Written by David
16th April 2013 • 9 min read
Dropshipping is one of the simplest ways to enter the world of eCommerce. All you need is an eBay account, Amazon store, or a website, and you’re ready to go. The products you sell ship straight from the manufacturer or wholesaler to your customer’s doorstep.
With dropshipping, you have neither the expense of a warehouse to store products, nor the hassle of arranging shipping.
Once your business is set up, you’ll have a steady income, and as your business grows, you’ll be creating a valuable asset.
At Veeqo, we believe dropshipping is a fantastic business model, which is why we love the new Ultimate Guide to Dropshipping from Shopify’s eCommerce University.
We agree with the guide’s authors, Mark Hayes and Andrew Youderian, that it’s “the most detailed and thorough guide to dropshipping you’ll find anywhere.”
Seriously, it’s the best we’ve seen, and we really like its no nonsense, accessible style. In fact, we like it so much that we’ve scoured the guide to find its most valuable gems of advice for those looking to set up a dropshipping business.
1. The Hardest Choice Comes First
Central to any successful business is the right product, and when it comes to setting up a dropshipping business, this is the first choice you must make.
Picking the right product and niche will determine whether your business soars or nosedives.
Contrary to popular belief, passion isn’t everything when it comes to choosing your product to dropship. As The Ultimate Guide states:
“The most common mistake at this stage is picking a product based on personal interest or passion. This is an acceptable strategy if being interested in the product is your primary objective, not necessarily business success. But if your #1 goal is to build a profitable dropshipping site, you’ll want to consider setting your personal passions aside when doing market research.”
You should also think about who will buy your product. For business success, set your sights on hobbyists, business customers, or repeat buyers.
2. Dropshipping Isn’t All Flowers and Sunshine
There are many advantages to setting up a dropping shipping business. It’s easy to get started, you can do it from your bedroom, and once the sales start rolling in it’s easy to scale up.
However, that doesn’t mean it’s a breeze. If it was simple, everyone would be doing it. You’ll face tough competition, you’ll battle against low margins, and managing your inventory can prove tricky.
When the going gets tough, you’ll find yourself in constant battle your own doubts and fears. In the words of The Ultimate Guide:
“It’s a common misconception that successful entrepreneurs have a rock-solid certainty about their business at the outset. When you dig a little deeper, you’ll find that most had fears and reservations about how things would turn out. Yet they moved forward with their plan despite these doubts.”
What’s more, in early days you’ll find yourself sprinting a marathon, and working every waking hour to make your business a success. Keep running, however, and once your business is in full swing you’ll find that it needs a lot less than 40 hours a week to keep it going.
What’s more, you’ll have a steady income stream, and your business in an asset you can sell. The Ultimate Guide again:
“Make sure you consider the equity value you’re accruing as well as the cash flow generated when looking at your true return.”
3. Finding Good Dropshipping Wholesalers Takes Savvy and Dedication
Once you’ve decided which product to sell, you’ll need to find manufacturers or wholesalers who are willing to dropship for you.
When searching for suppliers who offer a dropshipping service, keep your wits about you. As The Ultimate Guide says:
“You’ll likely come across a large number of “fake” wholesalers. Unfortunately legitimate wholesalers are traditionally poor at marketing and tend to be harder to find.”
In particular, beware of suppliers who demand monthly fees, or who sell direct to the public. Legitimate wholesalers will do neither of these.
Top tips for finding wholesales include:
- Contacting the manufacturer and asking for a list of wholesale distributers.
- Searching online.
- Meeting manufacturers and wholesalers at trade shows.
- Browsing supplier directories.
4. Google is the Dropshipper’s Friend
You’ll find Google will be your first port of call when it comes to doing research for your dropshipping business.
The Ultimate Guide recommends using Google to research the marketplace when you’re choosing a product to dropship, and to find suitable wholesalers. Top tips from the guide include:
- Google’s Keyword Tool is especially useful for checking out demand for a product, as you can see how many people search for the product each month.
- Google Trends allows you to see whether a market is growing or in decline by showing you the volume of different searches over the past few years. You can also use it to check out the geographical demand and seasonality of different products.
- When looking for wholesalers, dig deep into your search results. You’ll rarely find a good wholesaler on the first page of results.
5. You Can Set Up Shop on eBay, Amazon and your own online store
Both eBay and Amazon allow you to set up shop in a matter of minutes, and give you access to a huge marketplace with minimal marketing.
However, the high fees on both these sites will chip away at your profits, and you’re relying on a third party to build your brand. If they change their business model, you could be out of business.
Setting up your own store takes more time, especially on marketing, but it allows you to build a real business, and gives you a healthier profit margin.
According to The Ultimate Guide, how you choose to start depends on where you plan to take your dropshipping business.
“If you’re looking to dip your toes into the dropshipping waters and explore it as a hobby, selling on eBay and Amazon can be a viable way to move forward if you can find products with enough margin to cover your fees and still make a profit.
“But if you’re serious about building a long-term business, we recommend starting your own eCommerce store. You’ll need to invest in marketing and promotion, especially in the early days, but we think it offers the best long-term potential.
“Also, there’s nothing wrong with selling a few items on eBay and Amazon while you’re in the early stages of building your store. In fact, a number of mature, established brands sell merchandise this way, particularly through Amazon.”
Have We Tempted You?
Are you tempted to start a dropshipping business? We recommend you check out the full guide for more tips and advice, including nitty gritty on the legal and financial side of setting up a business.
If you decide to start your own dropshipping business, we’d love to hear your story.
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