If you’re yet to decide on what type of online business to start, you should consider the dropshipping model of business. Why? As of 2019, the eCommerce industry made nearly $3.5 trillion worldwide 2019. And in March 2021, Statista data shows the revenue generation for the United States alone was at $431.6 billion. Today, about 7.9 million online businesses sell products online, making eCommerce a significant business idea.
Deopshipping provides an avenue to sell merchandise without owning or having a stock. This means it has a reduced risk rate, and you can operate it remotely while reaching a global audience and market. There’s no need to rent a warehouse with this online business model.
Another reason to consider it is its rising popularity for order fulfillment. In this guide, I will show you all the need-to-know about how to start a dropshipping business on Amazon, its merits, and its demerits. Read on to learn more!
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What Is Dropshipping?
Dropshipping is an order fulfillment technique where you connect customers with suppliers and make a profit in return. This means you are selling another person’s, company, or wholesaler’s products under your brand. Of course, you likely recognize that this kind of business is only possible because of the advent of eCommerce platforms such as Amazon and eBay.
Additionally, with the arrival of AliExpress in 2010, the marketplace giant further opened up, allowing shippers to resell products directly from Chinese manufacturers. This meant a cheaper cost and an improved profit margin.
If you wish to start a dropshipping business, you need not worry about inventory management systems, warehouses, shipping, and general logistics. Your third-party partner handles all of these for you. Such a partner can either be a supplier, manufacturer, wholesaler, or another retailer. With drop shipping (as it is sometimes mistakenly spelled), you are in charge of setting retail prices for products in your store, market research, product marketing, and handling customer service.
Also, you have to search for and establish a partnership with the supplier. And in most cases, you have to sign up for their services and pay accompanying charges associated fees. After this, it is your responsibility to notify the supplier of customers’ orders and the location to ship products.
How it works – a breakdown of dropshipping systems
In its simplest form, dropshipping requires you to sell goods to customers without owning the product. This means it will need the supplier, the dropshipper (you), and the customer. Below is a detailed explanation of each role:
A. The supplier
As earlier stated, a supplier can either be the manufacturer, a wholesaler, or another retailer. The supplier is essentially the lifeline in the dropshipping business, so it’s essential always to pick the right supplier (more on this later). In general, the supplier is in charge of providing the products, shipping to customers on your behalf, and replacing defective or damaged goods. The supplier sells to you, the dropshipper, at a discounted rate.
B. The Dropshipper
As the dropshipper, you must create a platform that allows you to sell products from your supplier. This can be from a website or social media platforms supporting this business model, see this free tool to build a website in a matter of minutes. You can decide to charge whatever rate you so please, but keep in mind that you most likely aren’t the only one selling such a product. Keep in mind also that you are responsible for covering shipping costs which will be a determinant of the price you charge.
C. The Customer
To complete the dropshipping business model, you need the customer. This is the person willing to part with cash for you to make a profit. They visit your online store and place an order for any product. They then make the necessary payments and provide an address for shipping. With dropshipping, your customer can be from anywhere in the world, making it a lucrative means of making money online.
How to start a Dropshipping Business
Starting a dropshipping business requires careful planning. As simple as the model looks, it can quickly spiral into a bad experience if you fail to consider several factors. To help you out, follow the tips below to make well with your online dropshipping service:
1. Create a detailed Dropshipping Business plan
Your first step to owning a successful dropshipping business is an almost perfect plan. And since there are so many factors to consider and take care of before you start selling, having a plan makes it possible to handle it all. A dropshipping business plan summarizes how you intend to manage your business, from creation to funding and making your first sale.
Having a business plan protects you from failed attempts, bad investments, and poor business decisions, ensuring you succeed with your goal. Your dropshipping business plan should contain the following:
- Business development strategy;
- Source for funding;
- Business description;
- Determine products to offer;
- Create buzz and awareness;
- Control your expenses and maximize your sales funnel;
- Upscale your business.
