Intro: How to Start a Drop-Shipping Business
With online retail becoming the preferred method of shopping, starting a drop-shipping business has become a lucrative and relatively simple means of generating income. Even outside of the United States, e-commerce is skyrocketing.
More than ever, online retailers are expanding by opening up their websites to international markets. Learning how to become a drop-shipper is another method of expanding market reach.
Drop-shipping is revolutionizing the world of online retail. Various online stores and even major retailers have utilized business methods to make money drop-shipping. Widespread diversification for online retailers is possible through learning how to start a drop-shipping business.
How to Start a Drop-Shipping Business
Online retailers like Amazon and eBay often have their sales fulfilled through various drop-shippers. This retail method is available for privately owned retailers to utilize as well.
Some studies claim that a six-figure income can be earned independently through a successful online drop-ship business. This has generated a lot of advice regarding how to start a drop-shipping business.
With the online world of retail constantly evolving and shifting, many business owners are wondering how to become a drop-shipper. In order to make money drop-shipping, there are certain crucial elements about the drop-ship business that you need to know. Our review will walk you through everything you need to know about what a drop-ship business is and will act as a guide for how to start a drop-shipping business.
In order to cover all the elements of how to start a drop-shipping business, this review will strive to answer these questions:
- What is a drop-ship business?
- What are the benefits and downfalls to starting a drop-shipping business?
- How can I become a drop-shipper?
- What are the best items to drop-ship?
With a wealth of information and reviews on how to start a drop-shipping business, this comprehensive review will provide you with all the necessary information and tools to become a drop-shipper. By providing in-depth analyses of the core elements of starting a drop-shipping business, this review will provide a guide for the drop-ship business as a whole.
For those interested in starting a drop-shipping business, this review will have all the answers you need. If you are looking for general information on how to start a drop-shipping business, our review provides the perfect starting point.
What Is a Drop-Ship Business?
What Is a Drop-Ship Business? Guide
By nature, a drop-ship business is somewhat nontraditional. Drop-shipping combines innovative retail business methods with online shopping, referred to as e-commerce. The key component to a drop-ship business is that the merchant never actually physically handles or sees the product that they are selling.
While most traditional online retail stores keep stock products on hand, waiting in warehouses to ship out, a drop-ship business does not. Instead of dealing with warehouse maintenance and monitoring of inventory, drop-shipping involves utilizing third parties to bridge the gap between their customers and their business.
The drop-ship business relays customer orders and shipping details to the wholesale supplier, who fulfills the order and delivers directly to the customer. Although the items are advertised through a particular e-commerce retail store, they don’t physically come straight from that store.
For this reason, starting a drop-shipping business is dependent upon starting a partnership with a wholesale supplier. This partnership will include an agreement upon initial cost and shipping, which can be marked up by the drop-ship business. This is what enables a store to make money drop-shipping.
Drop-shipping can be a much quicker and cleaner process compared to traditional retail methods, as products listed through a drop-ship business can be sent directly to the customer from a wholesaler. There is no need for transferring to a store for purchase or pickup. Instead, the product is quickly relayed straight to the customer.
With the right tools, virtually anyone can master how to start a drop-shipping business. Of course, a crucial part of starting a drop-shipping business depends upon understanding the innate benefits and downfalls of this business model.
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What Are the Benefits to Starting a Drop-Shipping Business?
Starting a Drop-Shipping Business
There are many significant benefits to starting a drop-shipping business, typically revolving around low cost and high convenience. With the expansion of e-commerce, retail has certainly been given a lot of advantages, and drop-shipping is high on the list. Before analyzing how to start a drop-shipping business, here are the reasons why you should consider this business model:
- Low Initial Cost: Launching an e-commerce store can certainly pose a significant cost. Purchasing and maintaining inventory are the biggest initial costs that new e-commerce stores face. Starting a drop-shipping business, however, avoids this initial cost. Purchasing a product from a third party isn’t necessary until the customer has already paid for the product, usually at a relative price markup.
