Drop shipping is an extremely popular business model for new entrepreneurs, especially gen Zers and millennials, due to internet marketing skills far outweighing financial capacity.
WHAT IS DROPSHIPPING?
Dropshipping is an order fulfillment method that does not require a business to keep products in stock. Instead, the store sells the product, and passes on the sales order to a third-party supplier, who then ships the order to the customer.
The biggest difference between dropshipping and the standard retail model is that the selling merchant doesn’t stock or own inventory. Instead, the seller purchases inventory as needed from a third party—usually a wholesaler or manufacturer—to fulfill orders.
The merchant is mainly responsible for gaining customers and processing orders in dropshipping, meaning you’ll effectively be a middleman. Despite this, you’ll reap the lion’s share of the profit by marking up the items you sell. It’s a simple business model and one that can be very rewarding.
Benefits of dropshipping
- Less capital is required
- Easy to manage
- Easy to get started
- Low overhead
- Flexible location
- Wide selection of products to sell
- Easier to test products and audiences
- Easier to scale
Disadvantages of dropshipping
- Low margins
- Inventory issues
- Shipping complexities
- Highly competitive
- Challenging customer service
- Supplier errors
- Limited customization and branding
What is dropshipping’s main appeal? Because it’s flexible and it doesn’t demand much, it’s the ideal side job. Many entrepreneurs choose to do dropshipping on the side while they have a main job that provides steady income. In other words, you don’t have to sacrifice your day job to pursue your dreams of becoming an entrepreneur. It is important to understand how dropshipping can be profitable to you
Typically, the profit margins for dropshipping can range from 15%-45%. However, the profit margins for consumer durables and luxury items (for example, electronics, jewelry, etc.) can yield a profit margin of up to 100%. It’s about finding the right niche and supplier while entering a market that isn’t already overly saturated.
One of the benefits of dropshipping is the flexibility. You can make your business as big or as small as you want it to be. Many dropshippers choose to do it on the side, but it’s also a viable career path. If you want to be a full-time dropshipping retailer, you can be!
Dropshipping is a low-risk business model that allows you to sell products to your customers without incurring huge running costs like a wholesaler would have. Because of these lower costs, it is easier to become profitable with dropshipping a lot faster than other business models.
It’s easy to scale up your business with dropshipping, meaning you can grow your business pretty quickly while keeping costs down. Once you’ve reached customers and gotten enough sales, you can move from dropshipping part-time to full-time. Best of all, you can make this happen at whatever pace you want.
DROPSHIPPING MISTAKES TO AVOID
Do Not Base Your Choice of Product on What Your Likes & Dislikes Are
Do Not Sell Knock-Offs or “True Copies”
- Don’t Just Hop Onto the Bandwagon
Quick step-by-step guide
- Select a Niche. Research what products would fit well with your strategy, market, and customer base.
- Research how your competitors are selling the product, namely pricing.
- Find the best supplier. Partnering with the wrong supplier can ruin your business, so it’s important that you don’t rush this step
- Finalize a fulfillment process that works for both of you and incorporate it into your system. Depending on your sales management software, this could be easy or require ironing out some wrinkles.
- Build your ecommerce website
- List and promote your new product. Be sure to specify any special conditions, such as changes in shipping times or locations.
- Create a customer acquisition plan. Having a great product and a website is great, but without customers looking to buy, you don’t have a business.
- Analyze your data and metrics to grow your business. Tools like Google Analytics traffic and Facebook conversion pixel data will help you with this.
FACTS TO CONSIDER ABOUT YOUR TARGET MARKET
- Age Range
- Type of client
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