Dropshipping is a supply chain management where the retailer does not keep its goods in stock, but instead transfers customer orders and shipment details to either the manufacturer, another retailer, or a wholesaler who then ships the goods directly to the customer. The retailer becomes a medium man who manages and transfer the order details.
Like any other successful business, you’ll need to commit to it if you decide to start a dropshipping business, and you will also need to have a good business strategy. You can read about the implementing a business strategy here.
If you’re interested in starting a dropshipping company, you will need to invest heavily moneywise. This investment isn’t to be taken lightly. You need to grow in your connections to identify the right business partners for this job. This comes in handy when you’ll need the services of good programmers, developers and marketers. Time is also a factor, as patience is the true key to a successful dropshipping business.
Here are some helpful tips to get your started:
1. Find a supplier.
Look for those with plenty of experience and always meet their deadlines. Before you choose a supplier, check for important, decisive factors like:
- Shipment speed: Once you place an order with your manufacturer/distributor, be aware of how long it takes for them for ship your order.
- Shipment method: Check their shipping methods, and if they ship from out of country from the buyer’s address, make sure that you’re able to monitor the package location via their tracking systems.
- Insurance. Find whether their quality control systems are good and if they offer warranties for their products.
These factors are crucial to maintaining your high rating and in order to increase your reputation among potential and current buyers. You want to make sure that you can find a supplier that is trustworthy and professional.
2. Select best selling products.
For those who know exactly what they want to sell, this can be step one. The general idea is to start by trawling through your suppliers’ product selection and pick out a few items which interest you.
However, if since finding and supplier and selecting a best-selling product can be interchangeable, make sure that you conduct proper research on what you want to sell on popular marketplaces such as eBay and Amazon. See if you can sell a product that has high selling rankings (for example: at least in the top 2000 products of its category) at a profitable range for you.
Other important factors for choosing a product include:
- Size/Weight: If it’s under 16 oz, it can qualify for First-Class Shipping, which ranges from $2-4. However, if it’s over 16 oz but under 75 lbs, it can qualify for Priority Mail, which is more expensive ($5-25). Weight is a similar factor, as each class of mail fits into a different price category.
- Price: Make sure the item’s price is profitable and will entice buyers to purchase it. Anything under $100 is typically an easy buy for buyers as it’s not too much and doesn’t require too much thought to purchase.
- Shipping: Understand that shipping is also a crucial element of determining how well a product will do.
3. Obtain a Tax ID.
When you’re just starting off, you may want to wait on verifying your business. If you’re interested in running an official business, your business will need a tax ID if the state you operate from collects sales tax and if an order is placed by someone living in your state. For all orders placed by residents of other states, even if those states charge their own sales tax, you won’t need to collect any taxes.
4. Choose a selling platform.
There are plenty of online auction sites out there that are growing rapidly and are getting a lot of traffic. Some vary in fees and can be better suited for certain sellers due to their situation. eBay is one of the most popular marketplaces, and is geared towards individual sellers and is preferred for newer businesses with people starting out. Amazon, another popular platform, is also a great platform for selling.
The main difference between the two is that eBay is more flexible with listings and allows sellers to create individual varying listings of the same product, while Amazon lists all the sellers on the same item listing.
5. Manage your listings.
For the most part, selling items remotely is just as you would sell items that you have in stock. You, as the lister and seller, will have to manage all communication and listing information. Dropshipping requires you to list your items just the same way you would list them if you had this stock on hand, but when selling on the online platforms, you must disclose in your listings the location of your item — mainly if your item is in a different country than your location.
This is to let the buyer have an idea of how long it might take to get their order delivered, as different jurisdictions will have different shipping timeframes, and also may have different regulations.
Starting a dropshipping business isn’t going to be easy, but it’s the next step up from selling just the items you have in stock. If you’re looking to expand your business globally and also save a little time while expanding, dropshipping is one of the best options to reach out to other connections and increase your revenue.