How to Make Money Dropshipping

Dropshipping actually started before the internet, and was an idea developed in the ’60s with a mail order company taking advantage of mail order catalogues. As their business grew they were struggling to keep up with customer demand and needed to create an easier and more efficient way to ship out to customers. Hence, the start of dropshipping.

Dropshipping is a supply chain method of order fulfilment. It means that the retailer doesn’t actually keep any goods in stock. Instead, the orders are transferred to the manufacturer or a wholesaler, who then ships the goods straight out to the customer. Unlike other retail businesses, the retailer doesn’t hold any physical stock themselves – they act as the middle man between manufacturer and customers.

Therefore, you don’t need much to get started in dropshipping. As you’re acting as the go-between, you just need to  set up an online shop to begin.

While dropshipping can be a great money-making opportunity, there are a few things to keep in mind whilst starting out.

Pros

• Low start-up costs – Dropshipping is a very simple business to set up and because you don’t need to buy a stock of products before you sell them, there’s virtually no start-up costs. Not having to pay anything upfront eliminates the risk of going into debt with a business.
• Low overheads – You don’t have to manage or store your own inventory so you’re not paying for the facilities or tools to do so.
• Sell what you want, when you want – A physical inventory comes with restraints – you need to order products in advance of when you want to sell them. With dropshipping you can change the products you’re selling instantly. On top of this, you don’t need to worry about over-ordering or worry about the potential of disused inventory. If something doesn’t sell, you haven’t lost out.

cons

• Less control – As the middle man in this supply chain you are relinquishing control over order fulfilment and lead times. You also don’t control your supplier’s inventory – if they run out of stock so do you.
• Trust in the manufacturer – You need to be able to fully trust everyone you go into business with. Ultimately, they are responsible for managing and shipping your stock. If something does go wrong, you don’t have the inventory, you will be relying on the manufacturer to sort the issue for you.

While the business model is straightforward, there are things you’ll need to consider if you want to consistently make money from dropshipping.

quality

Check both the quality and reliability of your suppliers before going into business with them. They’re acting on your behalf and any negative feedback reflects on you and your business. You want customers to be happy with the quality of both the products and service they receive so you get their repeat business.

don’t compete on price alone

Although having a great price is always a good incentive, competing on price alone can set you up for failure. The problem is that there will always be bigger companies who can afford to go cheaper, or someone else willing to undercut your price.

Instead, think of ways to justify customers paying slightly more – do you have particular knowledge or expertise on the products? Do you offer a special service, or packaged deal?

cash in on holidays and seasons

These are great times for sales and, in particular, dropshipping businesses. Other retailers may run out of seasonal products due to under-ordering, as no one wants to have Christmas items still hanging about the warehouse come June. However, because dropshipping enables you to sell without preordering the inventory, this can be a great opportunity to make money.

sell what you know

It’s a lot easier to secure higher profit margins if you’re an expert on what you’re selling. This way you can write compelling product descriptions, offer personal recommendations, create suitable package deals, and you’ll be able to offer a higher level of customer service as well. Having knowledge and expertise on the products you’re selling is a fair justification for charging a slightly higher price, too.

go niche

Finding a niche can help you pick up more trade. One of the massive upsides of dropshipping is that you don’t pay for products until you sell them. This allows you the opportunity to consider selling niche and more unusual products. In the worst case, they don’t work out, you can simply take them off your store and you haven’t actually lost any money.

Other supermarkets and retailers may not stock these kinds of products because they’ll have to order a set amount in advance. If it’s something niche or unusual it’ll be hard to predict whether it’ll sell well, and the business may not be willing to take the risk of losing out. However, dropshipping provides the opportunity for businesses without the risk of losing money on a product that doesn’t sell.

Online shops are relatively easy to set up and anyone can create one from home. There are a few key things you want to consider when setting up an online shop.