Drop shipping is appealing to entrepreneurs and businesses due to its low start-up costs. It provides an opportunity to earn a passive income and grow a real business without having to invest thousands of dollars at launch.
The concept is simple:
- List products for sale on your e-commerce website.
- Your supplier will dropship products direct to your customers when orders are placed.
- You don’t have to worry about shipping or packaging the products.
- There are no upfront costs since the products do not have to be purchased wholesale.
- Packaging is discreet and white label, which keeps your brand intact.
Drop shipping provides you with the freedom to own your own business and work from wherever you want. It makes e-commerce a lot simpler and less intensive than what’s normally required to start an online store. If you want to make money online, a dropshipping business has very real potential.
What are the benefits of drop shipping?
You don’t have to purchase inventory, manage a warehouse or pay for shipping costs. There is considerably less overhead in drop shipping. Expenses that would normally cost a business thousands are non-existent with drop shipping.
Products do not have to be purchased until an order has already been placed and paid for by a customer. The money will already be in your account before anything has to be spent.
Easy to start
Drop shipping keeps everything digital. You don’t have to deal with physical products or any of the hassles normally involved in e-commerce. You won’t have to manage stock levels, handle packaging or shipping, inventory tracking, returns, or warehouse costs.
You can sell anything that you can find a dropshipper for. Since you won’t have to pre-purchase the products, it doesn’t matter how expensive or how large the items are. There is a lot of potential when your product selection is this wide.
Why should you work from home? Work at the beach, a coffee shop or anywhere you want. A dropshipping business is completely remote and as long as you have computer access, you can run your business from anywhere.
With most businesses there is a cutoff on to how far it can be scaled. With dropshipping you can scale your business as far as you want. You can work with multiple suppliers, you can start several e-commerce stores or you can add more products to a single store. When an order is placed you will need to contact the supplier to make the payment and notify them of your customer’s address. As long as you can handle this in large volumes, there’s no limit to how far you can scale your business. If it gets to be too much to manage, you can always hire virtual assistants or local help.
What are the drawbacks of drop shipping?
Every supplier is different on how they expect orders to be placed. Sometimes the supplier hasn’t upgraded their fulfillment process and they expect you to place orders through email every time your store gets a sale. This can be very time consuming if you are sending emails manually, although automation can usually come into play when it comes to email.
Most drop ship suppliers have custom order panels where you can view inventory and place orders. This can make your job considerably easier.
Low profit margins
Drop shipping is a highly convenient service that a supplier is by no means required to be provide. Some suppliers charge big fees for orders that are dropshipped and this can greatly reduce your profit margins. If you are in an industry that is already competitive, it’s going to be hard to get ahead when your competitors have you beat on pricing.
Competitors that are purchasing their products at wholesale costs will almost always have lower pricing than what you are capable of offering. Similarly, other drop shippers may list their products with just a few cents of profit in effort to grow their business. Since drop shipping requires such a small investment, it’s easy for them to do this.
When you stock your own items, you know when products are out of stock. When you drop ship, you rely on the supplier to notify you when products are getting low. You have to actively check listings and remove products from your website before they go out of stock. If a customer places an order for an item that is no longer available, it can be a real hassle to have to refund them and handle these situations on a regular basis. Inventory can change daily and it can be hard to seamlessly sync your inventory with your suppliers.
You have to correlate your shipping costs based off the shipping costs of your supplier. If you are working with multiple suppliers then this is easier said than done. It’s also much more difficult to automate the shipping cost process when you are drop shipping.
Errors by the supplier
If your supplier makes an error, your customer will believe that the error was your own store’s fault. Explaining that you drop ship and that it really wasn’t your fault just isn’t an option. You will have to accept responsibility for what happened and accept that dropshipping suppliers aren’t perfect and they make mistakes too. If you are dealing with a supplier that continues to make errors then you are better off leaving them behind and finding a new company to do business with.
Dropshipping is still a business
Remember that when it sounds too good to be true, it usually is. You can’t underestimate the time and money that it takes to run a successful business. It’s never easy and this holds true even when you eliminate having to package and ship products.
Set realistic expectations and don’t expect to make six figures your first year at this. Like all businesses, dropshipping certainly isn’t perfect or stress free. However, most of the drawbacks of drop shipping can be addressed and handled with proper planning and implementation.
