How do you like the idea of getting products that belong to other brands into the faces of your customers? It even gets better because you don’t have to rob a bank to be eligible to venture into this business. You can start a dropshipping business from home on a low budget.
As you’re reading this piece right now, some drop shippers just received their commissions for the sales they made. So, how would you like to be in their shoes?
In this piece, I’ll show you different things you need to know about starting a dropshipping business. But first, what is dropshipping?
Dropshipping and how it Works
To put it simply, dropshipping is a retail business that deals with a supplier, distributor, and consumer. In this case, you’d be the distributor who gets the supply of goods from your suppliers, sent to the consumer.
So, you’re more like a middle man as a drop shipper. In dropshipping, you get to work with a third party and that is your supplier. Your supplier supplies goods to you and then you distribute the goods to the consumers who are your customers.
The most obvious difference between dropshipping and a typical retail business is that the distributor doesn’t need to store products or even own any. Instead, the distributor buys from the supplier. Now, the supplier could be a manufacturer or a wholesaler
The Benefits of Dropshipping
Dropshipping is a nice venture especially if you’re a newbie in business who’s looking to start something. This is because dropshipping embraces all and sundry which makes it very accessible.
It even gets better because you can use drop shipping as a testing model to ascertain which products are in high demand. That way, you get to learn how to market the products and develop your own strategies. Below are some reasons you should venture into dropshipping today.
1. It’s not expensive to start
As I mentioned in this piece earlier, you don’t need to have huge capital to venture into dropshipping. This is the greatest advantage of dropshipping because you don’t need to save up a huge amount.
Furthermore, in dropshipping, you’re not required to make any purchase of products. Rather, you’re a distributor whose job is to market and sell products to gain a commission. Therefore, with very little money, you can start a dropshipping business and then source the products.
2. Dropshipping is easy to start
Facilitating an e-commerce business entails a virtual affair where you don’t have to engage with products physically. Rather, everything is online. It could be your shop, customers, and even your products.
So, with dropshipping, you don’t have to worry about the rental fee for a shop or warehouse anymore. This implies that you’re not expected to manage a warehouse or even pack and ship orders. In addition, dropshipping alleviates all the worries that come with tracking products.
3. Flexibility of Your Location
With a dropshipping business, you just need to be online with your computer or phone. It could be a laptop, tablet, or even a cell phone.
It even gets better because you get to carry your shop in your pocket if you’re using a cell phone to coordinate the business.
4. It serves as a testing model
One of the most difficult things to figure out in business is getting to know which product is in demand. Now, dropshipping lets you test the waters to see what works and what doesn’t.
This will help you know whether you have to purchase a product in large amounts or not. That way, you get to know what satisfies your customers.
5. There are varieties of products to sell
There is a wide range of products you can sell. That way, you don’t get stuck with the sale of a particular product. When you sell a particular product, you become predictable to your customers.
They could be looking for a product that’s different from your product. But with dropshipping, you get to offer your customers ways to spice up their online shopping experience with varieties.
6. Low overhead
Normally, owning a physical shop entails that you’d be incurring costs. It could be rent, electricity, maintenance, and security. Now, in addition to all these, you still have to source products to purchase and manage the business as a whole.
On the other hand, drop shipping takes some of that burden off your shoulders because most of what you’d be doing is online. So, that means you get to incur less cost on management and maintenance.
A lot of highly flourishing dropshipping businesses are home-based. That means, as you improve and master the business, there’s the likelihood that the cost incurred will be less than what you’d incur on a physical shop.
5 Hard Facts about Dropshipping That You May Not Know About
Sometimes the truth hurts and it even becomes a torment for us when we know the truth, but don’t want to face it. The good thing is there’s liberation in the truth. So, below are the 5 hard facts about dropshipping that you may not know.
1. Lack of control over the supply chain
Normally, a standard practice in commerce is to deal directly with your customers in terms of complaints. It could be queries, satisfaction with the products, or even return policies.
But in dropshipping, you’re more like the middleman and have no control over what your supplier sends to you. So, this puts you at the mercy of your supplier in a way.
The product could be faulty or may not even meet your customers’ expectations. Now, in a case like this, you can’t say much about the product because you’re only a distributor.
So, this makes it very difficult to deal with customers. The only thing you can do as a drop shipper is to hope that your supplier addresses the problems.
Now, chances are that after informing the supplier about the problem, it may take some time for the supplier to get back to you. The problem here is some customers may not have that luxury of time and this will make them seek alternatives by going to your competitors.
It even gets worse when they give you bad reviews that’ll end up affecting your business. That’s why it’s always advisable to get a reliable supplier.
2. The Competition is high
The fact that you don’t need to break a bank before starting a dropshipping business makes it highly competitive. This is because it requires little capital to begin a dropshipping business. Therefore, there will be a lot of competition.
Now, this competition will have a more negative effect on the markets with high popularity. Because the biggest companies have a tendency to lower their markups to offer reduced prices.
As for small businesses, the profits will be affected because they’d have to stay competitive to stay afloat. But at some point, this approach would not be sustainable.
Another worse thing is the fact that the products you get from your suppliers could already be in circulation. This is probably because the deal you have with your suppliers isn’t exclusive.
Now, this implies that your competitors could be offering the same products as you but at lower prices. So, if you’re just getting into the business, your rivals can frustrate you by undercutting your prices.
3. You can’t build a brand as a distributor in dropshipping
Remember that as a drop shipper, you’re basically a distributor. So, in essence, you’re promoting products made by different brands. So, if your customers happen to fall in love with the products you distribute, the glory will only go to the brand and not you. This is simply because you’re the middleman.
