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Everything you need to know about ‘Dropshipping’

Dropshipping, as a business model, is gaining popularity worldwide. It has opened up opportunities for many aspiring entrepreneurs to start a business with low capital. But what is it all about? Let’s dive in!
According to the report by Grand View Research, the market size of dropshipping business globally was valued at 102.2bn and was projected to grow at the CAGR of 28.8% from 2019-2025.

What is Dropshipping?

Dropshipping is a business model with which you can run an online business but without the requirement of maintaining the inventory and the logistics. It is a process through which the management of the inventory and delivery of the product is handled by a third-party supplier and the E-commerce store owner focuses on the sales of the products.

How does it work?

There are 3 steps involved in the process:

- The customer visits the online store and places an order

- The online store owner, either manually or automated, forwards the details of the order to the supplier of the product

- The supplier packages the order and ships it to the customer directly with the brand of the online store.

Reasons to start a dropshipping business:

With the online sales experiencing a surge, this is the most opportune time to start an online business but the requirement of the high amount of capital infusion, manufacturing/purchasing the inventory, storage might become the roadblocks. Dropshipping comes as a perfect solution for an aspiring entrepreneur. According to the data gathered by 3dcart, approximately 23% of the online sales in 2017 were fulfilled through dropshipping.

The following are some of the reasons for which you could opt for starting a dropshipping business:

Lower capital requirement:

Unlike many of the capital-intensive business models including having an E-commerce venture, a dropshipping business requires a very low amount of capital to start with. The costs associated with running a retail store like setting up the business or of an E-commerce business like purchasing the inventory are eliminated with dropshipping.

According to Finsmes, you can start a dropshipping business with a budget of $150 at the minimum end, if you could stretch a bit, it might come around $347 at the medium scale with added features in the packages. According to Dropified too, it would cost less than $500 at the higher end.

If you are someone who is an aspiring entrepreneur but you don’t have sufficient capital to start other types of businesses, you could certainly give it a try!

Avoids inventory management:

One of the features that work strongly in the favor of a dropshipping entrepreneur is that there is no requirement of managing any inventory. The supplier stocks the inventory and you just sell it. It saves the complete investment that would otherwise be gotten invested in warehouses and supply centers.

Low business expenses and overheads:

With a dropshipping business, the expenses and overheads are narrowed down to the hosting charges and other smaller expenses like telephone and electricity bills that might be easier to fulfill. A dropshipping entrepreneur might not even have to rent an office and the costs that might have been incurred for the rent gets saved.

Location-Independent type of work:

If you are someone who likes to travel and work from different locations, then this is for you. Given that the complete management of the business is from the laptop, it gives you the flexibility to work from any location of your choice.

Ability to Automate:

With many automation tools like AliScraper and Oberlo in place today, you will be able to automate the process of importing the products from platforms like AliExpress to your E-commerce store. It would save your time of having to manually select the products and processing them.

A higher no. of people are shopping online than ever:

According to data by Statista, in 2016 there were 1.66bn global digital buyers which will be increasing to 2.14bn by 2021.

There are more number of people shopping online now than ever. With the surge of Online businesses coupled with the impact of COVID-19 that has necessitated more and more online transactions, the sales of the products online are at their highest.

More options in the products:

With a dropshipping business, you are away from the space constraint of a brick and mortar store; or issues of inventory in the case of an E-commerce venture for adding multiple products to the catalog. You can choose to have a wide variety of products from multiple suppliers in your store so that the customers have more options.

Important points to have in mind:

Any industry you would want to enter for exploring the business opportunity comes with its challenges. It is up to an entrepreneur to find ways to solve them and move forward with it. Here are the set of things to have in mind before starting a dropshipping business:

Dropshipping Lower profit margin:

In dropshipping, the profit margin you could earn depends on the prudence in the choice of products. Some of the products might have a lower margin and some might have a higher margin. Depending on the niche of your business, you can choose the products that are only in demand but offer a good margin. Alike in any other business model, the profit margin might be lower initially but might get better once you have got a good hold in it.