Who is the dropshipper? Is it the manufacturer, wholesaler or retailer?
Dropshipping is a service, it’s not its own process in a supply chain.
A dropshipper, or “supplier” can be a manufacturer, wholesaler or retailer. It is whichever of the three is willing to offer the service.
If the manufacturer is the drop shipper, then your profit margins will be the highest as you are getting the product directly from the source. If your supplier is a wholesaler or retailer, then your profit margins will be much lower.
Just because a business is willing to drop ship doesn’t mean you are getting a low price on the product. You could be paying retail prices or higher if your supplier is a retailer themselves.
What products should you dropship?
Now that you know how dropshipping works, you can begin to explore product options.
Not every product is ideal for drop shopping and if you have a personal passion or a specific industry you’re interested in, you’ll need to do market research beforehand.
Some niches can get complicated. The products could have expensive shipping costs, the industry could be too competitive, or there just aren’t enough drop shipping suppliers for the niche. Market research helps you determine which products have potential to be successful.
Some products can cost an outrageous amount of money to ship. These are generally items that are too bulky or heavy for traditional shipping companies. For example, furniture is rarely purchased online because the shipping costs can sometimes be higher than the actual cost of the product. It’s best to focus on smaller items that are easily shipped as these are the most common online purchases. Consumers also love to buy products with free shipping and this becomes impossible with large items.
There may be an occasional niche where a large item can still have affordable shipping costs and you will have to evaluate these case by case.
Expensive products don’t sell well on the internet. There’s a lot of risk on the consumer’s end and this leads to a low number of sales in big ticket items.
Most customers are comfortable purchasing an item below $200 online. Once you break the $200 barrier, the risk tends to be too high and your conversion rates drop.
There’s a chance the item could get lost by the shipping company or it could get stolen once delivered to your door. These are concerns that lead online shoppers to stick to items within the $50 to $200 range.
The higher the cost of your products, the better your customer support needs to be. Prepare to offer personalized phone support if you’re selling big ticket items online. This is what it takes to reassure the customer and gain their trust.
Is there MAP pricing?
MAP stands for minimum advertised price and some drop shipping companies require that their resellers list products at or above this price. This is actually a good thing and it can prevent resellers from listing items too low for you to compete with. It helps prevent price wars, it keeps your profit margins intact and you won’t have to worry about your competition selling themselves short and stealing your customers.
If the products you are considering selling are doing well online today, will they have this same potential in years to come? Is there reason to believe the industry could grow? The market potential of your niche is important. Some markets have consistent growth, some are stagnant, some decline and others experience rapid change. Knowing the potential of your market is important to planning for the future.
To evaluate market potential you can:
- Check how many indexed pages there are on Google for keywords related to your products.
- Use the Google Keyword Planner to check the monthly search volume of keywords related to your products.
- Use Google Trends to view their search volume over a period of time.
- Find rising related search terms that are experiencing rapid growth.
- Explore seasonality traits for your products. Are they purchased year-round or do sales peak during certain seasons?
- Explore geographical concentration. Some products are more popular in specific areas of the world. If you’re looking for global concentration, you will need to find products that sell well worldwide.
The potential to market your products online is slightly different from the potential of your market.
Online marketing can be done in many different ways including search engine optimization & content marketing, pay per click marketing, social media marketing and more. We have many extensive guides that cover these marketing options in detail.
Keyword research will help you evaluate the online marketing potential of your products. You can use our keyword research guides to find profitable keywords that can drive traffic to your website. The goal is to find keywords with high search volume and low competition.
Niche specific products are generally the most profitable as it means less competition. If your niche is very broad, consider refining it and focusing your business around a particular department, rather than trying to sell every product possible. In the end, it will add simplicity to your business and make standing out from the crowd easier.
There are cross-selling opportunities in almost every niche and successfully pitching related products to your current customers will help you increase sales.
As an example, cell phones have cross-selling opportunities like cases and screen protectors.
You should first consider products with a solid variety of accessories that could be recommended to your customers during checkout. Consumers are much more willing to purchase small items than they are large ones. By recommending $5 – $30 products during checkout, you can increase your profit significantly. These are products that consumers are comfortable purchasing without doing extensive price comparison research. They will happily add accessories to their shopping cart without thinking twice about it.