Think of a drop shipper as a ghostwriter who writes great songs that go on to win awards. Now, when it’s time to receive an award, the recognition and all the goodies go to the singer. So, with all this, it’s clear that the dropshipping business is a more suitable venture for reputable brands.
4. The profit margin is low
Dropshipping is more like a garbage-in, garbage-out affair. So, the little money you put into initiating the business is what will be your likely return. This is mainly because the bulk of the money you make from distribution goes to your supplier.
So, you are only entitled to a commission that may not be commensurate to the cost incurred on the advertisement and distribution of the products.
Another issue might be the fact that your profit is determined by how much traffic you get. It could be on your website or social media page. So, if you’re a newbie, there’s a likelihood of you struggling to market yourself for potential customers to see. This is because you have to start off by building a client base.
5. Legal Liability issues
This last point may not be a problem that drop shippers face regularly. But to be on the safe side, I have to draw your attention to it. As a distributor, you don’t know your supplier well enough or even the source of what they supply you.
It even gets worse when you consider the possibility that they may be infringing on other brands’ property rights. So, you’re basically just in the dark in most cases as to their work practices.
The Right Approaches to Adopt for Dropshipping
A good way to think about dropshipping is as a source of side income. Below are some approaches I recommend you adopt for your dropshipping journey. These approaches will come in handy because they are effective.
- It’s safer to think of dropshipping as a means to an end
Now, the viability of going into dropshipping long-term is very uncertain. So, the best practice would be to consider it as a short-term venture. That way, it’ll be more effective and prove very useful to you. This is because Dropshipping can be a great tool for market research. That way, you have an effective risk assessment and management model.
Instead of diving straight into acquiring products that may end up not being marketable, you can mitigate that risk by testing the products with dropshipping.
This approach not only lets you ascertain a product’s marketability but also gives you a more accurate assessment of the product. It could be the price, quantity to start with, customer reviews, and more.
- Always go for products that are in high demand
Brands that are well-rooted in business are aware that fluctuations in the market can be very unpredictable. Instead of stocking up on products that may not sell, stock up on products that you’re sure will sell. This approach will help you curtail impending losses.
Reliable shipping system
Sometimes you may not live close to a shipping area. Now what this implies is that you’ll have to incur more costs when it comes to shipping. So, the farther you are from a shipping area, the more money you’ll have to spend.
You can use dropshipping to ascertain which shipping strategy would be reliable by testing different shipping locations on a trial basis.
- High-maintenance products
As you well know, extra costs come with products that require high maintenance. Such products are valuable, big in size, heavy in weight, and even fragile in some cases.
Now, the logical thing to do is to avoid spending more on the shipping of these products as well as the storage. So, it’s advisable to dropship these products instead of storing them.
So, if you’re looking to satisfy your customers, you can still make the high maintenance available to them to purchase.
As much as dropshipping is a great way to earn, you must always keep in mind two key things. That is your supplier and customer service. These work hand-in-hand. This is because you deal mostly with customers as a drop shipper because you’re the distributor.
So, dealing with an unreliable supplier that’s not trustworthy can sink your business in no time. This is simply because the responsiveness of your supplier determines the quality of customer service you give to customers. Bad customer service can kill any business.
Another option is to bypass being a distributor and only do affiliate marketing. Thus you send sales to companies and earn a commission but don’t deal with delivery or customer problems. Read my #1 Recommendation to create your own website to promote products for free by writing reviews.
If you haven’t already, I highly suggest you check out my review, and don’t forget to leave me a comment down below and share this article with your favorite social media networks! Thanks.
8 thoughts on “Start a Dropshipping Business from Home”
Drop shipping is something I’ve always been curious about and wasn’t sure how it differed from affiliate marketing. I’m glad I came across this, it answered a lot of the questions I had and helped me decide if it’s something I want to get Dashboard Destinations involved in or if I should pursue it as a separate venture.
Clever girl doing your research before making a decision and a business plan. There is a lot of opportunities out there and knowing the different models is so important. Wishing you great success in your business venture.
I was really encouraged to try dropshipping. So I have been reading for about a week many articles related to dropshipping. However, there are things I read here that have left me thinking that it may not be as good idea as I initially thought. One point is keeping stocks. And the other is legal issues. I will better check your other recommendation you left at the end of this post.
Dropshipping can be an exciting business but holding stock and getting a great flow on to your customers can be a huge issue if the supplier is not reputable. Do as much reading as you can and consider all your options.
Thanks for sharing. I’ve heard both great and not so great things about drop shipping. It sounds simple but I think you do need to put time and effort into researching products and logistics. My biggest question would be about the upfront capital and how you actually start the business and what you put money into.
Hi Molly, these are good questions and I think on balance you would have to have working capital to run a Dropshipping business, whereas it will cost you only website costs to run an affiliate business. Some people prefer to feel connected to the product more but if the supplier is unreliable you don’t have much control over the delivery, yet you are paying for it.
I hope this is a little clearer but let me know if I can help.
I have never heard of dropshipping and I am still a bit unclear on exactly what it is. I understand you are basically a middle man, but do you purchase products from the distributor and then sell them to customers? Or is it more of an affiliate marketing thing, where you just connect customers with their products?
Hi AL, it can be a little confusing as Dropshipping is halfway between buying stock and keeping it at home and selling and you deliver it and affiliate marketing where you just promote the product and the company does the rest.
With Dropshipping you promote the product and when you have a buyer you buy the item but have it shipped directly to the customer. This was created so that you get more of the profit, although you are charged for the delivery. Personally, I feel that affiliate marketing is the best way as the problem of delivery and refunds are all managed by the affiliate company.