There are several online business models such as affiliate marketing, print on demand, Kindle publishing, and so on, but dropshipping is one of the most popular ways to make money online.
There are countless courses, training, videos, and ebooks telling you how to go about it. The hype will frequently lead you to believe that dropshipping is a hands-off operation that would easily net you six figures per year.
This is why so many newcomers jump into dropshipping without understanding the risks that could derail their business or even leave them in debt.
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Is Dropshipping Suitable for Beginners?
Before deciding if dropshipping is suitable for you, you need an unvarnished view of the facts…
You need capital
While you don’t need a lot, roughly $2,000 to $5,000 is a nice amount to have before you begin. If you don’t have the funds, you’re better off working a day job and saving up first.
Do NOT expect to get into dropshipping with $500 and think you can bootstrap and scale up the business to 6-figures. In reality, you might blow the $500 on ads within a few weeks and be at a loss.
You need time to find a winning product and discover which ads will work. Since time is money – you need money.
You need skills
The good news is that the skills required for being a successful dropshipper can be easily learned. Unlike Kindle publishing which requires you to be a good writer and so on, with dropshipping, you only need to get a few things right.
- Being able to spot a winning product
- Being able to write decent sales copy
- Being good with paid advertising
- Being able to analyze the numbers and track your profits
If you master these, you’ll be a successful dropshipper in a matter of time. But no matter what, you’ll need to spend time learning and doing. Do you have what it takes to surf the learning curve?
That’s something to think about. This process is not a walk in the park.
It’s not as easy as it seems
While dropshipping has all the trademarks of an easy business, this is merely an illusion.
Yes, you do not need to create your own products. You don’t need to actively recruit affiliates. You don’t need to ship the products out.
Everything seems done for you. The system seems so ‘easy’.
In fact, one could even consider the simplicity of this business model as the siren song which has led many a hopeful newbie to disappointment and debt.
The model is only simple if you can get it right… and getting it right will require time, money, patience, and lots of trial and error.
You must be logical rather than emotional. It’s inevitable to lose money during the testing phase when you’re trying out new products and ads. If you panic the moment you lose money… and throw in the towel, you’ll never succeed with this business model.
You must know your numbers
Being able to calculate your profit margin and knowing exactly how much you’re making and if your ads have a positive ROI is crucial to running a successful dropshipping business.
Some people fear the numbers and feel like it’s too complicated. If you feel this way, either you get used to analyzing the numbers or you’re better off with another online business model.
Other than that…
You’ll also need to know how to do your taxes, how to set up a store (preferably with Shopify), how to minimize disruptions in your business because you don’t really control the supply chain, and so on.
There’s much to learn and do. If you’re ready to roll up your sleeves, do the hard work and get dirty, you can become a profitable dropshipper in a couple of months. This is a very lucrative business model for those who can go through the hard yards and master it.
Things to Look Out For Before Starting a Dropshipping Business
Starting a dropshipping business can seem like an exciting undertaking. You’ve heard about the ‘juicy profits’ to be made and the whole idea of not creating or shipping products but still making money with barely any work seems too good to resist.
While the business model on the surface does seem that way, let’s just say that reality is quite another story.
There are several important points you MUST be aware of before even buying a domain for your eCommerce store. Let’s see what they are!
Ideally, you should have about 2k-5k before you begin a dropshipping business. It’ll take you time to find a good product to sell and finding the right creatives for your ad will require trial and error.
During this time, you’ll be losing money on ads until you can find both a winning product and a winning ad. This magical combination in most cases will only be discovered with testing and tweaking.
Whatever the case, you’ll be losing money during this process. Marketers often like to sugarcoat it by saying that they’re ‘buying data’. While this is true, losing money still can make you feel the pinch.
So you’ll need to have some cash reserves to tide you through the testing phase and approach the process with logic and not emotion. Once you find a winning product, you’ll be able to scale up and your profits will cover any earlier losses you made and you earn much more than you initially invested.
Platforms and themes
Even the theme you use for your dropshipping store will matter. You want a store that looks attractive and legitimate.
There are many decisions to be made when choosing the different platforms. Do your research and pick what suits you best. Nothing is perfect and there are pros and cons to all the different options. In the end, your decision will be based on your personal preferences.
No matter how intelligent and capable you are, if you’re new to dropshipping, you’ll need to go through a learning curve – which will take time. So don’t be too quick to quit the day job.
Work at your day job while working on your eCommerce business. Once your online business takes off and you’re earning double what you make at your day job, you may quit and focus solely on your business.
Domain and type of store
You’ll need to think of a good domain name for your store and decide if it will be a niche store or a general store. If you’re a beginner, you’ll definitely want to go with a niche store. For example, a store that sells mini art sculptures.