When a product is hard to find locally, it usually sells well online. Think of collector’s items or niche specific products that you rarely see in stores. It’s a good idea to evaluate some of your most recent purchases and ask friends or family members what types of products they would turn to the internet to find.
Products that are updated regularly can be very difficult to manage. If you are constantly having to add/delete products, edit product descriptions, edit product images or make other changes to your website, you are going to lose precious time that could be spent growing your business. Products that last for years without becoming outdated are ideal for e-commerce.
If you have a personal interest in your products or niche, it will make marketing the website and staying dedicated much easier for you. Online marketing can be very content heavy and require a great deal of research and writing. If you’re writing about a subject you are passionate about, running the business will be much more enjoyable.
Your business structure
Businesses that offer drop shipping will want to work with established businesses. Their success is dependent on your success. This doesn’t mean your website has to already be making money in order to get approved but it means you have to look like a real business that is going to contribute and be a promising addition to their company. Otherwise, you will be looked at as a waste of time and resources.
Establishing yourself as a sole proprietor speaks to your level of professionalism and it shows that you are serious about your website. Sole proprietorships do not protect your personal assets in the case of a lawsuit but the filing requirements are rather minimal. Income can be reported on your personal taxes and your business assets have liability protection.
LLC Limited Liability Company
An LLC establishes your business as a separate legal entity. In case you find yourself in a lawsuit, your personal assets as an individual such as your car or home won’t be in jeopardy. There can be fees and extensive filing requirements to start an LLC and you will also want to speak with an accountant or financial advisor.
For the most liability protection, businesses can be set up as a C Corporation. C Corporations can have expensive fees and taxation is considerably more complicated.
Most small businesses are limited liability companies. It provides autonomy from personal finances and offers necessary liability protection. It’s also relatively low cost and easy to set up in most states.
Request an EIN
EIN stands for employer identification number. It is a lot like a social security number but it applies to your business, rather than an individual. EIN’s are used to file taxes, apply for a drop shipping account, open business bank accounts and more. Thankfully, applying for an EIN is not complicated and it can be done online completely free.
Prepare your finances
Keeping your business and personal finances separate is not only important for taxation reasons, it helps you stay organized. Of course, if you are ever audited by the IRS, it can save hundreds of hours of frustration as well. Make your accounting easier by preparing your finances ahead of time. Set up business accounts wherever appropriate:
Business bank account – Establish a separate checking and savings account for your business. You can use this for depositing your revenue and it can also be use for making withdrawals and paying yourself.
Paypal – If you use Paypal for accepting payments online, you will want to have a separate business Paypal account.
Credit cards – Many businesses use credit cards to make purchases and limit upfront expenses. Credit cards sometimes offer rewards and incentives that can provide you with cash back as well.
As an e-commerce business you will need to collect sales tax if your state requires it.
However, you will only have to collect tax when a customer residing in the same state as you makes a purchase. Customers from states outside of your own do not require sales tax collection.
You may also want to contact the company you are drop shipping with and find out if you will need to collect sales tax when your customers reside from the state your supplier is located from.
Signs of a Good Supplier
A good supplier will be have certain characteristics about them that make them better than the competition. If there are multiple dropship suppliers in your niche, then you’ll be able to compare your options and choose the best one. Below, you will find criteria to consider when doing this.
A good supplier will be available through phone and email. They should have support representatives and knowledgeable staff members that are willing to work with you and provide their insight.
Has order panel or uses email
You need an efficient way to place orders. Once your website starts getting sales, you will be responsible for placing those orders and making sure the supplier gets notified. A good supplier will have a quality order panel or they will accept orders through email. This speeds up the process and makes processing much simpler.
While a lot of suppliers have outdated websites and poor designs, a supplier that understands the importance of technology and continuously invests in their business will be much more pleasurable to work with. Data feeds, online catalogs, order systems, searchable order history and other improvements can and should be made by suppliers.
If you are located in the United States, you will probably want to find a supplier that is located within the states as well. Suppliers that are centrally located will ship packages faster, have the same time zone and be available during business hours, and possibly save you money when it comes to shipping costs.
Evaluating a Supplier
Before covering how to find dropship suppliers, let’s first evaluate how to spot a good supplier from a bad one. Working with the right supplier can save you countless hours of frustration and hard work.
How to spot fakes and suppliers that would be a waste of time:
- They sell publically – Legitimate wholesaler won’t sell to the public. Find a supplier that has an application process and only accepts registered businesses. If they are selling to the public and advertising it as “wholesale,” then they are just another retailer.
