Dropshipping is a business model often used by ecommerce brands. When a customer orders a product from an online store, the retailer then orders from a third-party supplier who’ll ship the product directly to the customer.
What is dropshipping and how does it work?
Dropshipping is an order-fullfilment method that means you - as an ecommerce store owner - don’t need to hold any inventory. When a customer orders from your store, you’ll send that order over to your third-party supplier (the dropshipper). You could do this manually, or use an app that does it automatically. Once the dropshipper has received your order, they’ll pack it up and ship it directly to your customer.
It's important to note that products ordered through a dropshipper often won’t have your branding on - nor will you get the opportunity to customise it. Instead, they’ll usually be branded and packaged by the supplier.
What are the benefits of dropshipping?
For ecommerce, there are loads of benefits to starting a dropshipping business. You can get up and running quickly, test out the market and let somebody else handle the logistics. Let’s take a look in more detail:
Test the market
You’re setting up an online gift store, but you’re not sure what products your customers will actually buy. No problem! You can list as many products as you like with absolutely no cost to you. If it turns out that your customers hate socks, you don’t have to list them on your site. You can experiment with new products instead. It’s entirely up to you.
Get up and running quickly
All you really need to set up a dropshipping store is a website, some knowledge of marketing and good dropshipping services with quality products. Of course, you’ll need to make sure you’re GDPR compliant and you’re using secure payment methods. But you won’t need to order loads of products or do market research before going live.
Less overhead costs
Your dropshipper will take care of packaging and delivery. This will considerably reduce your staffing and shipping costs. You won’t be paying for a warehouse, warehouse staff or delivery vehicles. This gives you more room to focus on brand awareness and product marketing.
Sell products internationally
The great thing about dropshipping is that you can send products pretty much anywhere in the world. Maybe you’ve got a customer base in America, but you’re based in the UK. If you pick a US dropshipper, there’ll likely be fewer shipping restrictions.
What are the cons of dropshipping?
Like any business model, there are downsides to dropshipping too. It’s harder to quality-check products and there’s a lot of competition. This doesn’t mean you should rule it out, these are just some things to bear in mind.
You can’t customise your products
As we’ve mentioned, dropshipped products usually won’t have your branding on. But this isn’t always a bad thing. Just take a look at Notebook Therapy and Mooshe Socks. You probably wouldn’t even realise that these are dropship ecommerce stores. Their branding and product positioning is what gets them their customers. If you do want to add your own branding to your products, consider using white label goods.
You can’t quality-check your products
When goods are sent by a dropshipper directly to your customer, you won’t be able to check the quality of the products. The only way you’ll know there’s something wrong is if your customers complain or leave negative reviews. The good news is that there are loads of great, top-quality suppliers out there. But if you pick a bad egg by accident, it could damage your brand’s reputation well. 😖
Lots of competition
If you pick a reputable dropshipper, chances are your competitor retailers are using them too. This can make it hard to set yourself apart from the competition. That’s why your marketing and branding needs to be on point. You may be selling socks from the same dropshipper as your competitors, but if your website, customer service and messaging are all unique, your audience is likely to remember you in the future.
How do I set up a dropshipping business?
Let’s say you want to set up an online business that sells gifts. You don’t have much budget, and you don’t have a warehouse to fill with loads of products.
Dropshipping could be your best option, especially if you’re not guaranteed loads of sales (yet). Instead of ordering loads of stock from a wholesaler, you can wait for the customers to order first. Here’s how it works:
Set up your online store
Setting up an online store should be relatively easy. Platforms like Shopify and Big Commerce will host the entire customer journey for you. These systems are easy to use and designed for non-web developers to get started quickly.
Find dropshipping suppliers
If you use Shopify, there are loads of dropshipping apps that you can integrate with. For example, Oberlo and Spocket help you choose the right products for your customers, as well as the dropshipping suppliers who can deliver for you. This is handy if you’re not sure what you want to sell. And Eprolo helps you manage supply chains and create custom packages for your consumers.
If you’re thinking about manufacturing your own products, but don’t have the warehouse space, you can opt for Amazon’s Fulfillment by Amazon (FBA). They’ll store, pack and deliver your customer orders for you.
⚠️ Be warned: there are some fake dropshippers out there. The easiest way to check if a dropshipper is legit is to call up the manufacturer of your product and ask for recommendations.
Choose the dropshipping products you want to sell
Once you’ve set up a website and found your dropshippers, it’ll be time to list some products. If you’re just starting out, we recommend you start with a limited range of products. For example, you might want to just sell socks and mugs in your gift store. This gives you a chance to test the market and see what products resonate with your audience.
Determine your pricing and profit margins
The beauty of dropshipping is that you can usually set your own prices. You’ll of course want to make a profit, but you won’t want to price yourself out of the competition.
As a starting point, most ecommerce businesses make, on average, 15%-20% profit on dropshipped products.
Launch your marketing channels
Now you’ve got everything set up, it’s time to attract some customers! That means creating a marketing strategy.
It doesn’t have to be anything too complicated. After all, dropshipping allows you to test the market and adjust accordingly. Just take a look at our guide to selling products on Shopify to get started.