Picking a general store and trying to be like Amazon is difficult and requires a much bigger budget. A more conservative approach is better here and focusing on one niche will improve your conversions too.
In conclusion, you’ll want to enter this business with both eyes wide open. Unlike affiliate marketing or other business models which require a lower cash outlay, dropshipping can rack up your bills because of the advertising costs.
So you have to be alert and learn the business well… and proceed cautiously. If you persist and keep testing and tweaking your actions, you’ll discover what works for you and have a 6-figure dropshipping income.
How to Choose a Winning Dropshipping Product
One of the biggest challenges marketers face when doing dropshipping is finding a winning product. While many products may look good, ultimately, the market will decide if they like a product or not.
Until then, it’s a matter of trial and error for the marketer. While this sounds straightforward, it’s actually a test of patience because you’ll need to spend money on advertising and tweaking your ads until you find a winning ad.
But a winning ad can only work if you have a winning product. This is what you need to look out for…
Does it solve a problem?
The hottest selling dropshipping products solve an immediate problem. For example, posture correctors, pet care gadgets, etc.
A product that solves an immediate need tends to often be an impulse buy. Your ads will convert better when the prospective customer immediately realizes that the product will make their life easier.
This brings us to the next point…
Mass market appeal
Since most marketers tend to use Facebook ads that are displayed to a wide audience, the more mass appeal your product has the higher the conversions will be.
If a product is too ‘specific’, most people will not click on the ad or buy the product.
This is another important factor to be aware of. Sometimes when a product is trending, every marketer and his neighbor tries to get in on the action. The end result is that there’s overexposure and most people who would want to buy the product have already bought it.
Sales will decline and if you get in too late, you’ll miss out on most of the profits. So it’s imperative that you choose a product that’s growing in popularity… and ride that wave upwards instead of choosing the product when the market is already saturated.
How unique is the product?
Generally, the product should NOT be available in big stores like Walmart, Amazon, etc. If the customer can buy the product from these places, they’ll probably not buy it from you.
Furthermore, the uniqueness of the product must make price less of an issue. For example, a roll of sticky tape that can hold up bricks and seal leaks is unique. You have no way of knowing how much something costs.
The dropshipper who is able to source the product for $2.50 a roll will be able to sell it for $15. The consumer who’s unable to guess the price of the product will willingly pay $15 because of the perceived value of the product – and the fact that it’s not available in stores.
Every extra step that a potential customer has to take will inevitably lead to a lower conversion rate. Your product should be simple to purchase and have very few options to customize or none at all.
You want a seamless buying process. Dropshipping products such as pet gadgets, car accessories, etc. are easier to sell.
Clothing and other products that require one to choose their size, look at sizing tables, choose the color, etc. require more mental energy… and many people will just click off the website than go through the buying process. So that’s something to keep in mind.
Besides the main pointers above, you should also take into account shipping times, product reviews, the demand for the product, and the profit margin.
Do your due research and it’ll take a while – but this is time well spent. Choosing a winning product to sell is one of the cornerstones of successful dropshipping. Then it’s just a matter of getting your advertising right.
Dropshipping VS POD: Which is Better?
Many beginners to dropshipping often wonder if they should dropship existing products sold by suppliers on AliExpress and other platforms… or go the “print on demand” (POD) route.
Since there are pros and cons with both business models, it’s crucial for the beginner to assess each business model on its own merits and decide for himself/herself which is suitable for them.
Dropshipping and POD are two sides of the same coin… and there are many marketers making good money with both models. So rest assured that both approaches are profitable. Let’s see which one is the best fit for you.
The biggest differentiator between dropshipping and POD is that with dropshipping, you’ll be shipping pre-made products created by manufacturers.
For example, if you’re dropshipping a sleeping bag, the manufacturer will decide the color, size, shape, etc. You’ll have no/very limited input and control in the process/designs.
While you could design a logo and ask the manufacturer to add your logo to the product, that’s about as far as you can go with the branding.
With print on demand, however, you’ll be able to create your own designs and/or outsource the process to professionals. Then it’s just a matter of getting your designs printed on POD products such as caps, mugs, backpacks, shirts, and so on.
For branding, print on demand would be the way to go. You’ll build customer loyalty and your repeat customers will look forward to what new products you have to offer.
Lack of variety (with POD)
One downside to POD is that there are only a handful of items you can print your designs on.
With dropshipping, you are spoiled for choice because there are thousands of products to choose from. Everything ranging from survival gear to baby care products is there for you to ship.
If you’re looking for variety, dropshipping is a better option.
This is a tricky issue. Generally, print-on-demand products need to be manufactured first before shipping out. If someone ordered a t-shirt from your POD store, the manufacturer would first need to print your design on the t-shirt before sending it out.