- They collect ongoing fees – You shouldn’t be charged an ongoing fee to order from a legitimate wholesaler. If the supplier requests a monthly fee or has an ongoing charge, they probably aren’t a company worth dealing with.
Stipulations that are common in drop shipping:
- Pre-order or drip ship fees – A $5 – $25 charge for drop shipping your order is common and has become a standard in the industry. Shipping small orders can get costly and it’s more tedious for the wholesaler. It makes sense for them to charge a bit extra for having to do this for you and you should expect to encounter this.
- Minimum initial order size – Sometimes wholesalers prefer to work with businesses that can provide large volumes of orders. To eliminate the small-time businesses that will be more hassle than profit, they require a minimum initial order size. This means you might have to order $500 of product before you can get approved. Since you obviously won’t be drop shiping this order to a customer, you can usually pre-pay the supplier and have them apply the credit toward future orders.
Finding Dropship Suppliers
Knowing how to find quality dropship suppliers is important to your success. Legitimate wholesalers will offer much better pricing than retailers and working with the right company can make or break your business.
Now that you’re familiar with what a real supplier behaves like, let’s start searching.
By getting in contact with the actual manufacturer of a product, you can ask for their wholesale distributors or find out if they dropship themselves.
Very rarely will the manufacturer offer drop shipping, but one their wholesalers is likely to provide it. Give them a call and ask if they have an application process.
Wholesalers usually work with a variety of manufacturers so this is a great way to find related products that are worth exploring as well.
Google will never let you down. You can find high quality suppliers by simply searching.
- Dig Deep – Wholesalers are not very good at SEO. They rarely care about marketing themselves because they sell to businesses and not consumers. Be prepared to search through dozens or even hundreds of pages when performing a search like: “
- Modify your search – Don’t expect to find a wholesaler right away. Modify your search with keywords like “warehouse” “distributor” “reseller” or “supplier.” Wholesaler is an overused term that might not be the best way to locate dropshippers.
- Don’t judge quickly – Wholesalers usually have ugly websites. It could be outdated, cluttered or horrendously designed. Don’t judge. It’s not about their website, but about their ability to successfully supply products.
Attending a trade show can help you connect and build relationships with manufacturers and wholesalers. At the very least, you can gain contacts and conduct market research. Of course, attending a trade show is only possible once you know your niche and the products you intend to sell.
Buy from a competitor
If you know of a competitor that you’re confident is drop shipping, you can place an order for a low cost product and check the return address on the package once it arrives. Usually a quick search on Google using the address will unveil the name of the supplier. You can use this to get in contact and set up your own drop shipping account.
Use a directory
Supplier directories and lists are common in the industry. They are essentially a database of dropshippers that are categorized by niche, product or market.
Paying for access to a directory is not necessary. There are ways to find dropshippers without spending money. However, some directories are worthwhile and can be very useful to you, especially when time is of the essence. They can help you find suppliers quickly without having to do the research on your own. Some of the biggest and most popular supplier directories are highlighted below.
- Worldwide Brands – Costs $299 for a lifetime membership that provides you with access to thousands of legitimate wholesalers and dropshippers. They have been around since 1999 and are a credible source for finding quality suppliers.
- Doba – With over 165 suppliers and 1.5 million products, Doba provides you with direct access to dropshippers. You can place orders with multiple suppliers and everything is managed through their unique interface. The cost is steep at $60 per month but the added convenience can be worth it.
- SaleHoo – There are over 8,000 suppliers in the SaleHoo database, with many of them offering drop shipping. SaleHoo caters to Ebay and Amazon merchants and they charge just $67 per year, which makes it much more affordable than Doba. We have never personally used SaleHoo, but we have heard good things about them.
- Wholesale Central – Suppliers pay Wholesale Central for advertising space, so it’s one of the few directories that’s free to utilize. They only list legitimate and honest suppliers and they have approximately 1,400 businesses listed to date. It’s free, so there’s no harm in utilizing it but be aware there are lots of retailers here that don’t offer real wholesale pricing.
