How To Start A Profitable Dropshipping Business? 6 Steps To Follow — Mentor Monkey
Dropshipping business is considered the future of retail, as it maximises seller profit by not having to invest in inventory, storage or equipment. It essentially works by using an online interface, thus cutting back on storage and warehouse costs and only processing an order once it has been sold to a consumer.
Rise of E-Commerce.
The internet age is no stranger to lucrative business opportunities opening up in every category, niche and otherwise. People have become increasingly driven and business-minded as the 21st century has worn on. This is nowhere more evident than with startups that have crossed into every conceivable public or private domain. As the internet dropped its veil of mystery with the coming of information technology and high-speed access, people have found it to be the ideal vehicle to propagate their very own low risk, low capital but high revenue businesses.
E-Commerce sales reached a staggering 3.7 trillion dollars worldwide in 2019, cementing itself as one of the most lucrative options for any person irrespective of experience hoping to get into business.
Now we can look at the steps you can take to start a drop shipping business, including everything you need to know regarding its requirements.
1. Choosing a niche in the dropshipping business.
The first step in getting your business plan to work is identifying what you can or need to sell. You must invest time and research on the best or in-demand niche markets you can target. The market you pick should align with your passion while also being profitable. The only way you can carry this business forward is if it is profitable, so you must find a niche in vogue and build your dropshipping business around it.
Fitness, fashion, tech, jewellery and beauty are some of the niches that have produced the best numbers in terms of online sales. You must look at the latest trends in these markets and plan accordingly because any attempt at a passion project will not stand in the long term in dropshipping.
To analyse and understand the niches in vogue, you can use Google trends that monitor upward or downward trends in markets, although it does not account for its viability. To gauge viability, you can use Ubersuggets’s keyword tool that searches for the volume of use for a keyword, giving you an idea of the market. Another method is manually searching for order volumes, which gives vital information on how products perform in a real market. Some of the most profitable ideas are niches within niches and trends within trends. So your store should not stock up on the market but a particular trend.
2. Analysing your competitors in the niche.
After identifying the niche you want to enter, it is important to research extensively into that market, particularly competitor profiling and analysis. Analysing your competition is the essential requisite for any company, and this is crucial in adapting to or dominating any market you may enter. It would be best if you had a clear idea of where and how they sell their products.
The easiest way to analyse competition is a quick Google search that will reveal the top sellers in that niche. This gives you a fundamental idea of competition and how to scale organically. Websites like SimilarWeb or Alexa provides a more in-depth idea of the competition you might face in a niche.
3. Finding a good supplier.
You should always find several suppliers who best align with your business plan. Dropship businesses rely on the dynamic between supplier and the seller, and you should get this right. When you have shortlisted your suppliers, you need to contact them regarding minimum shipping quantity, price points and shipping times.
4. Set up a Dropshipping business store.
This is the public interface of your dropshipping business, and it should be handled with utmost importance, like websites that are easy to access and find often get more orders when there is competition.
When setting up the website, you should remember the domain name, as it should best reflect your brand and what it signifies. As your business grows, you can invest in themes to further improve user experience.
5. Market your business.
When you have finally built your dropshipping store, the next step is marketing to potential consumers. Since the competition is high, it should be a priority to invest in marketing to get your business out there. The best ways include running social media ads, retargeting ads as well as influencer marketing.
6. Adapt and optimise.
Now that your dropshipping site is ready to go, you should start analysing the products and performance. Constantly optimising strategies and price points to best suit the market trends should be a top priority. This is a significant step that helps better your customer service and, by extension, improves revenue.
Now, let us take a look at some pros and cons of the dropshipping business –
Pros of a Dropshipping Business
- Low cost of inventory and entry – Brick and mortar and online stores need a heavy investment in the beginning: inventory cost, staffing and funding manufacturing. With drop shipping, these extra costs are eliminated as we directly move to retail.
- No requirement for any store – This may be one of the clearest advantages to starting a dropshipping business as you can significantly cut any cost related to setting up a store.
- Testing new products with minimal risk – Any store thrives with innovation, but most businesses are apprehensive about trying new products and brands. Since dropshipping does not involve stocking, you can choose to add or remove new products with the utmost convenience.
Cons of a Dropshipping Business
- The competition – Since there are countless benefits to starting a drop shipping business, the competition in the field is relentless. You will have to find new ways to outsell and outperform your competitors consistently.
- No product testing and control – Since the products don’t directly pass through your hands, the intermediate drop shipper will only have a second-hand idea of the quality of the product. No proper quality control could mean you would have no guarantee on the quality of products, relying on the manufacturer to provide quality items with no supervision over their process.
- No bulk discounts – As the products, you put in your online store are bought one piece at a time, you will have no provision to avail or offer any wholesale or bulk purchase discounts. Before you establish a solid customer base, the prices are essentially set by the manufacturer.