You may have heard about dropshipping via the Internet or from doing research online, but what is dropshipping and how can you utilize it? You may have an idea for an e-commerce business, but you have questions about how to source product to sell. It is important to know what you want to sell before you begin going down the dropshipping rabbit hole. There are many wholesalers that will dropship items for you, but it is important to know how you will utilize their services.
What is Dropshipping?
Dropshipping gives store owners the ability to fulfill customer orders through a manufacturer or wholesaler. When a customer purchases a product on your store, you take the information and transfer the order to the manufacturer or wholesaler. The manufacturer or wholesaler will then make or pick the product and ship your order. 1, 2, 3… done!
Sounds pretty great! However, there are some pros and cons.
Pros and Cons of Dropshipping that You Should Know
- You do not need to worry about stocking product. With dropshipping, there is no need to store inventory. There are major cost savings in not having to store inventory. Also, it requires management, time, and organization.
- A Minimal amount of capital needed. When you dropship products, you do not need capital to purchase the inventory. This allows you to offer a wide range of product on your store without having to invest capital.
- Making changes to your store product offering is simple. If you want to increase or decrease the number of products that you offer, you simply add or delete the product from your store.
- Managing Inventory. Wait…what? Previously, I stated that you do not need to manage inventory. It is true, you do not need to manage inventory in-house, however, you must keep an eye on inventory at the manufacturer or wholesaler. If the manufacturer or wholesaler runs out of a particular product, you must update your website or inform your customer that they can backorder the item. Find a manufacturer or wholesale that will send you alerts when a particular item is out of stock.
- Tracking, tracking, tracking. Customers who purchase product online love tracking numbers! If your manufacturer or wholesaler does not supply you with tracking numbers, you could be creating a headache for yourself and your customers. Update the order with the tracking number when you receive it from the manufacturer or wholesaler.
- Packaging and labels. You may not have total control over packaging and shipping labels when the manufacturer or wholesaler sends your product to the customer. This could possibly cause confusion for customers and diminish your branding strategy.
- Profit. It will take time for you to see a profit. Margins are smaller when you dropship, so you must move a lot of product to see an increase in your bottom line.
How to Succeed at Dropshipping
In order to succeed at dropshipping, you must be vigilant in a few key areas.
Marketing and Advertising
The first is marketing and social media. In order for you to increase your brand awareness, you will have to work hard at advertising your product online. I suggest starting with Google Adwords and Facebook Ads (you can read my article about Facebook Ads here).
Advertising your product and sharing your product in social media channels will help create awareness for your product. It is important that you understand your target audience and tailor advertising specifically towards the targeted audience.
Also, if you are a new company, expect to spend a lot in online advertising. In order to compete effectively with other companies, you have to bid on competitive keywords and run ads at specific times to audiences with specific interests.
Update your Online Store Continuously
Always set aside time to update your store on a continuous basis. If product inventory changes at a manufacturer or wholesaler, update your store accordingly. Run flash sales on particular products to see if it increases interest. You can also advertise specific niche products on your social media channels to drive traffic to your site, ultimately increasing brand awareness and sales.
Many people will tell you that offering free shipping to customers is a great way to win customer interest and drive traffic to your site. When you are competing against conglomerates like Amazon and eBay, it may be difficult to sell your product without offering free shipping. However, I find that free shipping works in some cases, and in other cases, it is ignored by customers.
If you offer free shipping, make sure that your shipping rates do not exceed the amount of profit that you will make on the product, otherwise you will be selling at a loss. I generally tell new businesses to offer shipping promotions like “Free Shipping on order $30+”. This allows you to move more product and make more profit while satisfying the customer.
If you are interested in learning more about dropshipping or you would like help in setting up a dropship store, please contact us.