- http://www.aliexpress.com – Free
- http://www.dropshipstream.com – Free
- http://www.solusource.com/index.htm – Free
- http://www.alibaba.com – Free
- http://www.thomasnet.com – Free
- http://www.dropshipdirect.com – Free
- http://www.sunrisewholesalemerchandise.com – Free
- http://www.vistawholesale.com – Free
- http://www.usdropshippers.com — Free
- http://www.net2mallsdropship.com – Free
- http://www.productsourcing.com – Free and paid
- http://www.greensupply.com/dropship.asp – Free
- http://www.megagoods.com – Free trial
- http://www.dropshippages.com/ – Paid
- http://www.usawholesalers.com – Paid
- http://www.megagoods.com – Free trial
- http://www.productsourcing.com – Free and paid
- http://www.net2mallsdropship.com – Free
- http://www.usdropshippers.com – Free
- http://www.vistawholesale.com – Free
- http://www.sunrisewholesalemerchandise.com – Free
- http://www.dropshipdirect.com – Free
Selling on Ebay and Amazon
When you are drop shipping, you’ll find that it’s very difficult to break into the Ebay and Amazon markets. There are likely to be hundreds of other drop shippers that have already been selling on Ebay and Amazon for years. Similarly, there may be sellers that buy their products wholesale and aren’t dropshipping, which means they will be able to list their products at a much lower price. This can be particularly true in niches like electronics where everyone is trying to get their piece of the pie. Unless you’ve found a niche that is just beginning to gain traction online, the competition is going to be steep.
This shouldn’t discourage you, as the real money is in owning your own e-commerce store. There’s still potential on EBay and Amazon as well and your success will be dependent on how patient and diligent you are with these selling platforms.
The pros to selling on Ebay and Amazon
Adding products to Ebay and Amazon is pretty simple and it only takes a few minutes. There are even tools that can do it for you automatically and manage your listings on auto-pilot. One of the biggest benefits to selling on Ebay and Amazon is how easy it is to get started.
These are two of the biggest websites on the internet and by listing your products here, you instantly get access to incredibly large audiences. It’s a great way to gain exposure immediately.
You don’t have to market your listings on Ebay and Amazon, as simply adding your products to these sites is generally enough. You’re using their brand and platform to get traffic without having to pay for it.
The cons to selling on Ebay and Amazon
You rarely get something for nothing and this holds true with Ebay and Amazon. You get to list your products in front of their large audiences and in return, there is a listing fee. These fees can get pretty high and when you’re drop shipping, your profit margin is already low. Listing fees can eat away at your business.
If you’re selling on Ebay, you’re going to have to monitor your listings and relist products that haven’t sold. Remember that it’s an auction marketplace and there can be a lot of maintenance involved in auction listings. Amazon is similar in that you will need to monitor your product listings and sales but you won’t have to relist products.
Lack of relationship building with customers
Most of your customers on Ebay and Amazon will order once and you’ll never see them again. Building a relationship and staying in contact with customers is next to impossible.
When you sell on your own e-commerce store, you can maintain communication through email and pitch related products and other opportunities to your customers. Ebay and Amazon limit this opportunity and restrict you from creating a long-term connection with customers.
Lack of customization
Product listings will have to follow the specific templates that Ebay and Amazon require. This makes it much harder to add depth, professionalism and value to your listings.
There’s no long-term value
When you sell on Ebay and Amazon, you are only contributing to their success as a business and you’re not building a tangible, long-term asset that can be sold. Your business is dependent on their platform and brand, it doesn’t establish itself as a separate entity.
Selling on your own e-commerce store
It’s very important to have your own store as a drop shipper.
The majority of successful dropshippers earn most of their profit through their own store and not from websites like Ebay or Amazon. You are not competing with other sellers on your own store and you can set your prices for maximum profitability. Having your own store also allows you to engage in online marketing methods like search engine optimization and pay per click marketing.
You can use a shopping cart platform like BigCommerce, WordPress using the WooCommerce plugin, Magento, Shopify, X-Cart or any other shopping cart plugin.
We highly recommend the WordPress with the WooCommerce plugin method.
WordPress is open source, free and very powerful. WooCommerce is a shopping cart plugin developed for WordPress that’s free and can be installed very easily. Whether your store is going to have 10 products or 10,000 products, WordPress can handle it.
Build your brand and business
Building your brand and establishing a long-term business model is crucial to your success. Having your own website provides limitless potential. You’re building a real business with repeat customers and if needed, it could be sold.
