Can You Make Money Dropshipping?

August 29, 2017

Dropshipping Business

US sales on the web reached $396.72 billion last year, a 15.6% increase compared with 2015. According to a market research company eMarketer, the amount will be doubled by 2020 and will reach $684.24.
Can You Make Money Dropshipping
US retail ecommerce sales, 2014-2020 billions
Dropshipping is a sales method where a consumer makes orders online and these orders are forwarded to a vendor. This vendor ships the orders from a warehouse to the customer directly. A dropshipping store owner gains the difference between end-user prices and vendor prices.

More and more entrepreneurs are getting involved into dropshipping business. Google trends says the number of requests increases:

Is Dropshipping Trending?

Some say that now is the best time for dropshipping, the others hold an opposite opinion. There is no doubt development of ecommerce and globalization have a positive effect on dropshipping. Online purchases are more popular than in any time before.

Let's compare dropshipping with a standard business model and see what points make dropshipping to be accessible to each Internet user to the same extent:
Standard retail business model
No expenses on stock
No warehouse space rent
No inventory
No worries about package
No worries about shipping
No need to test products
No geographic limits
No full-time implication
No experience required
Fast product line expansion
Basic knowledge about webmastering and ads is enough
Dropshipping Business: Potential Opportunities and Benefits
  1. Low barrier to entry is #1 reason that makes dropshipping "hot"
  2. Highspeed settlement of transaction
  3. Lack of territorial reference
  4. Auto operation for twenty-four-hour working condition
  5. Unlimited possibilities for promotion
  6. Interactive communication
In most cases dropshipping is a side business which one has apart from the main activity or college. Especially at the beginning.

How to Make Money Dropshipping: To-Dos
Dropshipping is clearly easier than buying wholesale and selling from your own stock. But don't get confused, as it doesn't mean dropshipping is easy. There is much work to be done especially upfront. Let's take a look at the list of tasks that should be done:

  • Stage #1: before making decision of dropshipping business start
  • Stage #2: before sales start
  • Stage #3: after sales
      Stage #1: To-Dos Before Dropshipping Business Start
      Products search (niche). Monitor existing profitable niches and choose an addressable market you prefer most to decide what products to sell via your dropshipping online store. Find here 48 best dropshipping niche ideas for 2018 and criteria that will tell you more about niche and hopefully inspire you to pick the right one.
      Suppliers search. Surely you need to find vendors and surfing takes time as reputation check is a must. Why is that so? You offer and sell products to end-users, then you forward orders to suppliers. As for suppliers, they produce and ship the orders directly to your customers. You are a supplier for your customer as he/she doesn't know that a third part (a producer) even exists. As you do not control production and packaging, you need to prevent disputes regarding products (description match, quality) or services (package, delivery) from the side of your end-customers. Suppliers analyses include ratings and feedbacks review.

      You need to make vendors investigation if only you are not using Dropwow.This is the only dropshipping-oriented marketplace that collects only those dropshippers that meet compliance requirements, so you don't need to examine suppliers reputation as this work has been already done.
      Delivery options. For instance, ePacket is popular in the US in case you deal with suppliers from China. It is cheap, reliable and you can track it online.
      Stage #2: Before Sales Start
      Audience segment. Decide who are your clients (interests, needs, location, environment, characteristics) to reach them and motivate for making a purchase.
      Channels. Find appropriate places and methods with the help of which your targeted audience can learn about your products, make a decision to buy and purchase from you.
      Countries to target. Choose the best countries to focus on and avoid the worst ones. Read both lists here.
      Pricing. Offer value at a reasonable price. Customers interpret the value as an offer utility minus a paid price. Find the balance between competitive analogs (there are at least indirect ones), profit and expenses.
      Website with a shopping cart. Shopify is the most popular service for online stores set up. All the necessary features and functions for website building and managing have already been developed. They are easy-to-applied and described in easily-accessible instructions.

