How to start a profitable dropshipping business?

At 925 Millionaires we find every single opportunity to make additional income. Having more streams of passive income helps us speed up the path to become Millionaires.

In this post, I am going to talk about the best way to start a dropshipping business.

Dropshipping is the most popular businesses model. Big eCommerce stores including Amazon and Walmart does this at some level and many other eCommerce businesses only operate based on this model.

What is dropshipping?

Drop shipping is a business model where the retailer (store owner) does not buy and store inventory. Instead, the store owner/manager transfers the order information to the manufacturer, supplier or another retailer to fulfill the order on behalf of the store. The supplier then ships the order directly to the customer.

How does drop shipping really works?

Here are the steps involved in drop shipping.

1. Store owner/manager finds a product from a supplier/manufacturer.
2. Lists the product on the eCommerce store
3. Sells that product to the customer. The customer pays a retail price to purchase the product from the store.
4. Store owner/manager sends that order information including the shipping details to the supplier. Pays the supplier a wholesale or negotiated price.
5. Upon the receipt of payment the supplier ships the product directly to the customer. Not disclosing the actual price or supplier details.
6. The customer becomes your loyal customer and you can continue to sell more products from your store.

It is an easy model and no hands-on type of business.

Most profitable online business

Drop shipping is one of the most popular and profitable online business model available right now.

Look at the Google trends it is continuing to rise over past few years. Which means more and more people are learning and adapting to this model.

Profit comes from partnering with the right vendor

If you search for drop shipping in Google you get a lot of advice on shipping from overseas and having a partnership with the Chinese manufacturer and so on.

It is a good model to sell a low-cost product that you want to ship worldwide. You can use sites like Aliexpress to find and sell products.  

Find profitable products to sell

However, if you are looking for a high priced product for more profit you can find a reliable and local drop shipping vendor instead.

This way it is like having your own inventory management that you have better control over.

To find a local supplier you can use a directory service called Salehoo. I have been using them for 3 years and they have many wholesalers and drop shippers in their directory. Sometimes you would be surprised to see cheaper wholesale cost compared to Chinese suppliers.

Click here to get an exclusive offer on Salehoo

Who can start this business?

I have been doing this business for over 3 years and I would recommend this to everyone. There is a little effort involved and it could be perfect side gig that makes some serious money.

Perfect for Bloggers

If you already have a blog then you have an advantage over others, because content marketing is one of the best ways to sell anything online.

Most of the bloggers have affiliated with Amazon and send their visitors to buy products from Amazon for a small commision. Instead of sending them to Amazon, you can sell your products at a higher margin and dropship that product to your customer.

For bloggers, it is a no-brainer since you already have the traffic, just present the product and you make a sale with a good margin.

Passive Income

This model works for people who like to earn some passive income on the side.

The drop shipping model takes less time to set up and run so it is ideal for people who have a few additional hours to spend each week.

Physical Store owners

Many physical stores are moving online, look at how many physical stores have closed in recent years. If you own a physical store business then you can use this model to transition into full online business.

The cost of starting is too low to ignore this opportunity. Just set up an eCommerce site in 30 mins using Shopify and start selling your physical inventory online.

Social media enthusiast

There are tons of people who have a popular social media profile. They can use this model to make some money with their social media profiles.

There are easy ways to integrate your social media profile with Shopify and start selling right away.

What do you need to start a Dropshipping business?

Here are the things you need to start this business.

1. eCommerce store: You need a solid eCommerce platform to run your store. I have been using Shopify and I definitely recommend it.
   If you are on a budget then you can setup a Woocommerce store. It is a WordPress plugin and you need to setup WordPress site to use this plugin. Even though this is an option I still recommend Shopify because it takes away many hassles that come with maintaining a Woocommerce store.
2. Supplier Partners: We need to find the reliable supplier to fulfill our orders and take care of issues that could come with shipping, insurance, customs and maintaining inventory. As I mentioned above use Salehoo to find those suppliers.
3. Working Products: Success with any business comes only when you have a good product that people really want. Dropshipping model is no different. You need to sell a profitable product that people need.
4. EIN or Tax id: Many suppliers ask for a tax id to make sure the paperwork is good for them to do business with you. Some retail supplier doesn’t have this requirement but you still need to have it for filing your tax and protecting your business.

Steps to start a Dropshipping Business now

Drop shipping is one of the easiest business models to setup and run.

Here are the 6 easy steps to run a successful drop shipping store.

Niche or Interest

Instead of niche, I would call it an interest/passion. Finding the interest of the people is important to understand their pain points. Based on their problems in that particular interest we can help them with a product that could solve it.

For example, cooking is a niche but only people who are deeply passionate about cooking might know that defrosting meat is a big issue. We can understand that only when we focus on one niche and learn more from their interest to provide solutions to their real problem.

Just being general or talking in a high level rarely help, so focus on niche.

Product Selection

You probably know this already.

Not all types of products sell. 

Only products that solve a real problem and the products that people understand it, sells well. The product has to be simple and effective for you to sell well.

But, how to find such products?

Researching a product is a critical but a simple process. All we need to find the products that are already selling well for others.

Start your reseach with best sellers in Amazon.

Keep drilling down the categories until you get to the specific product type.

Rather than just looking for cooking, drill down to cookware or even further in some cases.

Then look for the type of products that sell in that subcategory. Mainly look for keywords in those product titles, then use this keyword to find more products around that keyword.

