Is a drop shipping business plan the right online business model for you? Here’s a neat overview of what it is, how it works, and how you can start selling online within the hour, with no inventory at all.
E-commerce continues to grow in 2020 and with it an opportunity known as dropshipping. According to E-DSS.org, 22-33% of online retailers use drop shipping as their main order fulfilment method. It simplifies online business in a way that is very appealing to new e-retailers.
Small business owners who are looking for a fast, easy way to sell online can benefit from a drop shipping business plan. With minimal start-up risk and no limit on your potential growth – drop shipping is one of the most popular eCommerce models available for entrepreneurs today.
Here is a brief overview of everything you need to know about starting how to start a drop ship business. By the end, you’ll be one step away from launching your own successful online store.
What is a Drop Ship Business?
Dropshipping is a business model that allows online store owners to sell without the need for in-store inventory. The e-retailer sells third-party products from their own store. The orders are then fulfilled by the third-party (wholesaler, supplier or distributor) drop-shipper.
The beauty of this practice is that the store owner has no upfront investment and no inventory costs, it’s all done by their dropshipping partner. This is how dropshipping got its name! It bypasses the normal shipping process from wholesaler – to retailer – to customer.
Instead, the retailer does the marketing and processes orders, then notifies the drop shipper who sends products directly to the end customer. It’s easy and efficient, and a great way to enter the online retail market.
How Does It Work?
A drop shipping business plan is a straightforward, simple-to-implement online business model. Here are the basics of how it works.
- An eCommerce business partners with a distributor, manufacturer or wholesaler
- The partner’s products are listed on the business owner’s online store
- A customer visits the digital store and orders a product
- On payment, the order is sent to the partner to fulfill
- The online store pays the wholesale cost and keeps the profit markup
- The partner then sends the customer their ordered items
- All items shipped are branded with the online store’s branding
- The storefront tells the customer their product is on its way
- The customer receives their product
At no point does your customer ever know that the products aren’t coming from your online store!
What Does It Cost?
There are a few cost factors involved in launching this kind of business startup. For small business owners, partnerships usually don’t cost anything.
The exception is when you sign up to a site that offers you connections to dropshipping partners, or when you join a drop shipper’s program. There are subscriber fees in that instance, but the barrier to entry is very low.
With the right e-commerce partner, you will be up and running with a fully-fledged, fully-product populated store for a couple hundred dollars.
Who Is It For?
A drop ship business is the perfect business investment for a small business owner who is looking for an affordable, low-risk way to sell products online.
If you are starting out, this model is an affordable way to quickly and easily sell goods on the internet. It’s so popular that many e-commerce stores have a blended model, where some of their products are in-store, and others are drop shipped.
What Are The Pros and Cons?
Owning an online store that dropships products has its pros and cons.
Let’s explore the pros. First, there is no need to order, pack and ship products. That’s what the drop shipper does! You don’t have to worry about the staffing and building costs that cover product handling.
Another perk is the ability to enter the market. It’s low-risk and growth is at your own pace. With no significant upfront investment, you can focus on selling and building your brand. The drop shipping business plan is the ultimate work-from-home model, and can be done from any device with an internet connection.
You don’t have to deal with product returns when using this model. They’re sent back to your drop-shipping partner. You can also choose from a large range of diverse products and change your offering as needed. This allows you to fine-tune your business as a speciality seller.
An important pro you may not have considered before, is your ability to collect data. Testing products means discovering the best traffic streams, which you can use to improve your business. Many business owners have found success this way.
Ultimately, you may even sell that business for a tidy profit. The lesson here is to choose the right partner, and curate the right products.
Now, onto the cons – and thankfully there aren’t many. Sometimes your drop shipping partner will get customer service wrong. Then it will be up to you to correct things with your customer. You will also have to work hard to differentiate your store from others selling similar products.
If you can manage differentiation and customer service, you’re on the right track.
What Do I Need to Start a Drop Ship Business?
So what do you need to get this off the ground? Right now you need one hour, and a small investment. The rest is just making the right decisions about who to partner with.
The most immediate benefit of starting your online drop ship business is that it’s easy. You only need two key partners.
#1: A Drop Shipping Partner
Do your research and find a niche, then decide on a product range that you can sell like hotcakes. Secure your partner and the product content you’ll be using to sell online.
There are many drop ship business partners out there, the trick is to find one that suits your concept for an online store and has a fair pricing structure. Sometimes retailers pose as wholesalers so be wary about product costs, and large pre-order fees.
The best products allow you to make a strong profit, they’re good quality and they’re shipped super fast. Check out a variety of dropshipping products here.
Consider scale, and your profit margins – then decide on product pricing. Remember to start small, and think big. Do this in the next 30 minutes.
#2: An Online Store (Website)
Next you need to start a dropshipping website. Choose a cloud-based e-commerce platform with a wide range of tools that will help you get your dropshipping dream online.
Find an amazing template to design an eye-catching store for your customers. You will need a shopping cart, a domain address, order management, an SSL certificate for security and professional email addresses to get up and running.
Your store should come with an integrated checkout feature, that allows your shoppers to choose from a huge range of payment options. The storefront should also be modern and beautiful, while fully mobile optimized.
That’s everything you need to start selling products online! The best platforms are so easy to use, you can go live in 30 minutes.
Create your perfect storefront now, and start your drop ship business right away.