Dropshipping is a simple enough concept: You set up an eCommerce store and use suppliers to fulfill your orders and ship them out to your customers. This retail fulfillment method means that the merchant doesn’t have to handle or deal with the product. Dropshipping is designed so the merchant doesn’t have to store any inventory and there is no worrying about any logistics or shipping costs.
Dropshipping Scenario vs. Classic Commerce
- 1 – The customer orders and pays you for the product.
- 2 – Only after you get the money from the customer will you pay the supplier to fulfill the order.
- 3 – The supplier ships the product directly to the customer.
- 1 – You get the items from the supplier. You also pay them at this time.
- 2 – The customer orders and pays you for the product.
- 3 – You ship the order to the customer.
There are some pros and cons of the dropshipping model.
Low Investment – One of the biggest advantages of dropshipping is that you can launch an eCommerce store without having to sink hundreds or thousands of dollars into inventory. You aren’t manufacturing anything yourself or storing any goods so there is no need to actually create a product.
Easy to Start – Other than finding a supplier and setting up your online store, running an eCommerce business is easier to start and run when you aren’t dealing with physical inventory.
Low Overhead – You don’t have to deal with purchasing inventory and managing a warehouse or storage facility, keeping your expenses nice and low. You could run your dropshipping business from home from a laptop! With dropshipping you don’t have to worry about…
- managing a warehouse
- packing and shipping
- inventory tracking
- reordering products
- handling returns and incoming shipments
Location Flexibility – As long as you have a connection to the internet, your dropshipping business can be ran from just about anywhere. Just make sure that you are able to communicate with your customers and dropshipping suppliers.
Scalability – A traditional business will receive 3x as much business as you will need to do 3x as much work. By leveraging dropshipping suppliers, the majority of the work will be borne by the suppliers, allowing you easier expansion and less work. Remember that with an increase in sales, additional work will have to be done, especially with customer service, but dropshipping businesses tend to scale well relative to a traditional business model.
Array of Products – The nice thing about not having to pre-purchase items means that you can potentially offer a wide variety of products to your customers. This also allows you to pivot directions and offer different types of products if your original dropshipping business model wasn’t quite working out for you.
Low Margins – The biggest disadvantage to operating in a highly competitive dropshipping market means lower margins. Because it’s so easy to get started with low overhead costs, many merchants will start their store with super low prices in an attempt to quickly grow revenue. While these competitive merchants more often have low-quality websites and little to no customer service, this won’t stop potential customers from comparing their prices to yours.
Shipping and Returns – If you’re using more than one supplier, as many dropshippers do, this can complicate your shipping costs as they can vary from supplier to supplier. You also lose control over shipping quality and speed.
Returns can be tough as well. Based on the agreement you have with your suppliers, customers might be required to return the products to you, not the supplier. Then you have to go through the return and complaint process yourself. This can make keeping the customer happy difficult.
Lack of visibility – When you work with suppliers you are also outsourcing some of your customer satisfaction. Someone else is building and sending out a product which is a huge part of the overall customer experience. If anything goes south on the supplier’s end, the customer will blame you. Even the best suppliers make mistakes fulfilling orders; mistakes that you will have to take responsibility and apologize for.
There is also less control over the inventory. When you’re sourcing from multiple warehouses, inventory changes daily. It’s important to take advantage of software solutions that allow you to view your inventory levels with your supplier.
Picking Your Market and Finding Suppliers
A common misconception is that by having a dropshipping business you can work within any niche you want and you will turn profits. This is just not true. No matter which market you decide to sell, there will be multiple competitors with a more established presence and customer loyalty. A common mistake is picking a product based on personal interests. This won’t necessarily guarantee you business success. If your number one goal is to build a profitable dropshipping site, consider putting your personal passions aside when researching your market niche.
When researching products, consider the following:
- Are you a consumer of that niche? Do you understand the products and how they improve things? Having a first-hand understanding of a target audience can give you an instant edge in marketing efforts.
- If you have professional or academic expertise in the product this can help make you a bigger advocate for how the products can enrich and help people.
- You have seen other businesses attempt to sell in the same niche and you know their successes and failures, allowing you the foresight to avoid or follow them.
Before looking for suppliers, it is essential to know how to differentiate between legitimate wholesale suppliers and retail stores posing as wholesale suppliers.
Fake Wholesale Suppliers
They want fees – Real wholesalers don’t charge their customers monthly fees for doing business with them. If a supplier is asking for a membership fee or service fee, they are likely not legitimate.
Available to the public – If you are getting genuine wholesale pricing you need to apply for an account, prove the legitimacy of your business, and be approved before ordering with the supplier. If the supplier offers products to the general public at “wholesale prices”, it is just a retailer offering items at inflated prices.
Legit Wholesale Suppliers
Per-order fees – This isn’t the same as a membership fee. Many dropshippers will charge a per-order dropshipping fee that can range from $2 to $5, depending on the size of the items being shipped. This is an industry standard as the cost of packing and shipping individual orders is higher than shipping in bulk.
Minimum order size – Most dropshippers have a minimum order size, which is the lowest amount you have to purchase for your first order. This filters out any window-shopping merchants who waste their time with small orders and questions that never turn into meaningful business for them.
This could potentially cause some complications for your dropshipping business, especially if you are required to have a minimum of a $300 order, but your average order size is around $100. Offer to pre-pay the supplier $300 to build credit with them to apply against your dropshipping orders. You are at least committing to $300 in product without having to place a large order of stock you don’t need.
How to Find Suppliers
Finding quality supplier is crucial to your success. If you are working in a traditional model where you are holding inventory and you mess up an order, at least you have the means to solve the problem and make it up to your customers. You are controlling the entire process. In the dropshipping model, if the deliveries to your customers are going out wrong, it’s not something you yourself can fix. The only thing you can really do is look for a new supplier. However, you don’t necessarily have a backup supplier ready, meaning your brand and reputation are likely to suffer. That’s why working with the right suppliers is so important.
Check out this List of Dropshipping Suppliers from BigCommerce
Search with Google
It may seem obvious, but keep in mind:
- You have to get specific when searching. Wholesalers aren’t the best at marketing themselves and you probably won’t find one by just searching “wholesaler suppliers for product X.”
- Don’t judge by the website. Wholesalers are also notorious for having outdated websites. Don’t let quality of the site deter you from a good supplier.
- Make use of those modifiers when searching. Keywords like “distributor,” “reseller,” “bulk,” “warehouse,” and “supplier” will yield more narrowed results.
Go to Trade Shows
If your time and budget allow for it, make an appearance at trade shows where manufacturers and wholesalers will be in attendance. Make sure you have your product niche in mind and prepare to network.
A supplier directory is a database of suppliers that is organized by market, niche, or product. Many directories use a screening process to make sure the suppliers listed are genuine wholesalers. Supplier directories are a convenient way to quickly search for and/or browse many suppliers in one place while also giving you more ideas for products to sell or niches to enter.
Here are some suppliers to get you started:
This is only the tip of the iceberg when it comes to starting a dropshipping business. We will bring you more information to help you get started along with helpful hints and tips along the way.