      As this service is not made specifically for dropshipping only, you may need a Chrome extension that helps to import products from a marketplace to the store. For your information, Oberlo and Dropified are hits.
      Create effective product pages that sell. Your product pages should contain all the necessary elements to convert every user into a buyer, or at least into email subscriber.
      Gain traffic. A dropshipping online store owner is in charge of marketing and his/her task is traffic attraction to the website. Possible instruments are the following: social media (Facebook targeting, Instagram influencer marketing), SEO, Google ads.
      Stage #3: After Sales
      Orders forwarding to dropshipping suppliers
      Payment transfer to suppliers
      Delivery status updates
      Management of potential quality issues (refund and return)
      Realtime inventory
      Feedback collection and processing
      Analysis of cashflow, increasing sales, margin, target audience, channels, enlarging product portfolio.
      I listed above the tasks that should be done by a dropshipping entrepreneur to improve business success and eliminate a possibility of failure. However, in the end, it is not only about what you do to make money dropshipping, it is also about how you do it.
      Dropshipping Business: Potential Risks and Pitfalls
      Surely there can be problems caused by an external factor (new competitors, customs policy reform, crises… I don't know). Chances are better than ever that one of the above-given points wasn't worked out.

      Mostly the reasons of real and false (read as "contrived") dropshipping business risks are the following:
      What I want to say is that dropshipping is a business and it can and starts working in an automated way after you did everything necessary for your "money-making machine". Dropshipping business is not easy money. However, dropshipping startup is much easier and not risky in comparison with a standard business model.
      Upfront Investment
      As regards to start-up budget, here is a list of some articles of expenses which should be kept in mind while pricing and calculation of cash you need upfront.

      Part #1 investment:
        $30 - website domain and hosting.
        Both of them are needed for a website launch.
        $600-$700 - promotion.
        The amount depends on the methods of traffic gain you are going to use.
        $$ - the first orders investment including delivery cost.
        You will get money on your bank account after orders delivery. As suppliers work on a prepaid basis, you need to have money for your first orders (1 week or 1 month) till you have cashflow. Cashflow is a total amount of money being transferred into and out of your business.
        Part #2 in addition*:
          $$ - sales taxes
          $$ - payment solutions (for instance, PayPal is 2.9% per order)
          $0.30 - transaction fees per order
          $29, $79 or $299 - Shopify monthly fee depends on your plan.
          Shopify is an ecommerce platform that offers beginner entrepreneurs an easy way to start their online stores.
          from $29.90 till $99 - Oberlo or Dropified monthly fee depends on your plan.
          Oberlo or Dropified are Chrome extensions. They import products from a marketplace into an ecommerce store. You don't have to do it manually.
          $10/hour or $0 - hire a freelancer or use Dropwow app for free
          A freelancer manages orders, deals with disputes. A negative side of a freelancer work apart from payment for his/her work is that you need to find the right guy. It definitely takes time. Or you don't have to hire one when you use free Dropwow app which offers automation for dropshipping processing.
          *Part #2 contains amounts which you don't have to get out of your pocket. But you should keep these expenses in mind, in most cases these sums are deducted from your end-user prices. So, you should include them into your prices.

          When you register a company, have more than one online store, your expenses will increase. You will also need to include expenses on electricity, the Internet, office rent, etc. These points were not listed above as now I'm saying about upfront investment.

          If you worry about any of the given points, keep in mind that Shopify, Oberlo, Dropified and Dropwow offer many step-by-step instructions and tips. When you start using any of them, you will see.
          Be ready for a small margin, as much money is spent on ads. You will have good profit because of having a mass volume of sales. It is possible to reach it offering trending products. This is a source with about 200 trending products of the month.
          Minimal investment really makes dropshipping to be an attractive business model. A retailer pays to a vendor after receiving full prepayment. If we look at the negative sides, the most cases will depend on only you. Now is not just not late to start a dropshipping business, now is even the most actual time for a start than ever before.

          We're not saying that dropshipping is easy cash. However, in comparison with a standard model, it offers a quick start, easy running, and low risk. In addition, dropshipping is extra revenue which is raised on autopilot.

          Need to know "how to start dropshipping business"? Look at to-dos which are given above and enjoy your dropshipping trip!
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          Product Manager at Dropwow
          Victor Ikonnikov
          Product Manager at Dropwow