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Dropshipping: What It Is, How It Works, Where To Start

Modern realities, including the pandemic , are pushing people to create their own business, in which you can build your own business strategy. However, many start-up entrepreneurs are afraid of the large costs of starting their own company . For such people, there is a way out - to open a dropshipping business. Learn how to do this in this article.

What is dropshipping

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Dropshipping is a business based on the sale of goods from the supplier's warehouse without first purchasing products. In this scheme, you will take the place of an intermediary who takes orders from customers and sends the goods to the address of the buyer.

Dropshipping business allows you to sell products under your own brand, but at the same time not to be engaged in the production and storage of goods in a warehouse. At the same time, the assortment of an online store can be completely diverse - it all depends on the choice of a dropshipper.

The intermediary's earnings most often consist of the difference between the purchase and retail prices. Also, a dropshipper can make a profit in the form of interest that the manufacturer of the product pays for advertising and selling its products.

How dropshipping works

The concept of dropshipping is presented in the following diagram:

Dropshipping business consists of the following steps:

  • Niche selection
  • Supplier search
  • Conclusion of an agreement with a supplier
  • Development of your online store
  • Placing the supplier's goods in your online store with prices and product descriptions
  • Website promotion
  • Checkout
  • Sending customer order details to the supplier
  • Sending goods to the address of the buyer
  • Payment for the purchased products of the supplier

To work according to the dropshipping scheme, you do not need to worry about the production, storage and logistics of goods. The intermediary only needs to attract customers to their online store, as well as push them to buy goods. All this will require a quality website , as well as a reliable supplier.

Pros and cons of dropshipping

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Dropshipping is not a perfect way to do business: it has both positives and negatives. Consider the pros and cons of this scheme for organizing the work of the company.

Pros:

  • Minimum cost to start a business . You do not need to pre-purchase the product that you plan to sell. In addition, purchases from the supplier can be made after receiving payment from the customer. Thus, you do not spend anything from your pocket.
  • Transfer of work on registration, packaging and delivery of goods . This is done by the supplier on behalf of your brand.
  • Possibility of simultaneous cooperation with several suppliers . Thus, you have no restrictions on the categories of goods sold. You can sell products from different sellers to increase your customer base and store revenue.
  • No geographic restrictions . Dropshipping allows you to send goods around the world, because the sales process does not depend on the location of the warehouse with the goods. You can manage your online store from anywhere with an internet connection.

Minuses:

  • Increased competition . Due to the low threshold for entering this business, there are many sellers on the market. This creates constant competition between dropshippers for customers.
  • You are responsible for the quality of the goods and delivery . The supplier controls the products, but the customers will make claims to you, since the goods are sold on your behalf.
  • The business is underperforming . At the beginning of the online store, you should not count on high profits. Large revenue can only be provided by a large turnover, which is practically impossible when opening a new business.
  • Despite the disadvantages listed above, dropshipping is a promising idea for aspiring entrepreneurs who do not yet understand the organization of production and delivery of goods. Also, this model will help already promoted stores to expand the range of products and enter a new market.

How to start a dropshipping business

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To open an online store based on dropshipping, you must go through the following steps:

1. Niche definition

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The first step in starting a dropshipping business is to find a niche to trade with. To find a suitable area, you need to analyze various niches and answer the questions:

  • What is interesting to the target audience?
  • How much can you earn selling this type of product?
  • Are there many competitors in the market, and what are their strengths?

To assess the interests of customers, you can use the Yandex.Wordstat and Google Trends services.

2. Search for a supplier

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After analyzing and choosing a niche, you can proceed to the search for a supplier. First, formulate the basic requirements for a business partner. Choose the desired delivery region, the products you are interested in and the best conditions for returning orders. Once you have established your key milestones, use the following methods to find suppliers:

  • Find suitable manufacturers and ask them if they agree to work on a dropshipping scheme.
  • Check out dropshipping sites like Aliexpress, Amazon, eBay, etc. Look for sellers on these sites and agree on cooperation with them.
  • Use special services to find suppliers.

When choosing a manufacturer for cooperation, check with him the conditions that he provides to online stores. You should also check with your supplier for the following:

  • How orders will be paid for, and whether the seller charges an additional shipping fee.
  • Does the selected supplier manufacture the goods themselves or purchase from another manufacturer? In the second case, you should not cooperate with him, since the purchase price for the goods will be too high for you.
  • Will you be aware of the amount of goods in stock and delays in shipping products.
  • Discuss the possibility of branding product packaging so that buyers receive goods on behalf of your company.
  • How the seller will ship and how long it will take.

3. Creation of an online store

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For a dropshipping business, it is extremely important to make a quality online store. It is he who will be a kind of showcase, which will present the assortment of the store.

You can create a website yourself in online designers or ask a web developer for help. The main thing is to end up with an attractive and modern online store that will represent your brand favorably.

After the direct development of the site, you should add photos of products with descriptions and prices (with your margin) to it.

4. Store promotion

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One of the main tasks of a dropshipper is to attract customers to your online store. For this, various types of promotion of the company are used. You can run ads in all available channels.

When choosing a promotion method, consider the low profitability of dropshipping. As your income increases, you can increase your investment in brand advertising.

At the initial stage, it is optimal to use free PR tools , as well as word of mouth.

5. Starting a business

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With the right approach to building a dropshipping business, the first orders should appear in a few days. At this stage, it is important to analyze customer purchases, collect feedback on the product and delivery. This data will help you improve your business.

Conclusion

A dropshipping business will help aspiring entrepreneurs try their hand at sales without the cost of purchasing products. In case of failure, you will not lose anything, but only gain an important resource - experience. The instructions for opening a dropshipping business presented in the article will allow you not to make a mistake and create a successful business.

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