[UPDATED] If you are into online marketing or have stumbled upon it recently, you must have heard about various online ecommerce models. One of them is dropshipping.
The term “dropshipping” gained popularity in 2006 when AliExpress became popular in the United States with the launch of Chinese ecommerce stores. At that time many people didn’t knew what is dropshipping. But some clever entrepreneurs took the lead and launched their stores to reap profits. They used AliExpress because of its low prices. Soon, more people were jumping on the bandwagon and dropshipping business became an instant hit.
Today, dropshipping has become a highly profitable ecommerce business model that can be started with almost zero investment. Some ecommerce giants such as Zappos, Wayfair, and Fab and Gilt, all have built their business models around dropshipping.
Let’s dig deeper and learn what dropshipping is and how you can start it.
- What is Dropshipping?
- Dropshipping vs Affiliate Marketing
- Benefits of Dropshipping
- Drawbacks of Dropshipping Model
- Who Should Dropship? Who is it for?
- How to Start a Dropshipping Store?
- How to Promote Your Dropshipping Store?
- AliExpress Alternatives in Dropshipping
- Final Words!
- Frequently Asked Questions (FAQs)
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1. What Is Dropshipping? ^
Dropshipping is a supply chain model in which a dropshipper can directly ship one product from wholeseller’s warehouse to the customer’s house without handling logistics and management. This lets dropshippers focus on the ‘actual’ business aspect of their business, i.e., growth and scalability.
These dropshippers earn commission by selling products of suppliers for a markup, earning handsome commissions.
In short, the dropshippers work as intermediaries between suppliers and customers. When an order is received, they transfer the order information to the suppliers and keep the markup amount as commission for themselves. The supplier will then dispatch the product from the warehouse to the customers. In most cases, the suppliers don’t even know that the person buying from them is a dropshipper or an actual person.
So, here is what you need to know about dropshipping:
- A dropship store works similar to an ecommerce store. You place an order and receive the product.
- However, behind the scenes, dropshipper gets the payment and then places an order with a third party. This third party can be AliExpress, DOBA, or even a wholesaler from Salehoo and other platforms.
- Once the wholesaler receives the order, they ship the product directly to the customer
- Dropshippers don’t directly handle the product. However, they can track the shipment.
How Does Dropshipping Work?
Dropshipping works when a dropshipper fulfills orders with the help of a third party such as wholesaler or an ecommerce store that sells the product at an even lower price .e.g AliExpress. Most dropshippers sell products directly from Chinese manufacturers because the prices in China for most products are quite low. If the wholesaler’s price for a product is $5. A dropshipper will sell it for $8 and keep $3 for himself/herself. Most dropshippers target countries with higher purchasing power.
How to Start an Ecommerce Dropshipping Business?
A dropshipping business takes only a few minutes to start if you are experienced in it. To launch your dropshipping business, you will need to:
- Select a niche
- Analyze competition
- Get a supplier for your products
- Select an ecommerce platform and create a store
- Create a proper marketing and customer acquisition strategy
- Start receiving orders
- Repeat the whole process again
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2. Dropshipping Model vs Affiliate Marketing ^
Dropshipping and affiliate marketing are two lucrative online business models. Let’s see what the actual difference between them is.
Dropshipping involves the supplier, the dropshipping store, and the customer. The customer orders a product from the dropshipping store. The dropshipping store transfers the details of the customer to the supplier. The supplier then ships the product to the customer. The dropshipping store makes a profit by selling the product at a higher price.
Image Courtesy: Oberlo
For example, if the price of the product on wholesale is $150, the dropshipping store can sell it for $200 to $250 making a commission of $50 or $100 easily.
- You set your own prices.
- You can start wholesaling any product without partnering with the manufacturer using Aliexpress, Ebay, and Amazon.
- You earn through arbitrage.
In affiliate marketing, the affiliate sells the products of the company that he is marketing for at a set commission. There are many online programs available for affiliate marketing but the commission is usually set by the company whose products the affiliate is selling. Unlike Dropshipping, the marketer doesn’t have the liberty of setting his own prices.
The good thing is that both of these are profitable, free to start, and people can make a career in both types of ecommerce marketing models with some hard work.
- You work at a fixed commission.
- You have to either join an affiliate program or partner with an ecommerce store.
- You earn commission on the number of products sold through your reference.