With dropshipping, the products will be held in inventory by the suppliers. So the moment the order comes in, the product can be shipped out. If China suppliers are used, the e-packet option will mean faster shipping times.
However, if you’re using dropshippers based in the U.S. for your POD products, your shipping time might be even faster than the dropshipped products from China.
So it all depends on the product, supplier, location, etc. You’ll have to make your own assessment of the scenario.
These are some of the main factors you should factor into your decision before setting up your eCommerce store. Do note that both business models are NOT mutually exclusive.
You can sell dropshipped products and POD products in the same store. Learning to do both will give you more flexibility and your store will have a wider variety of products. That’s probably the best way to go about it.
Product costs and profit margins
Generally, dropshipping products have higher profit margins and lower costs, because they’re manufactured in bulk. Furthermore, most dropshipping products are sourced from China, where the costs are lower.
So if you’re looking for higher profit margins, dropshipping might be a suitable option. However, there’s one downside…
The biggest downside to dropshipping is that you’ll be facing competition from other marketers. Since your product is not unique (unlike POD), you’ll be dropshipping products that other marketers are selling too.
This will not only mean overexposure to some products, but advertising costs could rise too.
10 Common Dropshipping Mistakes Newbies Make
Making mistakes is common when you’re new and learning the ropes. While one can be patient and remedy mistakes gradually when following other business models such as affiliate marketing… with eCommerce, you need a faster reaction time.
Since you’ll be spending money on advertising and may even be paying monthly for Shopify and other apps, it’s imperative that you remedy mistakes quickly so that you’re in the green instead of languishing in the red.
The best way to remedy mistakes is to avoid making them. The following is a list of the top ten blunders that most newcomers make when starting a dropshipping business. You’ll be in good shape and your firm will succeed sooner if you avoid them.
Expecting quick profits
The concept of dropshipping is easy in theory, but difficult in practice. You’ll need to go through a process of trial and error before you discover winning products and campaigns.
Let’s not forget the nerves of steel you must have to keep losing money on ads until you find a winner and scale it up to massive profits.
All of this takes time, and you’ll be disappointed if you expect immediate returns… They may not have the patience to persevere till you achieve your goal.
Selling trademarked products
Selling branded items like plush toys with Disney or Pokemon images, for example, is a big no-no, especially if the manufacturers aren’t licensed to use the trademarks.
Your store will not only be taken down immediately (by Shopify), but you may also risk legal action. So, while selling products with popular brand pictures and the like, exercise extreme caution.
Not opening a niche store
All beginners to dropshipping should start off with a niche. Running a general store is not only costly, but it also reduces conversions. For example, if you have an art store selling mini-sculptures and so on, someone who buys one piece may buy a few more.
But if your store has too much variety and your sculpture is being sold next to a posture corrector and a pet pooper-scooper, the customer will just buy the one art item and leave – and you’d have lost the opportunity to make more sales.
Slow loading site
Research has shown that 1 in 4 people will close a web page if it takes longer than 4 seconds to load. You definitely want a site that’s blazing fast.
A small budget
You’ll need 2k to 5k in funds to be comfortable when trying to get your dropshipping business off the ground. A lack of funds will hamper your ability to tweak and test until you find a winning product and ad.
When selecting a provider, products, ad platforms, and so on, do your homework. This business has a lot of moving components. All need to work seamlessly for your eCommerce store to operate as an efficient and reputable sales machine.
The only way to ensure that you get it correctly is to conduct a thorough study and select the best solutions.
Selling low-quality products
Selling low-quality products will not only result in returns and complaints but will also affect your reputation with your payment processor. You must ensure that what you’re selling is of high quality.
Order the product first, or get a sample from the supplier. This will allow you to know if the product is of good quality and worth selling.
Not checking shipping times
Long shipping times are a no-no. Sometimes, a product may have fast shipping times to the U.S. but may take a month for the same product to reach Australia.
You must be aware of the shipping times to the different countries. Making your customers wait for ages for their product will result in refunds, chargebacks, and other problems in your business.
Not having a system to handle returns
The problem with dropshipping is that the customer usually doesn’t know that you’re the middleman and not the manufacturer. So when they wish to return a product, you need to know where they’ll send it.
To your place? To the supplier? How will you handle the returns?
You’ll need a system for handling returns.
Quitting too soon
Last but not least, a dropshipping business is a marathon and not a sprint. Quitting too soon will mean your business dies a premature death. So give your business the time and attention it needs till it succeeds beyond your wildest dreams.
Avoid these ten mistakes at all costs, and your dropshipping journey will be much quicker and easier.
To Your Success!