2. Pick a niche
Dropshipping isn’t new; many other entrepreneurs like yourself use the business model. Most have become household names in their industry, and competing with them head-on can be an uphill task. This is why selecting a favorable niche is essential. A niche is a specific subcategory of a broader industry that aims to provide solutions specific to that market’s needs.
Thankfully, dropshipping niches are almost endless, increasing your chances of finding one. To pick a niche for your business, it must satisfy these conditions:
- Any niche you decide to select must be one that you are passionate about. Even before your business kicks off, you need to think of creating months’ or years’ worth of content. Your passion kicks in as it’s easy to get bored and lose focus. Your best bet is to search for an area that naturally picks your curiosity. Once you are through with this, you can quickly build a strong brand around it.
- In dropshipping, passion alone is not enough; after all, you need to make sales to earn a profit. This means your passionate niche should also hold the profit potential. Your best chance at making this profit is to find possible solutions for problems in your chosen niche. Providing a unique set of keys to such common problems is what will lead customers to your business.
- In providing solutions, your niche must also stand the chance of being trendy. This allows you to sell trending products. Third-party tools like Google Trends and TrendHunter can help you see your target audience’s search. Alternatively, a quick google search will provide you with such details less accurately.
3. Conduct a comprehensive competitive and market analysis
Performing a comprehensive market analysis is an essential process that shows you all the vital metrics for running a successful business. Valuable information like competitors, strengths and weaknesses, target audience and demography, and marketing plans will become available.
Your aim with the analysis is to help create a stand-out dropshipping business from the competition. For this precise reason, being objective is non-negotiable. The data you gather from the research can also be vital in estimating revenues, profits, and pricing.
Platforms such as Serpstat or SimilarWeb are excellent for finding niche competitors you won’t see on search results from regular search engines. These platforms will also provide you a detailed summary of the websites you are searching for, including their social media profiles, advertisement play they utilize, audience, and traffic generated for their site. These tools are handy in providing a list of competitors for your niche and business. A strength, weaknesses, opportunities, and threats, or SWOT analysis helps you create a benchmark for your brand.
Having a list of your competitors isn’t enough; valuable insight data are also crucial. Your next step is to know the type of content they use and what practice performs better for them. Thankfully, Serpstat can again help you locate these data sets to replicate. This powerful tool will give you the necessary insight into what type of content gets the most social shares and can serve as a source of inspiration for newer content for your own business.
Social media platforms are another excellent source of competitive analysis. You can use them to generate accurate life data for further research. Facebook, Instagram, YouTube, and others run separate ads programs, and searching for those in your niche helps you learn which ads work. Using social media platforms directly also shows you how other brands interact with their audience, how many followers they have, and how they market their brand. You copy what works and improve upon it while discarding what doesn’t.
The other half of your research is the market analysis. It would be best if you had an idea about your niche’s value and market size. Research details like size, outlook, trends, and growth rate of your niche. This provides you information on whether there are enough customers interested in your products and gives an idea of if you can later upscale your business.
Niche demographics is another area you should take time to look at considerably. Details like age range, gender, income level, hobbies, and occupation will go a long way in determining the success rate of your business. More importantly, consumer behavior is critical. Knowing this ensures you have a firsthand idea of what drives consumers’ need for a product. This makes it easier for you to interact with them and provide relatable content to their needs.
4. Come Up With a Concise Name
Naming your business will be one of the most important tasks you will have to do, and it should be as concise as possible. Why? Whatever name you pick will be the first contact potential customers will have with your online business—so make a good first impression while still being clear about what you do. You can come up with precise catchy names by checking what your competitors use for inspiration.
Alternatively, you can automatically generate original names using third-party platforms like rhymezone or brandpa. You can edit the terms generated by adding appropriate suffixes or prefixes. Check its availability once you have a name you feel you can run with. The namechk tool can help you check the availability of the name, domain, and social media handles. Never be in a rush to pick a name, as it will be the face of your brand. Therefore, take your time and check as many variants as possible before settling for one.
