So, you’ve decided you want to enter the eCommerce market, but don’t know where to start. You don’t have a large amount of capital. Actually, you have nothing. But the driving force to start a business and become financially independent is there, and that’s all you need. That and the willingness to work hard.
A dropshipping business is an easy in for most eCommerce entrepreneurs. It has an extremely low startup cost, since you don’t have to carry any inventory. Let’s look at the business model.
You, as a seller, list products on your website to sell. You receive an order from a customer. At this point, you have already established a relationship with at least one but probably several dropshipping companies that supply these products you have listed. You then send the order on to your supplier and they send the product to your customer. You therefore never see or hold the product itself. You are the middleman that connects the manufacturer with the customer, and making a profit while doing so.
Why you should invest in a dropshipping business
There are several advantages to the dropshipping business model. With the traditional private label eCommerce business model, your inventory could be up to 80% of your startup cost. And this does not include shipping and storage fees. With dropshipping, none of those costs are paid by you. Your suppliers are responsible for the inventory cost and storage fees.
Dropshipping is a very low-risk business model. You don’t have to worry about ordering the correct quantities from your supplier when you are running low on stock. And what if your sales go up significantly because of a holiday season? Then you run out of stock where you could’ve been making money! There is usually a one-month minimum wait to ship your products from China to America, and no seller has the luxury of time regarding stock levels.
You as a seller never have to worry about stickers and labels, invoices or packaging. Dropshipping streamlines your sales in such a way that there is no point where the onus is on you to be constantly involved and double-checking the workflow. All that you need to do, is let the dropshipper know that you have received an order, get the money from the customer, and pay the product cost to the supplier at a much lower margin.
Challenges to consider with dropshipping
Because of the low risk, a lot of sellers use this business model and thus you will encounter a lot of competition. You also might have some big sharks in your niche already that have a significant head start. Make sure you choose a product that doesn’t have too much brand loyalty, where you can bring something original to your branding and marketing campaigns.
As opposed to an average of 40% profit margins for private label products, dropshipping has relatively low margins, usually about 20%. You are competing against businesses that have their own warehouses and manufacturers.
In some cases, low brand control can hurt you. Since you don’t ever have the product in your hands to inspect, and oversee the branding and packaging of the product, it is in the hands of the dropshipper to see to it that your product’s quality is on par with your competitors. For this reason, you should take the time that you would’ve spent on production and logistics and focus instead on your branding and marketing campaigns.
How to create value through branding
Create value for your customers where suppliers fall short. Very often suppliers from China, India, and several other countries with manufacturers and large warehouses don’t have the means to brand and sell their products to an American or any English-speaking market. That is where your hard work is invaluable to your success, and also helps them penetrate the market.
You will have to find a unique competitive advantage to stand out from your competitors and create a constant revenue stream. Branding is the way to get you there. Your strong brand identity needs to be splashed all over social media and should also be integrated in your website. When starting out, don’t underestimate design. Visuals speak volumes. Hire the best designer you can afford.
Be sure to find a good copywriter for your site. Good content means more targeted branding, and it establishes your brand identity. You will need good writing for ad copy, product descriptions, marketing content, social media posts and additional posts such as blog posts, videos and guides on your products. You have much more credibility with good content, and your customers will be able to identify with your brand and appreciate your unique marketing angle. Focus on building a reliable brand while the logistics are happening behind the scenes.