Most likely these are the products that people are searching currently. When you present these products to people who are already searching for it is easy for you to make the sale.

Once you found the product keyword, use the same keyword to search for drop shipping suppliers in Salehoo.

Reach out to 3 -5 suppliers in that list and see who can give you better deals. Pick the one that you see fit and start working with them.

More read: Find products to sell

Setup your store

Setting up an e-commerce store takes only 30 minutes, especially, if you use any readymade platform like Shopify.

Basically, they give you everything you need to run a powerful eCommerce store, it is tested by millions of people and store owners.

Once you have the platform ready start listing the products in your store.

The supplier usually gives you the images, description and other details of the product. However, they are generic and most likely everyone is trying to use the same details. So try customizing them to blend with your brand and then list it on your store.

Sometimes you can even ask the supplier to white-label the products with your logo on it. It would be even more powerful when you can sell products with your brand name in it.

Advertise the products effectively

The most important aspect of selling a product is advertising.

Although there are a few ways to sell products without spending on ads. I am only going to focus on using ads to sell products because only ads can help you sell products fast. You will invest some money to make a lot more money quickly, else the free methods are going to take a long time to start showing results.

Use Facebook and Instagram ads

Let’s keep it simple, I had tried all kind of ads from Google shopping ads, Search ads and many 3rd party ad networks. Out of all these I found Facebook ads work best.

I recommend to start with Facebook and then once you are saturated with Facebook ads then add other networks like Google and more.

I also learned that focusing on more than 1 ad network might not work well because of many reasons like the tracking data gets messed up and your budget gets split.

The main reason I recommend Facebook is, it provides a very detailed targeting option.

Like you can target specific people based on their activities, interest, buying pattern, relationship status and even the friends of a person with specific interest.

Check out a targeting that worked well for us.

If you look closely, I am targetting only people who are engaged shoppers and avoiding all the people who only browse Facebook. On top of that, I am narrowing people who like the blogs with specific interest.

Facebook then gave me a potential reach and estimated daily reach. This audience brought 2 -4 sales everyday because it was targeted well.

Facebook also provides many other targeting options that are not available on other platforms. You can also upload a list of your customer or people who visited your site and ask Facebook to find similar people.

The possibilities are amazing. It would be hard for other ad platforms to beat this ad network.

Fulfillment

This is the easy part from drop shipping perspective.

You just have to give the order details to your supplier and he will take care of the rest.

There are 2 ways to do this.

1. Place Orders
   When you start, you would start getting a few orders daily. It is easy to manage these orders by going to the supplier website and placing the orders manually.
   Some of the suppliers might have a retail site where you can buy the product as you would normally buy for yourself. But put your customer’s shipping information rather than yours. The order would get fulfilled and shipped to your customers directly.
2. Bulk extracts
   When you get to a point where you have 100’s of orders to fulfill each day. Then the above model might not work, you need an efficient way to pass the order details to your supplier.
   Shopify or most e-commerce platforms have this option to export the orders in a CSV(excel) format.  You export it, then open it in the excel or google sheets and remove all the other details like the price they paid for and other details that are not required for the supplier.
   Send this updated sheet to your supplier and ask them to fulfill the orders in bulk.

Customer service

You might have heard that customer service is the heart of any business. People like to be treated well and when they are happy with the service, they keep coming back to you for more.

But that shouldn’t scare you. It is easier than you can think. Since your customers are also people, most of them are very reasonable and understanding.

Although there will be tough to deal with people, it is a small percentage.

To keep the customer support request to a minimum make sure you have all the information, faq, other terms and policy details in the site are clearly accessible.

Tracking information

Usually, people reach out to know where their product is, it is always a good idea to ship the product or ask the supplier to ship with a tracking number. Give that tracking number promptly to your customers and it takes a lot of hassle out of the support.

Once you provide the tracking information, the customers can check the status of the shipment themselves.

Returns & Refunds

Another most frequent customer service question is satisfaction with the product. Sometimes the product might not match people expectation and they would request for a return and refund.

To minimize it make sure you have the product description clearly written about the product to avoid any surprises.

However, some of the return cases are totally out of our control. In such events, always ask them to return the product to you for you to process the return. This will make sure the customer is not scamming you.

If they return within the refund window specified, always process the refund promptly. Not only it will keep the customer happy but also avoids any chargeback claims.

Chargebacks

The scariest thing for an online business is a chargeback claim. When there is a discrepancy with the payments such as fraudulent transaction, customer complaints to the bank about not receiving the product or conflict between the store owner triggers a chargeback.

Bank or credit card company will put that transaction on chargeback and will request evidence that you shipped the product with tracking number. If you lose the chargeback bank will charge a high fee on top of refunding the money and the cost that you spend on the product.

Here are a few things you should do to avoid chargebacks.

Prompt communication with the customer – Always respond quickly to the questions or concerns from the customer, so they are not suspicious of you.

The customer is always right – Any discrepancy on the product, shipping or anything the customer says. Just accept it and refund. The cost of negotiating and fighting does not worth the effort.

Be watchful for the fraudulent transactions – Shopify provides many features to detect and report any kind of fraudulent transaction. Always refund those orders without thinking twice. I lost a lot of money initially dealing with kind of orders.

Is the dropshipping business right for you?

Starting a dropshipping business is a great idea right now. Not only it is easy to run a store it also gives a ton of flexibility to change products.

I can’t stop recommending this business model and I think everyone should have a small store.

Just give it a try for a few months and I am sure it would be a good passive income stream for you.