5. Find a Dropshipping Supplier
You can’t start your Dropshipping business without finding the right supplier. This can be the difference between the success and failure of your business. And since you don’t manufacture products, you will heavily rely on your suppliers’ product and service quality.
Picking a less efficient supplier will mean your clients will have to deal with poor quality products, damaged packaging, and delayed shipping. This will ultimately reflect on your performance as a business, and your brand will be known for unsatisfactory service. To avoid this, it’s best to pick your supplier choice carefully. Here are some tips to guide your decision:
- It’s best to search for suppliers with industry-approved and are in good standing. To protect yourself from fraud, it’s best to ask for a supplier’s business license and a veritable client list.
- You also have to try extensively review each potential supplier’s online presence. Go through their websites, search for reviews, and comments about their service. Also, check out their customer service for efficiency and professionalism.
- No amount of online reviews will do, and as such, getting your hands on physical products will get you an accurate picture. Order samples of the product you wish to dropship and thoroughly test them out. Ensure they match the illustration and description on the supplier’s website.
- Most certainly, you also want to consider the delivery and the packaging. If possible, order a sample of products to different areas to check for consistency of packaging and shipping.
- Make an overall assessment of the general sales and delivery process. Check to see if your potential supplier keeps to deadlines. Also, take a keen look at the return policies and procedures.
For this, I will recommend Amazon and in the later part of this article, you will find out why.
Where to find Dropshipping suppliers
Finding a dropshipping supplier has been made easy thanks to significant marketplaces. A few clicks of the button can get you scrolling through a list of potential candidates, with you needing time to scrutinize each candidate. Dropshipper websites are your quickest means of getting a supplier.
Some of the most popular include SaleHoo, Modalyst, and Spocket. These platforms help connect you with the perfect suppliers. They have a catalog of suppliers in different categories focusing on their niche. Many also offer integrations with popular platforms such as Shopify, BigCommerce, and WooCommerce.
6. Create your Dropshipping store
The dropshipping business model is not complete without an online store where customers can come to make orders for products your sell. This is one of the crucial decisions you’ll have to make, seeing how your success or failure also depends on this—creating your store on whatever platform will dictate customers’ perception, which will influence sales.
With a dropshipping store, you can go either of two ways; build your store on an established eCommerce marketplace or create your eCommerce website. For this guide, we will be considering the former option.
Building your Store on an ecommerce Marketplace
This is by far the most popular method for creating a dropshipping store. This is more so if you are starting with this business model as it takes care of most of the heavy lifting, making it excellent for beginners. Depending on which marketplace you choose, you will have to sign up, name your dropshipping business store, and list the products for sale.
You wouldn’t have to worry about hiring a web developer with this option. You also won’t need technical skills to design your storefront or add shopping features. The general setup provided by eCommerce marketplaces means it’s simple and easy to get started. There are several marketplaces, but we’ll take a look at Amazon.
How to use Amazon marketplace for dropshipping business
Amazon is arguably the king of online sales as it is one of the most popular marketplaces to start your dropshipping business. The platform boasts of a vast audience base, as shown in an oberlo survey, around 89% of eCommerce shoppers revealed they’re more likely to purchase on the platform than any other marketplaces.
You need to sign up and create an account at the platform’s Seller Central to use Amazon marketplace. It’s a straightforward process, and all you need is to provide personal and business information, billing, and tax details. After this, you will also have to get approval depending on the type of product you wish to dropship. Categories such as Fashion, grocery, music, and jewelry often require approval before setting up your Amazon store.
As with many marketplaces, Amazon charges a fee for you to sell on it, and this fee often depends on several factors. Some of these factors include the category of the product, the selling plan you pick, and the number of products you list. Many sellers pay Amazon 15% for every sale they make in many cases. If you choose an Individual plan, you should expect to pay $0.99/item, and if on the Professional plan, expect to pay $39.99/month irrespective of the number of units you sell.