3. Benefits of Dropshipping ^
Dropshipping is a highly lucrative business opportunity for entrepreneurs. The good thing is that it doesn’t have a barrier to entry and anyone having little or no investment can easily enter the market. It is practical and convenient for anyone who would like to start their ecommerce store in 2021.
Here is a list of benefits of a dropshipping store.
i. Low Barrier to Entry
- In dropshipping, you don’t have to pay upfront for the products. So, you will only pay for the hosting and domain charges.
- As you have no excess inventory, hence your business is less prone to loss of revenue.
- You can upsell your own products along with best-selling ones on your store.
ii. Convenience for Supplier and Dropshipping Store
- With dropshipping, neither the dropshipping store has to worry about shipping and packaging of the product nor the supplier has to worry about marketing and promotion of his products and both reap decent profits.
- Dropshippers can work with multiple wholesalers at once.
iii. Easier to Scale and Remodel
- As dropshipping stores don’t require storage facility and are completely digital, they are easier to scale.
- Even if one niche or product doesn’t sell well, dropshipping stores owner can easily move to a better selling product.
iv. Minimum Risk
- A dropshipping store can be started for free. Just get a domain and hosting and you are good to go.
- Even if you lose the store, not able to scale or profit from it, you can easily back out with no risk at all.
4. Drawbacks of Dropshipping Model ^
Just like any other business model, dropshipping also comes with certain drawbacks. However considering the benefits, you could ignore these drawbacks. Nonetheless, all potential dropshippers need to know about the hurdles and challenges they might face before making the jump.
i. High Competition
Almost all ecommerce businesses have high competition. That’s why the online store owners try to stand out by providing quality services and unique products that their customers would love to buy. The high competition can become a problem for dropshippers who aren’t too careful about the way they market their products. New stores pop up everyday because it is very easy to duplicate and they will copy your store code by code. That’s why changing strategies, and keeping above the trends is the only way you can keep yourself ahead within the competition.
ii. Lower Margins
Yes! Most dropshippers tend to simply give up because the profit margins are too low. However, if you look closely at it, dropshipping isn’t a short-term business. It is all about staying in the game and moving up the ladder one step at a time.
Think about how you can turn lower profit margins into huge ones? Sell more products. If you have a formula that sells products at a margin, then just scale it further. If you were selling 10 products per day, simply scale it to 50 and you will have more profit margin.
The important aspect of a dropshipping business is that you don’t have to worry about the logistics. Simply get the tracking code and forward it to your customers and you will not have to worry about a thing. In this way, you will be making more profit on lower margin.
iii. Complete Liability of Products
Dropshipping is one business where you will be selling a product that you haven’t actually seen. Therefore, chances of a product failure are high. When that happens the whole responsibility of returning the actual amount to the customer and returning the product to the supplier lies on you.
But this doesn’t mean that you start to panic. Instead, devise a 30-day refund policy in which the customer can return the product if (s)he is not satisfied with the purchase. The individual buyer will simply have to send the product back on the shipping address.
Note: This may cost shipping charges to the customer. Hence, you must ensure to clearly mention this clause in your return and refund policy.
iv. Managing orders can be burdensome
One place where most dropshippers will pull their hair is when one of their products goes viral. They will then have hundreds of orders to fulfill. Managing orders can be a strenuous task. But thanks to many dropshipping plugins available, this is not a major problem now. Dropshippers can now install AliDropship or WooDropship plugin on their WooCommerce dropshipping store and fulfill orders with a single click.
5. Who Should Dropship? Who Is It For? ^
Well, now that we know the benefits and drawbacks of a dropshipping business, it is time to simply get a domain, hosting, and start dropshipping. No?
But before we do that let’s just hold our horses for sometime.
Dropshipping isn’t a business that anyone can start. Keeping the fact in focus, we have compiled a list of people who will be more successful in this kind of online arbitrage business.
Let’s take a look at some of them:
i. Beginner Entrepreneurs
Entry-level entrepreneurs, those who are looking to start a new business. Since they are totally new to the startup game, they will have a hard time learning the process. But the good thing is that they are fresh, and ready to understand the concepts. In our opinion, these beginners can take the dropshipping game to a whole new level quite easily.
ii. Budget Entrepreneurs
Budget entrepreneurs are maths wizards. They calculate everything, including their profits and losses, and keep benchmarks for their next success. Dropshipping can be an ideal business for them. Because they will grind to the tiniest of details and build processes to keep the cash-flows high. For them, it’s all about passive income pipelines.
iii. Ecommerce Store Owners
Ecommerce store owners are professionals. Ecommerce is their bread and butter. Taking dropshipping challenge will be nothing but a little more gravy on their plate. They can easily win the dropshipping business because they know their customers, the adsets that convert, and the market they want to target. They are the lords of dropshipping game.
iv. Side Hustlers
Side hustlers have a permanent day job. They are just trying to make a few bucks on the side. They are ready to learn new technologies that can bring in more money. They might require some training in the start, but once they figure out how the whole dropshipping process works, they will be ready to take things into their own hands.
