Want to start a new e-commerce business? Drop shipping has become the order of the day for new online retailer as the business model to adopt. In dropshipping, the retailer does not stock the products. Instead, you tie up with a third party supplier, and the products are sourced and delivered by the dropshipping supplier.
This model is beneficial as you can start off with very little capital investment and an e-commerce website. The benefits are:
- You have no overheads for managing inventory
- As you do not have to own the products, you can start with a minimum initial investment
- You have a wide choice of products to sell as you can tie up with a dropshipping supplier or many others
- No location constraints – Your supplier can be selling wholesale from China or anywhere in the world
However, it is easy to get carried away with the idea of starting the business with little capital and low-cost operations. It is important to realize that running a dropshipping business involves a lot of planning hard work as you will be competing with many other e-commerce sites.
What are the things you need to get off to a good start?
1. Focus on niche products:
The products you sell need to be items that interest customers. If you choose a product because there are fewer competitors in the market, it is likely the product is not really in demand.
Your focus product should be something which is not readily available in the local region.
2. Have a decent profit margin:
As the overhead costs are low, there is a tendency to undercut prices to beat the competition. This will take you on a downward spiral with the eventuality that your margins become very poor. Always keep in mind why you are in the business – to make a profit
3. Tie up with a reliable drop shipping supplier:
As you have no control over the inventory, it is essential your supplier delivers on promised delivery timelines. When there is high demand, the supplier should not be scrambling to fulfill orders.
4. Have low delivery costs:
Even if your product is excellent, high delivery costs can be off-putting for any customer. Your supplier could be shipping wholesale from China, but you need to ensure that shipping cost is low. You can even absorb some of the cost so that the customer get free or low-cost delivery at all times.
Follow these steps to get off to a good start, and you will have a drop shipping business which continually evolves and expands.