Asides from Amazon charges, there are other things to keep in mind if you plan to start your dropshipping business with Amazon. Although the platform allows dropshipping on its platform, it has a current and active policy for it that you should know about.
Amazon’s Dropshipping policy
Amazon allows you to drop ship so long the customer has zero knowledge that your products are being dropshipped. This means purchasing products from a third-party retailer shipping directly to customers by the same third-party retailer, with shipment failing to identify you as the seller isn’t allowed. This means records such as packing slips, invoices, external packaging, or other information indicating a different seller’s information other than yours is against this policy.
Therefore, to carryout dropshipping on Amazon, you must:
- Identify yourself as the seller of the product on all documents with each sale;
- Get rid of any documents that indicate a third-party supplier before shipping the order;
- You are responsible for accepting and processing customer returns of products;
- Must comply with all other policies and terms of the seller agreement on Amazon.
– Find a multi-channel fulfillment software
After getting approval for your amazon store, it’s essential to find and connect your store to a multi-channel fulfillment platform. These platforms abound, and the most prominent example is Shopify. Shopify has an Amazon fulfillment app on its app store to help you connect to your Amazon store. You can learn more about it by taking this masterclass on using the software for dropshipping. Platforms like this are helpful since they allow you to automate the order fulfillment process, provide up-to-date tracking information for your customers, and sync your product inventory. Other examples include Amazon by Codisto or FBA Shipping by ByteStand.
– Create an Amazon Product Listing
Once your account is up, you can start listing the products you wish to sell. If you are trying out dropshipping for the first time, it’s best to sell high-demand, low-competition products. And if you’ve opted for the Shopify integration, the process is simple and can be done via three different means. You can:
- Link Shopify to your current Amazon listings using the integration app.
- Alternatively, create an offer for a product you already sell on Amazon.
- Lastly, create a new listing for a new product to sell on Amazon.
Please keep in mind that as a new seller on Amazon, you may not be able to list all your products immediately. Amazon limits the number of new ASINs you can create per week until you sell on the platform.
– Drive Traffic to Your Store
After setting up your store on an eCommerce marketplace, your following action is to start marketing your dropshipping store to drive traffic. This requires you to develop excellent marketing and customer acquisition strategies. Thankfully, technology means it’s easy to do this, and your options range from free content marketing to paid advertisement. See this article on best ways to drive traffic to your store or platform.
To utilize content marketing, you have to create unique, valuable, and helpful content about your store and its products for your audience’s consumption. Content marketing strategies include creating blog posts and consistent posting on social media.
Social media means you can target your audience with a more specific approach. Brand deals and influencer marketing is one way to promote your dropshipping store to drive traffic. Online personalities and social media influencers can help you do this with a greater chance of success than conventional adverts.
This is another marketing strategy you can leverage to make sales. It works by rewarding affiliates with a commission each time they help create a deal via their affiliate link. This is a low-risk and cost-effective method as you don’t pay if no sales are coming from an affiliate partner. ShareAsale and ClickBank have the most popular affiliate programs and you can join them today.
Paid advertising can significantly increase your visibility to a specific audience or demography. Your paid ads platforms are numerous, with nearly all social media networks providing space for adverts. You can turn to Google, Facebook, Instagram, and others as platforms for your adverts.
Dropshipping is an excellent means of making money from the internet. You don’t spend much, and your chances of making a profit are ever-increasing. To start your dropshipping business, there are many tools to help you out, and you can choose to create your site with an established eCommerce marketplace like Amazon, eBay, and others.
Alternatively, if you are willing to invest more in your business, you can create your store from scratch. This offers you more flexibility and control over your business. Regardless of how you choose to start your dropshipping business, you will also need to perform some form of marketing to help create buzz and drive traffic. This will be the core of your business as the competition is high irrespective of your chosen niche.
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