5 Factors for First-Time Ecommerce Dropshippers to Consider

Business.com / Business Solutions / Last Modified: January 8, 2018
Photo credit: Nik Symkin/Shutterstock

Dropshipping could be a great option for your ecommerce business. Here are five things you need to know about in making your decision.

If you're reading this, you're probably interested in starting an online business. Although this process is full of excitement, it's also full of worry about money. This is where dropshipping comes in.

With dropshipping, a company pays your upfront inventory costs and manages your shipping and fulfillment operations for you. This takes some of the financial stress out of the process. It also allows you to source your products from anywhere in the world.

Dropshipping 101

Dropshipping is a retail and ecommerce method in which you don't keep your own products in stock. Instead, you partner with a wholesaler or trading company that stocks its own inventory. When you receive an order, you send the order details to that company, which ships the goods for you. Customers won't even know you're dropshipping, as private label shipping allows you to use your address on the invoice and return label.

It's an incredible setup, but if you're just getting started, these are a few things you'll need to know.

1. Candidates for dropshipping

Almost everyone who starts an online business can benefit from dropshipping. It's one of the simplest and most proven ways to manage and ship inventory. Further, it helps keep startup costs low. Dropshipping can enable you to start a business in less than one year with only a few thousand dollars.

If you need help getting physical products to launch your ecommerce store, dropshipping is for you. In little time, you can have access to hundreds of thousands of dollars of inventory without pre-buying, warehousing or shipping any of it on your own.

2. How to select dropshippers

There are a few methods you can use to pick a dropshipper, but one of the best is to start with the products you want. Once you have an idea of what you're interested in, you can start to contact original manufacturers and ask them for their qualified distributors.

When you do this, you'll want to keep a few things in mind. First, this market is full of people trying to make a quick buck. Individuals will pose as dropshipping companies to scam you, so use caution when you interact with companies. Ask them for their legal credentials and try to make multiple contacts at the company before you do business with them. Also, remember that not all distributors are willing to dropship. Finding a valid company that's willing to carry out this process for you may take some time.

Another way to find wholesalers is through Google, but generally, you'll need to search through around 20 Google results pages to find a few viable options.

3. Finding your niche

Again, it's often best to determine the products you want to sell before you look for a wholesaler. Finding your ecommerce niche is a big hurdle that requires all of your attention. To start the process, think about the things that inspire you. You'll need to write, read and talk about this topic daily for years to come, so make sure it's something you're passionate about.

Unfortunately, not all of your passions are moneymakers. You'll also need to think about the topic's profit potential. Search the internet to see if people are looking for products like yours. Try to gauge the current competition as well.

Finally, you'll need to test your idea. Run a quick A/B test to see how your audience responds to your product before you commit to it completely.

4. Potential downsides

Like all business opportunities, dropshipping also has some downsides. Mainly, you'll have weaker margins with dropshipping. There's a ton of competition in dropshipping, and this rivalry often leads to cutthroat pricing and decreased product margins.

Inventory management can also be quite tricky. You won't have hands-on management in a warehouse, so you'll probably be blindsided by out-of-stock items and other inventory issues from time to time. Fortunately, there's a workaround for this issue. Working with multiple companies with overlapping product lines can save you a lot of inventory distress.

Passionately selling products you've never seen is yet another challenge you'll need to overcome. Chances are you won't be able to get a sample of every product you sell. Sometimes, you'll need to sell your products from the information you can find about them online. This is why it's important to be passionate about your products. Your genuine interest and excitement will allow you to sell the value of the item without ever having touched the physical product.

5. Benefits

One of the main benefits of dropshipping is a low upfront cost. You don't need a lot of money to get started selling online. Without investing in inventory, you can offer thousands of items to your customers.

Launching and growing an online company is a ton of work. Your plate will always be full, and you'll never feel like there's enough time in the day. Not having to worry about fulfillment will free up your time to focus on growing your brand awareness and gaining more customers.

As a first-time dropshipper, you'll also have unmatched mobility. Since you're not tied down to a physical warehouse, you'll be able to run your business from anywhere with an internet connection. You'll also be able to source from anywhere in the world. Many companies that use dropshipping are based in the United States but source their products from Asia.

A tried-and-true opportunity

Well-known companies like Walmart, Best Buy and Fossil use dropshipping to offer their customers more products without increasing their physical inventories. Small startups and other first-time dropshippers also use this method to get started with little upfront cost.

If you want to start an online store with a variety of offerings, you can take advantage of dropshipping. When managed correctly, dropshipping can save you money, time and undue hassle.

 

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