- Ease of Startup: Starting a drop-shipping business means that the typical retail worries of renting and managing a warehouse, keeping track of inventory, tracking shipments, or even preparing shipments are eliminated. A drop-ship business simply collects payment and purchases a customer’s order through a third party. All elements of shipping and inventory maintenance are taken care of by the wholesale supplier or retailer, not the business itself.
- Low Monthly Expenses: Without the hassle of keeping inventory on hand or having to maintain a warehouse, most of the typical business-related expenses are eliminated. Many successful drop-shipping businesses can easily be run from home. The ability to make money drop-shipping increases because many businesses can easily keep expenses below $100 per month.
- Flexible Location of Operation: Since many online retailers don’t need to have physical locations, starting a drop-shipping business online affords the luxury of flexible working space. Learning how to start a drop-shipping business could also mean learning to work from the comfort of your own home.
- Vast Array of Products: Because products don’t need to be physically purchased until they are ordered by the customer, this gives a drop-shipping business the ability to offer a wide array of different products. They have the ability to use trial and error to find the best items to drop-ship with minimal consequences.
With such a diverse list of benefits, it is no wonder that entrepreneurs are expanding their research into how to start a drop-shipping business. Maintenance costs are kept to a minimum, an important benefit for any new business. Starting a drop-shipping business means having the ability to be flexible not only with your time and work location, but flexibility with your product selection, too.
What Are the Downfalls to Starting a Drop-Shipping Business?
While learning how to start a drop-shipping business, there will inevitably be a few downfalls to accompany the benefits. Every business model comes with its own innate challenges, and being aware of these challenges is crucial.
While considering your options to become a drop-shipper, considering the potential pitfalls is important. Part of discovering how to start a drop-shipping business involves meeting new business complications and challenges. Our review recognizes the following three elements as potential pitfalls for starting a drop-shipping business:
- Increased Need for Customer Service Skills: Through the drop-ship business model, the business assumes all responsibility for delivery and accurate order fulfillment. This can be challenging, as shipping is handled exclusively by the third-party retailer, and not the business itself. One suggestion says that increased customer service might not be entirely bad, as it could provide opportunities to either upsell or generate positive customer reviews.
- Shipping Costs: Shipping can be difficult to maneuver, especially when ordering from multiple wholesalers. Each business is likely to charge a different shipping rate, making it difficult to charge all customers one flat shipping cost. For those looking to make money drop-shipping, losing substantial amounts of money on shipping is not an option. A good suggestion to avoid this pitfall is to try offering a flat-rate shipping fee, with free shipping after a certain threshold.
- Finding Reliable Suppliers: It is important to be careful about who you partner with as your wholesaler. This is especially important, since starting a drop-shipping business also means giving up control over inventory. It can be difficult to locate reliable suppliers with a good grasp on inventory levels and quality shipping methods. This particular pitfall can only be remedied through trial and error. To help ease the process of finding reliable wholesalers, a drop-ship business should be prepared to continuously update their online product selection.
No business model is completely without its own type of stress, and drop-shipping is certainly no exception. Although learning how to start a drop-shipping business brings its own unique concerns, the benefits certainly seem to outweigh the pitfalls.
How Can I Become a Drop-Shipper?
It is entirely possible to learn how to start a drop-shipping business in as little as one day. Mentor Palojak, blogger and co-owner of Hoasted Webhosting, built his drop-ship business in 12 hours. Surprisingly, building his online retail store only cost him about $35.
Figuring out how to start a drop-shipping business can be much easier for an already-established online retail store. With an existing website, framework, and marketing, learning how to become a drop-shipper typically requires minimal work.
However, for new businesses who have just begun, or have yet to explore becoming a drop-ship business, additional effort will be required to become a drop-shipper. Starting a drop-shipping business through this method provides two options. The first, and perhaps the easiest one, is to go through an online forum which will advertise drop-ship websites for sale.
