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What Is Dropshipping? How To Start A Profitable Dropshipping Business?

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The recent competitive retail market and its constant changes require businesses to upgrade themselves and move upward. At the same time, more and more modern solutions are developed to facilitate retail businesses to adapt to their market and enhance profitability. And the technique that we want to discuss further today is dropshipping.

If you are a retail owner, you must have known that the inventory process in your warehouses plays a crucial role in maintaining and growing your business. However, there are numerous things to handle in your warehouses, most of which, in the past, were fulfilled manually. This can lead to a series of unexpected mistakes and interrupt the whole process. 

In the modern context, powerful business models like Dropshipping will help you solve this issue by automating various inventory tasks and speeding up your workflow. Yet, before digging deeper into how beneficial this model is, let first know what Dropshipping is.

Contents

What Is Dropshipping?

How Does Dropshipping Work?

Is Dropshipping Worth It?

Successful Dropshipping Stores

How To Start A Dropshipping Business?

Is There Any Drawback Of This Modern Business Model? And Solutions?

Tips To Starting A Dropshipping Business Propitiously

Best Dropshipping Products To Start With In 2021

What Is Dropshipping?

Dropshipping is a cost-effective and low-risk retail fulfillment method.

The reason is that the retailers applying this business model can operate an online store without having warehouse locations. Once their stores receive an order from customers, all information about those orders will be sent to a particular third party.

The third party can be a manufacturer, a wholesaler, a fulfillment house, or another retailer who takes responsibility for fulfilling and shipping orders directly to customers’ addresses. Those are also called dropshipping suppliers/ dropshipping companies/ dropshippers.

This model allows the dropshipping business owner to focus on sales and marketing without worrying about product sources and inventories.

How Does Dropshipping Work?

How Does Dropshipping Work

To illustrate, when receiving an order from the customers, the retailer will place the same order for the dropshipping supplier. This process can be implemented manually or automatically (by setting it on the dropshipping website).

In other words, the dropshipping businesses can cut down the steps of receiving the goods from the suppliers’ warehouses and then delivering them to the buyers.

All of the orders will be fulfilled and shipped by dropshipping companies.

As you can see, this model saves a large amount of money for building warehouses and delivery. But, a small proportion of revenue from each order will be shared with dropshipping suppliers as remuneration.

Is Dropshipping Worth It?

Many people believe that dropshipping pave the way for startups and newly established retail stores.

1/ Smart investment on a small budget

Is Dropshipping Worth It

As you can see, Dropshipping appears to be a perfect business model for small businesses with limited capital.

This model enables retailers to build a complete retail business without spending much on building warehouse locations.

Also, they don’t need to pay for other inventory stuff such as inventory employees, equipment, or devices.

2/ Easy start and monitoring

Although Dropshipping is a new business model, it will not take you much time or effort to learn the basics or get started with it.

Compared to the traditional business retail models, dropshipping costs you considerably less budget. And since there is no warehouse to manage, you can shed your burden of keeping the business on track.

3/ Access from everywhere

With the Dropshipping model, you can run and manage your business anywhere, anytime. For example, traditional business with warehouse locations requires retailers to monitor every change in the warehouse closely.

Retail owners need to spend time and money optimizing the inventory process to ensure not losing any orders. On the contrary, with a dropshipping model, all they have to do is to contact suppliers right after gaining new orders via mobile devices such as laptops or tablets.

And even when you connect with multiple suppliers or vendors at a time, Dropshipping can make things much easier.

4/ No worries about managing inventory

benefits of dropshipping

Since Dropshipping allows retailers not to keep stocks in their stores, fewer inventory tasks would be to deal with.

With traditional business models, storing stock may cause an array of problems related to preserving stocks, effectively streamlining stock flow, or transferring stocks across warehouses, etc.

Also, you can avoid common stock issues such as understock or overstock, especially during seasonal or special events.

Successful Dropshipping Stores

Despite having read about the impressive advantages of dropshipping, many of you may look for a typical successful case study of retail stores adopting dropshipping. And in this article, we have three examples for you.

Wayfair

Wayfair is a US-based homeware company founded in 2002. In the early day, leaders of Wayfair were keenly aware that they need lots of space to store their inventory. Yet, it was impossible at that time. And eventually, they decided to apply the dropshipping model.

After ages of operating dropshipping business, Wayfair is now one of the largest homeware companies in the world that serve more than 8 million customers each year.