6. How to Start a Dropshipping Store? ^
The two best dropshipping platforms for starting a dropshipping store are WooCommerce and Shopify. Both have their fair share of pros and cons but are great. Shopify is great if you are just starting out and don’t have any knowledge of development. However, Shopify is a costly platform and will require you to upgrade your package if you want to scale the store.
WooCommerce, on the other hand, is a free WordPress plugin. You may have to pay for a plugin such as AliDropship, WooDropship, or YouDroop to start if you don’t want to go the manual way. However, it can also be started without plugins but the process may become complicated since you have to work with the code.
Setting up a store on WooCommerce is easy and you can easily set your own store by watching the video provided below.
i. Selecting Products for Dropshipping
In order to have a successful dropshipping store, you need to select products that are in demand. There are multiple ways to select these kinds of products such as from websites like Product Mafia or Google Trends. Most of the time, the best strategy of selling a dropshipping product online is by testing what actually sells.
Going sub-niche is also a good idea to sell your products. For example, yoga pant is one sub-niche that sells a lot. You can start your own store just for selling yoga pants.
The trend for searching ‘Yoga pants’ in the United States; retrieved on April 26th, 2018. Source: Google Trends
Yoga pants trend on Google Trends for the last five years or you can go even more narrow and sell yoga pants for fat women. In the end, it all depends on what type of products people prefer to buy online.
Points to Note
- Products should be less than $50 so a person can easily buy them online.
- They have ePacket delivery option enabled.
- They have a large order volume on eBay, Amazon, and AliExpress. This will help you know that people are actually buying them.
- The products need to have an upward trend in Google Trends.
ii. Selecting a Domain Name
There are two types of dropshippers. One, who have multiple dropshipping stores. These type of dropshippers don’t worry a lot about the brand name. In fact, most of their domains are either Exact Matching Domains (EMDs) or they go sub-niche and select a name that resonates with the niche.
Second, who have a single store. They are trying to make it a brand and are genuinely working to scale it further. Apart from the paid marketing to sell their products online, they are also working on increasing organic traffic to the website. They carefully select a name and then register the domain.
Tip: Think which type of dropshipper you are and then select a domain or a number of domains and then register them. You can get the domains either from GoDaddy or Namecheap. Both are trusted websites and often provide coupons for registering domains.
iii. Selecting a Hosting Platform
There are two best platforms available, WooCommerce and Shopify when it comes to dropshipping. Shopify is fully automated but costly. A basic store setup can cost you around $100/ month alone (Shopify costs $29, Oberlo costs $30, aftership costs $10).
In comparison, WooCommerce is an open-source CMS. You will only have to pay for the domain and hosting of your store. And, if you are hosting multiple stores, then you can host all those domains on a single host.
Tip: Using Cloudways for hosting your ecommerce store is a great way to start your dropshipping journey. With it, you can install the store in just a few clicks. As it provides optimized ecommerce hosting to ensure your site loads with lightning speed, also you are only charged for the resources you consumed.
iv. Selecting a Dropshipping Plugin
Though dropshipping is possible without the plugins, the store setting up process is quite difficult. On the other hand, the plugins help you automate the whole process and are quite easy to use. I will focus on the dropshipping plugins that you can use for your WooCommerce store.
1. Spocket Dropshipping
Spocket dropshipping works seamlessly with WooCommerce. It is available as a forever-free plan or you can upgrade to their paid option at $29/mo for the Pro plan or $79/mo for the Empire plan. Once the plugin is installed and connected to your store, you can browse products, easily view the price and shipping costs, and import the products to your store.
Two key features Spocket offers are branded invoicing and that the majority of their products are sourced from the US or Europe making it the closest to local dropshipping.
AliDropship works with WooCommerce. It is available for $86 and you can connect it with your store for automating the import of dropship products. It can import products from AliExpress and allows you to set your own prices. The plugin is available for one website only. You will have to get a new one if you are launching another dropshipping store.
