Dropshipping is a common business model for those who want to work from home, work online, or be a digital nomad. The model is well suited for sustaining an “on-the-go lifestyle.” Dropshipping is also a good business for entrepreneurs who need a way to make extra money to invest into their other business ventures. Some claim dropshipping is the ideal passive income, but it is not the right option for those looking to “get rich quick”. The initial process can be time consuming with low profit margins, so make sure to do your research before starting a dropshipping business.
Dropshipping used to be all the buzz a few years back. I remember the first time I came in contact with a dropshipper was in a nail salon in Manhattan. She was on the phone with a supplier while getting her nails done. She said she traveled all over doing what she loved while managing her dropshipping business. I thought it was extremely exciting that there was an avenue for well-organized people to work this way. The minimal upfront investment encourages entrepreneurs from all over the world to flock to this business model.
Today the hype around dropshipping seems to be dying out. Entrepreneurs are wondering if there is still money to be made with this business model when considering the challenges, and many think not. When set up correctly, and if automation is mastered, a dropshipping business is still a good way to create passive income. It’s also easy to scale by using advertising.
To get started, first create a legal entity, as this will protect you legally as well as provide the ability to have tax write offs which will help you offset initial losses. There isn’t a lot of upfront investment to create this business, but there are costs, so get your company entity set up right away. Meet with an accountant or CPA to be sure you have the right type of business established for you.
Test products to choose the right ones for you. This lowers your risk since there isn’t a lot of initial investment to try them, and you will then know if this product is what you want to work with.
Invest time and energy in the beginning because it will save you time and money later. Find the right products, then create the right partnerships with suppliers who are trustworthy. Choosing reliable suppliers is your most important task, but there are still challenges to watch out for.
Challenges
Since the supplier pays all the expenses, including labor and storage, you won’t be eligible for wholesale pricing.
There is a lot of competition from others wanting to be in the dropshipping space, so build a good relationship with suppliers to stand out from the crowd.
Profit margins are low, so you will need to work hard in the beginning to get set up and scale quickly. If you take your time in the beginning to make sure your relationships and products are good, then the customer’s experience will be good then you can focus on scaling with fewer issues.
Suppliers can leave you hanging, which means you will temporarily have no product. This can create issues with your customers and your business’ reputation and reviews. Make sure to have contracts that are mutually beneficial. Taking time up front to create the right partnerships with reliable suppliers will help reduce these risks.
Tips
Have a business plan and calculate the amount of time you will need to achieve that plan. Start simple with one supplier, and maybe even one product, until you have the process automated. You can always add more as you get more comfortable and established, but make sure you have plenty of time to test new products and meet with suppliers.
Partner with reliable suppliers. It’s worth giving them a larger cut if it means they are going to be more consistent. Partner with a supplier who has similar values to yours. Find someone who cares about your customers’ experience as much as you do.
Prioritize customer service. Have a phone number and email address for customers to express their needs. Encourage them to contact you to tell you what worked well and what didn’t. People are happy to help people who are new. Tell them you’re new and are working to find and provide them the right product, and they will feel comfortable telling you what they like and don’t like.
Your customer support representatives need to have fantastic people skills and be problem solvers. If there is something wrong with an order, take the blame and make it right for the customer. Let the customer know you are taking ownership of the issue even if it’s not your fault. In private, reach out to the supplier for the money back if it was their fault.
Choose a hot product. One of the benefits of drop shipping is that you can quickly join trends without the risks. When there is a product doing well, find a supplier for it and add that product to your dropshipping store. You can use scheduling tools or Google Trends to help you to find the right products for you. Also, a great resource is the top 30 dropshipping products for 2021 – these are some of the hottest trending items right now.
I can’t reiterate enough – test your product, and always order a unit for yourself so that you can see how it works. Get the feel of its user experience, and then decide if it’s something you want to sell. If you can find high-quality generic options, use those. Often multiple suppliers will sell the same generic brands, which is a great backup plan in case your supplier runs out. Always have a backup for in-stock items in your store.
Master routing orders. Organize your suppliers geographically so that orders can be sent based on where they are located. If you have suppliers in multiple regions, customers get their orders more quickly, which means they will be back for more.
Enjoy building and scaling your remote dropshipping business so you can have more passive income, freedom, and flexibility in your life. You’ll find what works best for you with a little bit of trial and error. For more information, read Why isn’t my Dropshipping Strategy Working for more about dropshipping, and Keep your Customer for how to maintain loyal customers. Subscribe for more business, sales, and investing posts. Have a lovely day!