When you have your own website you can put listing fees behind you. You will never have to pay for product listings again. It saves a considerable amount of money and when drop shipping, your profit margins can be low, so every penny counts.
Your website is entirely yours and you get to do with it what you please. You can add value to your website through blog posts, guides, tutorials or anything you wish. This type of content can attract visitors and help build your brand. You also have complete control over the layout, colors and how the site is organized.
Having your own website means you can start to promote yourself online. You are no longer relying on the audience of Ebay or Amazon, you get to build your own audience. This means less free traffic for your products but it opens up opportunities that would otherwise never be available.
Investing time vs. investing money
When it comes to whether you should invest time or money, the best answer is both, but with an emphasis on doing everything yourself until it makes sense to outsource. Once your business is profitable and making enough money to justify hiring help, you can outsource day-to-day tasks and focus your efforts on scaling and getting to that next level.
Not only will you learn the business and its operations, you’ll develop new skills that will make you a better business owner. When it comes time to outsource, you can create videos and tutorials for your employees to assist them. The better you know the job and its requirements, the better your training will be.
How much time is needed?
Every business is different and your success is dependent on your work ethic.
As an estimate, you could expect to make around $1,000 – $2,000 per month spending 10-15 hours per week on a drop shipping business. This would be approximately 6-12 months after launching the business.
If you applied yourself full-time toward the venture, you could expect to make around $4,000 – $5,000 per month after 12 months.
These are general estimates and it may seem like a lot of work with not that great of a return but you have to consider the potential the business will have as well. If you can build a $50,000/year business within 12 months, then you can build a $100,000/year business within 24 months. It’s certainly not easy to accomplish but it is possible and there are plenty of successful entrepreneurs that have done it.
By starting a drop shipping business, you’re also creating a tangible asset that can one day be sold. If you get a year or two in and you’re not happy with things, you can use websites like Flippa.com to sell the business and move on. The profit the business makes while operating is only a portion of its true potential.
How to be a successful dropshipper
Before we leave you, let’s make sure you have all the ingredients you need to be successful.
Drop shipping can be complicated and you probably have some questions still. We’ll do our best to provide some last minute suggestions that can save you months of stress and frustration.
Understand that suppliers do make mistakes
Suppliers make mistakes too, it’s inevitable. When they do, never blame them for the mistake or raise too much of an issue about it and remember that your customer can’t know the drop shipper exists. Own the mistake and act as if it was your own fault. Do everything you can to make it up to the customer. This could include refunding them for the product, refunding the shipping costs or even sending them a new item.
Just because your supplier goofs up doesn’t mean you should have to suffer for it. Make sure they recognize their own errors and provide a refund to you if applicable. Reputable suppliers will be more than happy to rectify the issue and make sure you’re on good terms.
Use multiple dropship suppliers
Using multiple dropship suppliers will allow you to carry more products and protect yourself with order fulfillment. If you have multiple suppliers that carry the same product, you’ll have multiple options for fulfilling orders. If one supplier is out of stock, you can have a backup supplier at the ready. If you’re only using one supplier, you’re putting yourself at huge risk in case they go out of business, raise their prices, or decide to stop drop shipping.
Item availability and out of stock orders
Sometimes suppliers will list products on their website or data feed that are out of stock or no longer carried. If a customer of yours places an order for an item that’s not available, always remain calm. This will happen from time to time.
Contact the customer and let them know of the situation. Offer to upgrade their order to a similar product, preferably one that’s better. If you’re working with multiple suppliers then finding an alternative product should be easy. More than likely the customer will be happy with the outcome and you will have retained a strong customer relationship.
If you don’t make any money on the order, that’s a hit you’ll have to take. The best you can do to prevent this is constantly check your suppliers for products that are out of stock and update your own website before any orders are placed.
Use your best supplier first
If you have multiple suppliers that carry the same product, you should always use your best supplier to fulfill the order. Using a supplier based off price or location can be advisable if there is a significant difference in price between your suppliers or one supplier has faster shipping speeds than another.
Add value to your website
Your products can’t be the only value of your website, a good e-commerce business would offer more than that. You can add blog posts, tutorials, guides, infographics, videos or other types of helpful content. The goal is to position yourself as an authority in your industry and give your audience a reason to come to your website other than just to buy stuff. Providing quality products at a fair price is a good start but focus on adding valuable content to your website.