Meowingtons

Meowingtons is a company providing all products for cats, and especially, those products are sourced from AliExpress wholesalers. This company has an Instagram store with 557k followers and 1.3 million likes on Facebook, which are powerful tools to raise people’s awareness about their stores and attract more orders.

And from a dropshipping car store at the beginning, Meowingtons can now introduce their own customized product lines and suppliers for various local cat cafes.

HYGO

HYGO is a Shopify retailer that was just established in 2017. But this company only needs a few years to become one of the largest retailers having stores on Shopify.

The reason for HYGO’s success stems from its variety of product categories and an effective dropshipping system. In practice, HYGO can fulfill and dropshipping products in bulk, which is an up-and-coming shopping option nowadays.

How To Start A Dropshipping Business?

Below is the formula to start a dropshipping business with minimum effort and maximum outcomes:

1/ Select dropshipping business ideas with a promising market

How To Start A Dropshipping Business

It is vital to bear in mind that, Dropshipping is not for every retail market. In fact, retailers will be able to make the most of it in particular markets, such as providing high-maintenance products. Besides, the majority of dropshipping businesses provide products that are not widely sold necessities but are only available in some particular regions.

For example, when customers want to buy daily necessaries, they tend to choose the nearest stores with in-store available products. On the contrary, when customers want to buy a wardrobe, they tend to go online, seek the most suitable products and have them shipped to their address. Owners of these stores don’t need to have their own inventory, and dropshipping is the better option.

2/ Find a suitable dropshipping supplier

In Dropshipping model, the supplier is a major determinant. And “how to find dropshipping suppliers” is one of the most pivotal concerns of those who want to start a dropshipping business.

It is essential that you conduct research on current suppliers existing in the market and find the best one that can fulfill your need.

Communication with suppliers is also important. The effectiveness of this model can be increased if all parties have discussed and come up with a business goal in common. 

Top 10 dropshipping suppliers in 2021:

If you are managing to open a dropshipping business yet, have not found a suitable dropshipping supplier, here are some recommendations for you.

  • Spocket
  • AliExpress
  • Worldwide Brands
  • Megagoods
  • SaleHoo
  • Doba
  • Wholesale2B
  • Wholesale Central
  • Inventory Source
  • National Dropshipper

3/ Make a dropshipping website

Make a dropshipping website

Since the main point of the Dropshipping model is to focus on gaining more sales fully, retailers should consider selling their products on diverse channels. Or in other words, retailers should develop omnichannel sales strategies.

In the modern days, having an online store is an emerging trend, especially after covid 19 pandemics hit our worlds. The number of customers buying products online significantly increases, which is a huge opportunity for online retailers.

When it comes to selling online, an effective eCommerce website is a key factor. With the help of technology innovations such as eCommerce platforms like Magento, it is no longer a challenge to build an online store. If you want to know further about how to build an eCommerce website, feel free to contact us.

4/ Attract your customers

From this step, you are now ready to launch your business and gain your very first customers. It would be impossible to list how many methods to attract new customers, which is all about your marketing strategies. Yet, make sure you have a detailed one for your business in order to guarantee your sales revenues.

In fact, there are various ways for the retailer to promote their products online, including Google Ads, Facebook, Instagram, etc. Since dropshipping businesses don’t need to allocate money to inventory management, they should consider investing more in marketing efforts.

5/ Monitor and optimize the process

The best way to avoid unexpected problems is to monitor every aspect of your business closely. When adopting Dropshipping model, you will need to keep track of all data and metrics during your process as well as your suppliers’ process. Those data can help you to timely figure out possible problems and solve them. 

Also, by generating insightful reports based on in-hand data, retailers can predict market demand in the future and shopping trends among customers. That information enables you to adjust the process and bring your best services to customers.

Is There Any Drawback Of This Modern Business Model? And Solutions?

dropshipping model disadvantages

Of course, every business model has its pros and cons. It is important to bear in mind that not any method is suitable for all types of business. Neither do Dropshipping. Hence, if you are considering adopting this model, make sure you have examined the following disadvantages. 

1/ Low profit margin

As mentioned above, when adopting Dropshipping, retailers can pour less money on inventory management compared to other models. Yet, you will also gain fewer returns.

The reason is that you will have to pay a considerable part of your income for your suppliers who handle inventory issues for you. 

If you deal with everything yourselves in your warehouse, you can adjust and monitor the whole warehouse process to save your wallet. In addition, you can not take control over what your suppliers do before shipping your orders.