WooDropship is a freemium plugin for dropshipping. It is an open-source plugin that easily integrates with WooCommerce. It has its own repository of products that you can import to your dropshipping store with a single click.
Dropified is available for both Shopify and WooCommerce. It works similar to AliDropship plugin and lets you import products from AliExpress. The only difference between the two is that it is available for a monthly subscription of $47 to $99.
Tip: Don’t give an impression that you’re importing product from AliExpress. Therefore, you should brand your website like an ecommerce store.
7. How to Promote Your Drop shipping Store? ^
Most dropshipping products work on impulse buying. That’s why, instead of waiting for the people to visit your dropshipping store, push your products in front of them.
There are various ways available to promote a dropshipping store such as social media, influencer marketing, email marketing, search engine marketing, and display marketing. For starters, going with social media and paid marketing would be a good idea.
i. Promoting on Social Media
Dropshippers have tested that Facebook, Instagram, and Pinterest are three platforms where people buy dropshipping products. So, we will discuss on these three but they really work?
ii. Does Social Sharing Really Work?
Social sharing alone won’t work for your dropshipping store. Facebook has reduced the organic reach of posts on its platform. People who have pages with millions of likes are not able to get a reach of even 0.1 million for a post unless they boost them.
Similarly, Instagram, which once allowed users to use hashtags for promoting their products, has also reduced the reach. Now, even those people who use tens of hashtags for promoting their products see a reduced reach or even no reach at all if they don’t have engagement on their accounts and relevant followers. That’s why most promoters of dropshipping products are now moving to influencer marketing to target niche specific audience.
iii. Try Instagram Influencer Marketing
Instagram influencers are those people who have made a following on their Instagram accounts through engaging content. They fall into three categories: micro influencers, social influencers, celebrities.
- Micro influencers are niche-based. Each influencer has between 5,000 and 10,000 followers in a certain niche. They are great for promoting your products in a single niche. They also charge less for the promotion of your posts.
- Social influencers have a following of more than 10,000 followers. They are not restricted to a single niche. They charge more for promotion and are usually working with multiple brands at once.
- Celebrities are real-life influencers. These are either movie actors, artists, sportspersons, social workers, or politicians, etc. They are already powerful and don’t usually work with small businesses.
Points to Note
- To start influencer marketing, select a niche and then select influencers that have more engagement. They should have at least 5 comments or hearts on their posts
- Make a list of 5 to 10 influencers and then start pitching, saying that they can keep the product if only they post a picture of it on their Instagram accounts.
- More tips on influencer marketing are available in our Influencer Marketing Guide.
iv. Facebook Ads and Google Ads Are Powerful
Facebook and Google have different nature of advertising. Facebook Ads work on the user information. It makes a list of its user’s interest. These interests are known as data points.
According to Washington Post, Facebook has made 98 data points public that it stores to target users with advertisements. Facebook offers its own certification program known as Facebook Blueprint. It provides everything you would like to know about Facebook advertisements.
On the other hand, Google Ads also offers its own certification for the AdWords program that works on keywords. Users, who are searching for a keyword on a search engine, are shown ads that are relevant to them. Unlike Facebook Ads, Google Ads are a little different in search and most dropshippers favor Facebook because targeting potential is much stronger on that platform.
v. Email Marketing Still Works
Email Marketing is another way to market your dropshipping products. Email marketing requires you to have at least the list of people who you can market. In comparison with paid ads, email marketing is much more complex because you don’t know the buyer intent. That’s why, in email marketing, people prefer to turn cold leads into warm leads by providing them with informational material.
Email marketing is usually done for the remarketing purpose. This means that when you have collected the emails of all the buyers, you can upsell to them by emailing them of your new products.
8. AliExpress Alternatives in Dropshipping – Why You Should Know About Them? ^
AliExpress is one estore that helps Chinese manufacturers sell their products directly to customers around the world. But, honestly, it is at the core of dropshipping business as well. Because most dropshippers directly take products from AliExpress and sell at a higher margin at their own stores. This is all great, isn’t it? You get products from one store and sell on your own store for a margin? No.
What if a particular product that you want to dropship on your own store gets out of stock on AliExpress? Or, what if the product you want to sell is not available on AliExpress? These are times when you start searching for alternatives because your customers are waiting for their products to arrive on time. It’s time sensitive.
To help you save the effort, here is a list of top AliExpress alternatives:
Here, you can get almost anything that is available on AliExpress. However, the prices will be a little high. For example, one product that costs $9 on AliExpress may cost $11 on DHGate. So, do your research and then purchase.
