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What is Dropshipping?

4 min to read

Dropshipping is an online selling method where you work with a supplier. When a customer fulfills an order, the supplier ships the product. The profits you make are the cost of the sale minus any fees that you have to pay the supplier.

As a dropshipper, your role is to link customers with your suppliers. It’s possible to do this in different ways, such as setting up a website and embedding links to products (e.g. Hocoos).

Dropshipping is used as a way to quickly start an online business without significant financial investment, but to succeed, you’ll have to understand the basics of customer service and marketing. Moreover, while it’s a common beginner’s business model, there are some dropshippers with years of experience.

• Alternatives: There are similar business models to dropshipping. These suggestions could be appealing if your focus goes beyond the price and encompasses branding and product characteristics. For example, print-on-demand services might be a better fit; you should also look at third-party logistics providers (3PL) if branding is essential for you.

• Example: If someone sold cups online and had a dropshipping business, the supplier would then receive the order when a customer buys one. Their job is to then package the product and send it to the customer. At no point in the sale do you physically interact with the product; make sure that you price them appropriately to make a profit.

Deep Dive:
Choose a niche market for your products. You should start with something you know as you will then know more about what you’re selling and the target customer. Consider where the customer is likely to hang out online and market in those places; you can use paid ads or organic marketing.
Key Takeaways:
  • Risk management
    • If you don’t want to purchase inventory before selling, consider dropshipping.
  • Marketing
    • Your job is to sell the product; storage/shipping are dealt with by your suppliers.
  • Choose the right suppliers
    • Vet suppliers based on their delivery times and the quality of their products.
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What is Dropshipping?

What are the benefits of dropshipping?

Dropshipping is used as a starter business model (and by more established ones) for multiple reasons. Some of these are listed below. 

  • Startup costs: When you set up a dropshipping business, you only pay the supplier when you make a sale. With the potential for high startup costs associated with many businesses, this could be a feasible choice if financial limitations are a concern. 

  • Online business: To run a dropshipping business, you can be anywhere in the world as long as you’re connected to the web; however, you should hire customer support that’s available for your customers round the clock.

  • Product offerings: You can choose which products you want to sell, and because you don’t need to order or store them, some might deem this business model to be lower-risk. 

  • Scalability: Some eCommerce businesses need to deal with storage limitations; you do not need to think about this if you’re a dropshipper. 

  • Operations: Since someone else is handling the orders for you, you can focus on customer service and marketing instead. 
Deep Dive: 
Build a brand that your audience can recognize and resonate with if you want to run a sustainable dropshipping business. Investing in customer service and marketing can help attract and retain customers, while neglecting them may lead to customers choosing competitors. 

What are the challenges of dropshipping?

It’s easy to dive straight in after realizing the benefits of dropshipping, but you should consider both sides of the coin before doing so. Here are some more things to think about before you start a dropshipping business. 

  • Profit margins: These can differ compared to other forms of eCommerce and high street retailers, and as such, it’s important that you set prices that will enable you to make money. 

  • Managing inventory: Because you’ll have to pick a third party to manage your stock, it’s vital that you choose one you can trust. 

  • Shipping: Be careful when working with numerous suppliers as you don’t want to make shipping complex; instead, pick a couple of high-quality options.

  • Dependence on your supplier: It’s vital that you communicate with your supplier and choose a trustworthy option so that they deliver high-quality products on time.  
Pro Tip: 
Perform comprehensive supplier research before making your decision. It’s important that you clearly outline how you’ll talk to them and understand how they manage their inventory. 

How do I start a dropshipping business?

To start a successful dropshipping business, you’ll need to put the same amount of planning into it as you would with any other business model. It’s very important that you are also patient, especially in the early stages.

  1. Niche down: Pick a niche that you like and know about, and focus on a specific product within this niche. Then, target your marketing.
  2. Choose your suppliers: Perform research to find a supplier that meets your business needs. Consider other customer reviews and pick a supplier who you think is reputable.
  3. Set up your store: List products on your store and set up your website. You can use Hocoos to generate a website with AI and incorporate its eCommerce features to sell more effectively. 
  4. Marketing: Start creating content to find your customers. Paid advertising is one option, but you should also think about social media and building an SEO strategy. 
  5. Customer service: Should primarily focus on addressing customer queries and resolving any issues encountered. Give customers a clear channel for which they can contact you. 
Pro Tip: 
Your product descriptions are vital. Make sure that you spend time on the copywriting for these and choose matching visuals. 

Where can I find dropshipping suppliers?

To find dropshipping suppliers, you should choose a multitude of different options. Here are some commonly used strategies. 

  • Directories: Look at online directories to find suppliers that match your business needs. 

  • Trade shows: Find trade shows where suppliers will be attending, and talk to them when you attend. 

  • Industry contacts: Networking is vital; spend some time speaking to people in your niche to see who they choose as their supplier. 

  • eCommerce platforms: Look at eCommerce supplier directories. 
Pro Tip: 
Make sure that your efforts are a mixture of online and offline. Doing so is important for ensuring that you choose a supplier that you’re happy with. 

Conclusion 

Dropshipping is an option to consider among other business models when starting to sell products online, though it will require significant research before you start.

Make sure that you know how to choose a supplier, and what to look out for. You should also spend time building your brand and choosing appropriate marketing channels. Understanding how to provide customer service is also essential, and you should bring all of these components together.

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