2/ Extra inventory problems

Without control over your entire supply chain, you may encounter numerous problems that break the whole business process.

For example, your suppliers may not fulfill orders as your customers’ demand in terms of time or quality. In those cases, you will lose your customers for your competitors right away. 

Therefrom, it is a must that every retailer should find a reliable supplier with great services and have a clear contract right at the beginning of their journey. We have once talked about suppliers and how to find one. To have more information about the wholesale and supply market, don’t forget to go there.

3/ Difficulties in streamlining the process

Usually, a retailer should not only connect with one single supplier. Although multiple suppliers enable you to provide customers with more product sources as well as shopping options, it is never an arduous task to manage all those supply sources. In other words, the more third parties (suppliers or wholesalers) involved in your supply chain, the more complicated it will become. 

A tip to solve this problem is that when creating online stores, retailers should choose a robust platform with the ability to integrate and connect directly with many suppliers. Also, the platform should be able to synchronize all businesses at one centralized monitor screen.

4/ Constraints on enhancing customer services

The problem is that you can not take control of your orders after sending them to dropshippers. In other words, you can not take control over the whole customer journey.

On the contrary, if you have your own warehouse, manage all inventory yourself, and work directly with other service providers such as delivery, it is more feasible to enhance your customer satisfaction with the best services they can expect.

Tips To Starting A Dropshipping Business Propitiously

1/ In-depth understanding of your market

Before taking any method into practice, you need to learn and gain a detailed understanding of it first. As I have mentioned before, no business model fits all types of business.

Dropshipping is also designed to meet particular requirements and most fit in particular industries. 

Hence, what you have to do before starting up this model is to do a research market and examine your opportunities. Make sure to have a detailed plan for how your business will grow in both the long and short term.

2/ Prepare for possible problems

In this article, we have addressed some common problems when adopting dropshipping. Depending on particular businesses, there might be more or less. Addressing possible problems and preparing to solve them will protect your business from being severely damaged.

3/ Have an effective website

build an ecommerce website

As mentioned above, when adopting the dropshipping business model, your businesses’ major concern is to gain customer attraction from every channel. And an eCommerce retail store is one of the most beneficial.

An effective eCommerce website is not just about having an intuitive or user-friendly interface. The online store should also provide visitors with useful information and great navigation. Therefrom, retail store owners can convert as many visitors into customers as possible.

Find out how to build a new e-commerce website within 30 days here.

Best Dropshipping Products To Start With In 2021

The very first and foremost stage of starting a dropshipping business is choosing potential niches – products that are in high demand right now. Based on our market, here are some promising products for new players in the dropshipping industry:

Slime

Best Dropshipping Products

Slime is not just a toy for children, but many people love having a slime collection. In fact, slime is reported as one of the best-selling products in 2020. Yet, customers prefer to buy slime online rather than thanks to the diversity of color and providers. And there is an array of wholesale or supplier provides these products from different countries.

Pet accessories

how to choose dropshipping product

The number of pet owners is at an all-time high, and the demand for pet suppliers is also rising in almost every country. However, not many countries have standardized the pet products industry, and they import this category from others. As a result, pet product is also a promising category for a newly established dropshipping business.

Car accessories

Mid to high-end car brands usually manufacture car accessories for each of their product lines. From the customers’ perspective, they also prefer to buy car accessories at the same company as their car.

Usually, these products are not distributed widely in every car outlet, yet only deliver to customers when they ordered. Thus, being the bridge between the car manufacturers and customers is an interesting business idea with low capital investment.

Home gym equipment

dropshipping products to sell

Before Covid 19 pandemic, people may prefer to go to the gym rather than bringing equipment home. But after days of being lockdown, many gym lovers expect to have indoor gym equipment. Because of this reason, in 2021, this category has experienced an impressive upward trend.

Tech products

The industry 4.0 revolution paves the way for tech product manufacture to expand their business. It is undeniable that in recent years tech products are always hot-selling.

Especially, not only high ticket products gain more sales but also cheap electronic devices. And people usually go online to buy these items. Hence, tech product is a perfect option for dropshipping businesses with low capital.

All In All

This article has answered some of the most popular concerns of those who desire to start a Dropshipping business. By providing an overview on Dropshipping, we hope to help somewhat you understand this prevalent business model and examine if it is suitable for your business or not. For more information about Dropshipping as well as other business issues, leave your comment below.

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