Next we have DealExtreme. It doesn’t have as big an inventory as DHGate but if you are looking for electrical / mechanical products, DealExtreme is a good alternative.
BangGood is an ecommerce store, not a manufacturer market place. So, the prices are higher than other AliExpress alternatives. Consider it your only go-to destination when you don’t have any other alternative available.
TomTop has an inventory of around 100,000 products. It is a good alternative if you are looking for geeky and tech products. What we liked about this estore was its selective product catalog. You won’t find anything useless on this ecommerce store. For us, it is a worthy AliExpress alternative.
Final Words! ^
That’s all you need to know about starting a drop shipping store. Just remember, starting your dropshipping store is not the hard part, the hard part is when you get stuck and your product is not getting sold. When that happens, don’t worry and keep testing. Soon, you will have a product that sells well.
Q1. How Does Dropshipping Work?
Dropshipping works by arbitraging products for a profit. Most dropshippers get products from Chinese manufacture and sell in the first world countries with more buying power. They earn by selling for a higher price. The most used platform for getting dropshipping products is AliExpress.
Q2. How to Start Dropshipping?
Dropshipping is just like any other digital business. First you have to make a feasibility study. Find out:
i. How your dropshipping business will work?
ii. What products will you dropship?
iii. What are the trending products within your niche?
iv. How to select a dropshipping niche that has low competition?
v. Which country is best for dropshopping?
vi. What type of marketing platform will you use to market your products?
Once done, set up a dropshipping store and add a plugin to import products from AliExpress. Now start promoting your products on social and paid platforms.
Q3. How to Promote Dropshipping & Where Can I Promote It?
Dropshipping products are promoted through social media, search engines, and paid marketing platforms. You can promote them in Facebook groups and communities, using Instagram posts, search engines, and even through your personal network. If you have a budget, then the best way to promote your products is through Facebook and Google paid marketing.
Q4. How to Start an Ecommerce Dropshipping Business?
You will need an ecommerce platform to start a dropshipping business. There are multiple dropshipping ecommerce platforms available including Magento, Drupal, WooCommerce, Shopify, BigCommerce and many others. The easiest one of these is WooCommerce. We have written on how you can setup WooCommerce with AliDropship, WooDropship, and Dropified to start your dropshipping business.
Q5. Where Can I Find Dropshipping Suppliers?
You can find dropshipping suppliers on AliExpress, DHGate, DX, and other shopping websites. Apart from these sites, you can also get dropshippers from dropshipping portals such as World Wide Brands, DOBA, and Wholesale2B.
Q6. What Are the Benefits of Drop Shipping?
Dropshipping is a business that literally anyone can start from the comfort of his home. It is easy to start and requires almost zero starting cost. You just need a website and you are all set to start dropshipping. Here are some benefits of dropshipping:
i. Easy to start business
ii. Takes only two hours or even less to manage
iv. Easy to scale horizontally and vertically
v. Virtually unlimited inventory
Q7. How to Find the Perfect Dropshipping Products?
Dropshipping works best when you can find a trending product to market to the users. There are multiple dropshipping products available and the best way to find them is by doing a market research. You can find the most trending products on product mafia, ecomhunt, dropship spy, and other product hunting platforms. Or, you can search for the bestselling products on Ebay, Amazon, and AliExpress.
Q.8 How to Choose the Perfect Domain Name for Ecommerce?
Exact matching Domains (EMDs) don’t work anymore. So, you can use any domain name for your dropshipping store. Most dropshippers now focus a lot on branding because that makes the store what it actually is. Remember Zappos? It started as a dropshipping store. So, the crux is that the names don’t actually matter. Keep a name that you love and that syncs with the products you sell.
Q9. How to Choose a Niche for Dropshipping?
Here is how to find a profitable niche for dropshipping. First of all select an interest. For example, fashion, survival, camping, etc. Now search for products related to it on Chinese ecommerce stores such as DHGate or AliExpress. Filter the searches by order volume, price, and ratings. The price should be less than $30, orders should be 500+, and ratings should be 4.5 at least.
Make a list of these products and search similar ones on AliExpress and Amazon. You have now a collection of products available related to your niche.
Now that you have made your mind of building a drop shipping store. The next step is to choose between a niche store or a general store. Here’s a detailed guide for you to choose between the two dropshipping models.
Niche vs General Store: Pick the Right Model for Your Drop shipping Store
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