop new skills connected to e-commerce. Read guides, tutorials, and anything you can find about online advertising. I recommend reading the Practical Guide to Dropshipping and Dropshipping, Amazon FBA, Affiliate Marketing.
  • You must become a master of social media, as well. Learning new tools and implementing them in your business practice will lead to success. Ecom Empires offers free training to anyone who likes money (their words).
  • Study successful dropshippers. Crazylister writes about dropshipping success stories. #1 on the list is Irwin Dominguez who made $1M within 8 months. His story is truly an inspiration because he started with nothing, and is self-taught. Some of the tips he gave to the readers are: start small, find a niche product, use Facebook ads, and prepare for bigger demand.
  • English. The knowledge of English at the native level is crucial. This is especially important to emphasize for dropshippers based outside the US who are targeting the vast American market.
  • If you want to expand your dropshipping business globally, you should definitely consider learning and implementing other languages to your website.

Conclusion

Fast and easy start, low initial and upkeep costs, potentially high earnings, and much more are promised to successful dropshipping businesses.

The high unemployment rate, job insecurity, looming economic crisis are significant factors that should persuade you to secure your plan B.

A ton of free online resources on any topic cancel out all excuses. Just don’t be lazy. It won’t be easy money, but heck, what is?

With so many success stories, it makes you think.

When the initial investment is close to zero, everybody should give it a try. After all, this is the 21st century. We should embrace e-commerce and move our business online.

Related post: Online Passive Income in 2020 [15 Tactics That Instantly Work]

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