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The ultimate beginner’s guide to starting a dropshipping company

This ecommerce supply chain process is gaining momentum with forward-thinking entrepreneurs.

It’s no secret that ecommerce is a burgeoning industry. Today, eight out of ten people shop online and are spending more each and every year. The market is set to eclipse more than $44 billion this year and should see continued growth through 2021 and beyond.

With such a big market in play, many entrepreneurs have successfully secured a piece of the pie by carving out a niche, big or small. Whether providing an unfulfilled demand or bringing a better version of a successful idea to the table, opportunities are seemingly endless — and many of these successes are built on the model of dropshipping.

What is dropshipping?

Starting a dropshipping company

Dropshipping is the shorthand term for a specific supply chain process. It involves creating a store wherein the product that you sell isn’t actually held in your own physical facility. Dropshipping storefronts are generally built online, with websites that contain product descriptions and images of what’s available for purchase.

Once the customer selects an item to buy, submits their address information and then pays for the goods, the owner of the dropshipping store (the seller) must request that the product is distributed. The seller contacts their product supplier to request the item be sent according to the customer’s specifications. That item is sent directly from the supplier to the customer, skipping over the seller in order for them to complete the sale.

Think of the seller as a niche product broker, setting up deals between buyers and suppliers. The seller’s revenue comes in the difference between the retail price and the supplier’s warehouse price — and the seller doesn’t interact with the product itself throughout the entire sale.

What are the benefits to starting a dropshipping company?

It’s no secret that starting a physical retail business and even purchasing products can be quite expensive. But you don’t need to worry about overhead costs like a physical storefront or staff to begin a dropshipping operation. Technically, you just need a website and to follow your local business regulations.

Another benefit is saving on warehouse costs, as the supplier takes care of this for youThe dropshipping selling model also allows you to offer a wide range of items in your chosen niche. It gives you access to every variation of a specific item without forcing you to hold hard-to-sell inventory.

Want to refresh your offering? Just check with your supplier’s offerings, then put up a new product image and description on your website.

Success stories

You’ve likely heard of success stories from the dropshipping world — even if you weren’t aware that this was the selling model involved.

For instance, Kim Kardashian’s beauty empire in KKW makeup is actually built off dropshipping, as is her sister Kylie Jenner’s Kylie Cosmetics (one of the major contributing factors to her being the youngest billionaire ever). Shoppers pick their selection (customized to their needs) and a request is sent to their supplier. All the while, the seller — in this case, the Kardashians — receive their cut of the revenue for connecting customers with the supplier in the background.

Other brands including FashionNova and Gymshark — staples of online advertising and social media influencer advertising — were built on dropshipping. Additional concepts like bespoke steel-band watches from Bremont, fit under the umbrella of dropshipping.

How to get started with dropshipping

Starting a dropshipping company

Like most businesses, you can’t serve everyone. The best way to start your dropshipping business is to start researching potential niches. 

Use tools like Google Trends, social media and even the news to find what might be a product line of interest. After you select a niche, it’s important to verify that there’s interest — so try to find conversations happening about it online. Do some product research, find a reliable supplier and start realizing your plan.

You’ll also need a website. Shopify and Oberlo offer some of the biggest and most mainstream platforms for DIY ecommerce sites, or you can always talk to a web developer to help you get started.

Building your business takes a lot of dedication and you can’t get shoppers without telling people about it. Think about different ways you can hook your audience, whether it’s by inviting social influencers to try and demo your offerings with samples, buying digital ads or doing guest blogs. Creativity is key here.

Don’t forget to set measurable goals to track your success. You can start building your store, but much like owning a brick and mortar business, it comes down to strategy and timely decision making.

Consider your pricing and margins

You’ll want to figure out your pricing strategy as well. Shipping complexities, moving parts and potentially low margins can all factor into how much money you’ll make. Margins can be low but if you sell enough volume, you can meet your target. Alternatively, you can sell fewer high margin products it’s up to you.

The ease of entry means competition can be fierce. You have to figure out a way to set yourself apart and find a niche that fits.

Don’t forget the customer service aspect. Schedule it into the time you expect to spend on the business, and should you be successful. Remember that service and your interactions with customers, even if it’s online and in social media, can make or break the experience for a wide segment of your customers.

 

Up Next: Are you doing all you can to promote your company’s financial health?

Michael Badejo

Michael Badejo is a communications professional and entrepreneur based out of Winnipeg. His diverse body of work has appeared in Canadian and international outlets covering technology, transportation, commerce and more. When he’s not writing, he’s running his boutique communications shop or finding out the latest in current events and technology.

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