How to Start a Drop Shipping Business in 2021
All you need to know about Dropshipping.
Many people shy away from starting an online store because of the initial start-up costs. But imagine if someone offered to pay your up-front inventory costs on thousands of items and manage all your shipping and fulfillment operations for you.
It’d be much easier to get started, and you could run your business from anywhere in the world. Sound too good to be true?
Well, it’s not, if you know about dropshipping.
What is dropshipping?
Well, dropshipping is a retail method in which you don’t keep products in stock. Instead, you partner with a wholesale supplier that stocks its own inventory — you transfer customer orders and shipment details to them, and they ship the goods directly to the customer.
The Benefits of Drop Shipping
The biggest benefit of dropshipping is you don’t have to worry about fulfillment or inventory issues. Also, most customers don’t know you’re dropshipping, since “private label shipping” lets you ship from the wholesaler with a return address and invoice customized to your eCommerce store. Let’s quickly go over a few other benefits of drop shipping.
One — You don’t need buckets of money
Dropshipping makes it amazingly easy to get started selling online. You don’t need to invest heavily in inventory, yet you can still offer thousands of items to your customers.
Two — Convenience and efficiency
Successfully launching and growing an eCommerce business takes a lot of work, especially if you have limited resources. Not having to worry about fulfillment is incredibly convenient and frees up your time to concentrate on marketing, customer service, and operations
Three — Mobility
With all the physical fulfillment issues handled, you’re free to operate your business anywhere you can get an internet connection.
Four — It’s a trusted model
You might be thinking that this sounds like some sketchy, fly-by-night model — but it’s not. Plenty of online stores and even major retailers use drop shipping to offer a wider selection of products to their customers without having to deal with increased inventory hassles.
How do I find dropshipping wholesalers?
Well, first off, in the United States, most suppliers will ask you for your business EIN number and a copy of your state sales tax and/or resale certificate.
So you may want to consider having your legal ducks in a row before contacting suppliers. However, this isn’t always the case and there’s no reason why you can’t start contacting dropshipping suppliers immediately.
Now, if you already know what products you’d like to drop ship, contacting the original manufacturer is the easiest way to find qualified distributors. Not all distributors will be willing to drop ship, but it will give you a list to follow up with.
Unfortunately, the market is littered with scams and low-quality information. If you do decide to invest in a directory, we recommend the paid directory World Wide Brands as a reputable source of drop shipping wholesalers — but it’s still very important to exercise caution.
How to use Google to find wholesalers
Google can also be an effective tool for finding drop shippers, but you need to keep a few things in mind. Here are some tips you can use to find a wholesaler through google.
The first thing you’ll want to do is Search Extensively. Wholesalers and drop shippers are notoriously bad at SEO and marketing, and usually aren’t going to pop up on the first page of Google for a term like “handbag wholesaler.” Instead, you’ll need to dig deep into the search results, often going through 10 or 20 pages of listings.
Additionally, you should use lots of modifiers: As you hunt for suppliers, don’t stop with a search for “wholesale” — make sure to use other terms, including “distributor”, “reseller”, “bulk”, “warehouse” and “supplier.”
It’s also important to note that suppliers also tend to have outdated, late ‘90s-era websites. So don’t be scared away by abysmal design and layout. While a sleek, modern site could signal a great supplier, a low-quality one doesn’t necessarily indicate a bad one.
Drop Shipping Challenges
Now, despite my glowing recommendation, dropshipping isn’t eCommerce nirvana. Like all models, it has its challenges and downsides, which I’ll quickly go over now.
One — There will be loads of competition and weaker margins
It’s true. Products that can be drop shipped will spawn a lot of competition. Usually, this will lead to cutthroat pricing and diminishing profit margins, making it hard to build a viable business.
To be successful, you typically can’t compete on price. Instead, you’ll need to offer value in a different way, usually through top-notch product education, service, or selection.
Two — Syncing inventory is difficult and leads to out-of-stock items
The best way to mitigate this problem is to work with multiple suppliers with overlapping product lines. It’s inherently dangerous to rely on a single supplier.
Having two suppliers doubles the likelihood that an item will be in stock and available for shipment.
Many sophisticated suppliers offer a real-time product feed, and you can use a service like eCommHub to easily sync your dropshipping website with the warehouse.
Eventually, you’ll sell a customer an out-of-stock item. Instead of canceling the order, offer the customer an upgraded product or discount.
You might not make much — if any — money on the order, but you’ll likely build a loyal brand advocate.
Three — It’s hard to sell products that you never see
In today’s world, it’s possible to become an expert in just about everything through information online.
Selling products from manufacturers with detailed websites will allow you to become intimately familiar with a product line without ever having touched a physical item.
And when you do need to answer specific questions about a product, a quick call to your supplier or manufacturer will give you the answer you need.
You can also buy your most popular items to get acquainted with them, and then resell them as “used” or “refurbished,” often recouping most of your investment.
Four — Third-party errors
Involving a third party will result in more fulfillment errors, mistakes, and logistical problems. Even the best drop shippers make occasional mistakes, and mediocre ones make a lot of them.
Suppliers are fairly good about paying to remedy problems, but when they’re not, you need to be willing to spend what’s necessary to resolve the issue for your customer.
If you try to blame your supplier for a fulfillment problem, you’re going to come off as amateurish and unprofessional. Similarly, if you’re unwilling to ship out a cheap replacement part to a customer because your supplier won’t cover the cost, your reputation is going to suffer.
One of the costs of drop shipping convenience is the expense of remedying logistical problems. If you accept it as the cost of doing business — and always make sure to put your customer first — it shouldn’t be a long-term issue.
The Final Words on Dropshipping
Is dropshipping the path to overnight eCommerce success?
Of course not. As with any successful online store, you’ll need to invest over time in a quality website, marketing, and customer service. But drop shipping does provide an easy way to get started and the ability to leverage other people’s capital without having to invest thousands of your own. When managed correctly, it can form the foundation of your own successful online store.