BLOG: What is dropshipping and how can you make money from it?
Whether as a side hustle or a full-time gig, dropshipping offers an opportunity for anyone to start and quickly grow an e-commerce business. And age isn’t a barrier. We are seeing a growing number of people dropshipping in retirement as a way to boost their pensions.
But what is dropshipping? Considering the global dropshipping market is expected to expand to more than $500bn in the next four years, it’s surprising how few people actually know.
Running an e-commerce business can be extremely rewarding, but it can also be a hard slog at the start, as many business owners have to handle every aspect of the process – from product design to order fulfilment.
Dropshipping is an efficient type of order fulfilment, that eliminates the need to pre-purchase inventory and store it. Many new small business owners don’t have the space to keep a large amount of inventory, or the budget to rent a warehouse, making dropshipping an attractive set up for an e-commerce business.
As a dropshipper you are acting as a go-between for your customers and the companies that manufacture your products. You’ll never need to warehouse any stock: in fact you never need to receive any stock at all.
You can list your products for sale through any number of channels, such as Amazon or eBay, and your manufacturing or supply partners take care of the physical fulfilment of customers’ orders. You are only in charge of marketing, point-of-sale, and liaising with the customers, if they have any questions or complaints.
The attraction of setting your e-commerce business up as a dropshipping operation, is that it’s possible with just a laptop to run your business anywhere, spend just a few hours a week on it, and earn a healthy income. For people who are fed up with the daily 9-5 grind, that’s hugely appealing.
You do still have to put the hours in at the start, but once your store is up and running, you don’t have to devote substantial amounts of time running it if you don’t want to.
Tips to start your dropshipping business
- When it comes to your first store, go with a vertical that is interesting to you, such as electronics, toys or gifts. Don’t try and sell across too many verticals to start with.
- When you research suppliers, choose one geographic region and then branch out.
- As for the number of products in your store – there isn’t a magic number, but I would start off with 50 to 100 products as it creates a decent number of buy opportunities for potential customers.
- Don’t be tempted to dump thousands of products in your store straight away because you’ll be spending all your time correcting your mistakes.
How to grow and increase your profits
- Start adding more products to your shop or shops, once you’re comfortable doing so. The more opportunities you create for your customers to buy, the higher your sales are going to be.
- Expand your business to other regions. If people are buying your products in one place, then there are probably people who would buy them in other places as well. Often suppliers who are shipping to the US will ship to Canada, and those who are shipping to the UK will ship to continental Europe.
- Create shops on additional sales channels. After a few months of selling on Amazon, you may look for other marketplaces, focusing on those that have built up regional or niche-based audiences that align with the audience that you have seen making purchases from you. Also, if you haven’t created your own e-commerce website, then you may want to do so.
- Finally, don’t give up. If you are driving at least a few sales early on in the process that should keep you motivated, and assure you you’re on the right track. Set aside some time to work on your dropshipping business every day while it’s in its infancy, and the results will come.
Zaid Arshed is CEO of dropshipping network Armaan Resales