Craft your return policy based off the policy of your suppliers
You should set your return policy based off the return policy of your suppliers. For instance, if one supplier has a 45 day return policy and another has a 30 day return policy, then the longest you should allow is 30 days.
When a customer contacts you about a return you will need to contact the supplier and request an RMA (return merchandise authorization) number. You can then instruct your customer to mail the item back to your supplier and be sure they write the RMA number on the package. Your supplier should refund you upon receiving the merchandise and you can then refund your customer.
Be ready for chargebacks
A chargeback occurs when a customer calls their bank or credit card company and contests/disputes a charge on their account. Chargebacks happen with online sales and we’ve seen it for just about everything. Your customer could be unhappy with the product, forgot they bought it and are now disputing it, didn’t recognize your business’ name on their checking account and are disputing it, or it could be fraud. If a chargeback occurs, you will need to provide proof that the item was purchased and shipped. Tracking information will be very useful in chargeback cases. Your supplier should be able to provide you with all of this and as long as the transaction was legitimate, you should get the money back.
Be ready for occasional defective items
If an item is defective and your customer has requested to return it, you should pay for the return costs even if that means taking a loss on the item. It’s the responsible action to take and it helps maintain business integrity. More than likely, your supplier won’t compensate you for the return fees but there’s still a chance they might.
The best course of action for defective items is to offer a replacement. This of course only makes sense if the item is relatively low in cost. The customer will be thoroughly impressed and it can sometimes be cheaper than having to fund the return fees.
Choose the correct shipping option
Dropshippers generally provide multiple options at checkout for shipping. These options may include USPS, UPS or Fedex. Be sure to review the options when placing an order and choose whichever one is cheapest and has an acceptable delivery time. Sometimes it’s cheaper to ship with UPS or Fedex, but the delivery time can be significantly longer than USPS.
With different products shipping from multiple suppliers, knowing how to charge for shipping on your own site can get complicated. You can charge a flat-rate per item, a flat-rate per type of item or use real-time rates based off the weight and size of the product.
Try not to get hung up on shipping costs. Far too many dropshippers get overwhelmed with shipping complexities when their store has not even received a sale yet. Work something out initially that makes sense and won’t cause too many headaches and know that you can change the shipping structure down the line once the store is making money.
Never neglect marketing your website
Marketing your website is very important and this is where the most time and money will be spent. We have many helpful guides that cover SEO, PPC, content marketing, social media marketing, outreach, email marketing and more. There are lots of great ways to market an e-commerce website.
Niche specialty is good
Being specific with the types of products you carry is a good thing. Creating a niche for your business and specializing in a particular type of products will help you stand out from the crowd and make a connection with your customers. It also means less competition and an easier time marketing yourself. If you’re just getting started, you probably won’t know which products are highest in demand and most profitable. That’s okay and as your business develops, you will start to realize where your focus and attention is needed.
Outstanding customer service is a must
Your customers will expect nothing short of outstanding customer service and by offering it, you will build a business you can be proud of. The customer is always right. Even the angriest, rudest and most disrespectful customer is important. A negative review could jeopardize your business and you can’t afford to let that happen. If you aren’t treating your customers right, it won’t stay a secret for long.
Keeping your customers happy is the best thing you can do for your business. You’re more likely to get repeat orders and grow your business through word of mouth.
The most common issue drop shipping businesses face is not taking action when there are errors or fulfillment issues. If your supplier or you make a mistake, then you must fix it and accept responsibility for it, even if that means not making any money on the order or even losing money. Top notch service comes with some downsides but they are worth it in the long run.
Focus on long-term goals
Don’t get hung up on small details. Focus on long-term goals and never let yourself get discouraged. There are always moments of doubt when starting a new business. Your company logo, theme or other small details won’t make or break your business. If you stay committed and stick to your long-term goals, your business will thrive. Struggling to make decisions and take action will only lead to disappointment.
A lot of entrepreneurs get into drop shipping with the perspective they can build a six figure business in less than a year. Don’t allow yourself to think like this. Even if it’s your goal and you thoroughly believe it can happen, you have to set realistic goals. Six figures in a year with a new business is not realistic. The first few months are generally the hardest. It’s a time when you’re likely to have zero sales and you are working your ass off for minimal return. As long as you mentally prepare yourself and understand that growing a business is a challenge, you’ll have the ingredients you need to be successful.