Shopify is a good example of this. Instead of creating your own online store, Shopify will do the hard work for you. In addition to offering drop-ship websites for sale, Shopify also offers additional features for website themes, blogging, and expert assistance. A similar option for purchasing a drop-ship website is Selz.com.
Instead of purchasing drop-ship websites for sale, you can become a drop-shipper by creating your own website. This means actively building a business specifically catered to drop-shipping. This involves the following:
- Creating an Online Space: This is where the initial cost comes in. In order to make money drop-shipping, you need to have a website. As Palojak demonstrates, paying for a domain name and website hosting is a minimal cost.
- Basic Programming Knowledge: For a drop-ship business, developing a clear and easily navigated website is key. Discovering how to display items in a clear, attractive way on a website will require a bit of basic programming knowledge. Luckily, this usually doesn’t require hiring an actual programmer. WordPress and various plugins make website creation and management simple. Blogger Mentor Palojak provides a simple step-by-step process to learn the technical aspects of how to start a drop-shipping business.
- Register Your Online Business: This seems like an obvious requirement, but it is one that cannot be ignored when starting a drop-shipping business. Establishing an EIN (employer identification number) is the best way to protect your online store. Not only is this required by the IRS, but it can also help develop ongoing relationships with wholesalers, as they are likely to require an EIN.
- Begin Searching For the Right Wholesalers: With an established and ready website, it is time to find products to advertise. When looking for wholesalers to provide those products, have a clearly defined concept of what you want from your partnership. Keep in mind what countries the wholesaler will ship to, what their shipping rates are, and of course, what products your drop-ship business will need. It may be beneficial to look at what their customer service policies are as well. This last element might take some time to figure out. Learning how to start a drop-shipping business revolves around learning to identify the best products to drop-ship and the best wholesalers to provide those products.
- Market your Business: As with any entrepreneurial venture, marketing is typically left to the individual. Part of starting a drop-shipping business involves a heavy concentration on building your store’s brand. Social media outlets like Instagram and Pinterest have been helpful in developing a successful drop-ship business.
With a little bit of dedication and patience, it is entirely possible to learn how to start a drop-shipping business. The easiest part is organizing a website; the hardest part is finding the right retailers and the right marketing to ensure success.
What Are the Best Items to Drop-Ship?
While establishing a good working relationship with a wholesale retailer is certainly important, there are some products that are better suited for drop-shipping than others. For those who are starting a drop-shipping business, finding the best items to drop-ship will help ensure online success.
The best products to drop-ship are typically those that are in constant need. If a product is routinely purchased, that product can be counted on to be in consistent demand.
For example, a business will probably make more money drop-shipping computer hardware accessories than they will by drop-shipping a computer chair. Laptops and computers are consistently being updated, which prompts consistent purchases of the linked hardware accessories.
Among the best products to drop-ship are:
- Clothing: Online buyers can either choose a single item of clothing or an entire wardrobe. Tapping into the online clothing market is a good idea for those looking for the best products to drop-ship. In 2015, 62% of online shoppers reported purchasing clothing.
- Beauty Products: This is another easy fit for a drop-ship business. From haircare items to cosmetics, beauty products are a refillable order, and in constant demand.
- Books: In 2014, online book purchases came in at 29%, establishing their spot in the top three online purchases. From physical books to ebooks, they are easily one of the best items to drop-ship.
Conclusion: Starting a Dropshipping Business
Make Money Dropshipping
Learning how to start a drop-shipping business involves knowing what products to buy, and what retail outlets to use as business partners.
While learning how to become a drop-shipper, an entrepreneur may need to practice patience and a bit of trial and error. Although starting a drop-shipping business may take a little bit of effort, the benefits are huge.
It is entirely possible to make money drop-shipping right from home. This freedom and flexibility is one of the most lucrative parts of drop-shipping.
Those who are starting a drop-shipping business should certainly be wary of the innate pitfalls of this business model, and learn methods of working around them.
With methods and practices of online retail changing every day, learning how to start a drop-shipping business can certainly go a long way in keeping your online retail business ahead of the competition.
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