Liability of errors:

Dropshipping demands responsibility even in situations you might not be at the fault. There might be a delivery issue at the end of the supplier, but the customers will reach out to you as they had ordered from your platform. Coordinating with the suppliers on one hand and keeping the customers convinced on the other, would be your responsibility. Playing a blame-game will only tarnish the reputation of your brand.

It is like the company’s management owning the errors in front of the customers though it might be a department or a particular employee at fault.

Competitive arena:

Dropshipping is a competitive game. With a low entry barrier, it offers equal opportunities to all the players trying their hands at it. Your speed, customer service, dedication, and how you race past the competition would determine how far you can go.

No control over supplies:

The supply-chain would be in the control of your suppliers; hence, it would be imperative to not only find quality suppliers but also maintain a good relationship with them so that there are minimal errors on their side in the delivery process and helps you increase the customer satisfaction.

Creating a brand can be a difficult process:

With the supply being in the control of the suppliers, the customers have a brand recall of their company instead of yours, though they had booked from your platform. There are many platforms like Spocket and Printful that offer the branding options through which you could send the invoice from your brand instead of the suppliers’.

How to start a Dropshipping business:

They say “If your ‘why’ is clear, the ‘how’ follows. If you are clear with your objectives, here are steps that will help you set up your dropshipping business faster:

Choose the niche of your products:

The niche you choose for your store would go a long way in determining the success or failure of the business. If you happen to choose a niche for which there is less demand in the regions you choose to sell in, it might crumple your business and the finances. Choose your niche wisely. The below-mentioned factors might help in deciding better:

- Has attractive profits

- Shipping costs must be lower

- Good demand for the products in that niche in the sales regions

- High durability of products

Research on the competitors:

Make sure to research your competitors in the niche you have chosen. Run a competitor analysis for the number of competitors, their sales numbers, strategies, etc. If you have your competitors selling on Amazon, tools like BQool will not only help you understand the pricing of their products but also automate the re-pricing of your products in accordance with the data.

Dropshipping Have a good supplier:
Factors for choosing the suppliers | Platforms for getting the suppliers

The drop shipper-supplier relation is a long-term relationship and hence it must be based right from the onset. Make sure to choose a quality supplier for the products in your store. Make sure of the below-mentioned factors while choosing a supplier:

- Is co-operative

- Should have a good experience in the field

- Provides quality products

- Has some technical knowledge as well

- Has an efficient delivery process

The below-mentioned platforms might help you source quality products from good suppliers listed with them:

1. Spocket: Spocket enables you to find quality products from various categories that have a high conversion from the suppliers primarily from the USA and the EU.

2. SaleHoo: It is a directory with the list of wholesale companies and the dropshipping suppliers to choose from.

3. Printful: If you are looking to sell Print-on-demand products, Printful has to be your first choice to source from.

4. Oberlo: It is embedded with the Shopify app. You can import the products from AliExpress, the platform used by many suppliers, on to your store.

5. Launched by AliDropship, this WordPress plugin helps you in finding and importing quality products from AliExpress.

6. Dropified: It helps you automate several tasks that are required to run a dropshipping business including importing products to your store.

7. AliScraper: Alike Oberlo, AliScraper is a google chrome extension launched by Spocket that allows you to automate the importing of products from the AliExpress store.

Dropshipping Create an E-commerce website:

In the E-commerce arena, having a quality website is a pre-requisite to business growth. Better the UI (User Interface) of your website, the better the conversion would be. A customer must find navigating your website easy. A chaotic website would see a very high bounce rate, I.e. the number of people coming to the website and leaving without purchasing. Options for a good website:

- If you have sufficient capital, you could hire a web designer or a web designing company for the project

- Though building an E-commerce website is tough, if you decide so, you could build it yourself. (If you are not well-versed with web-designing, you could start from the basics of HTML & CSS)

- Create a website through web developer tools available on any of the major platforms like Shopify, WooCommerce, BigCommerce, and Wix. This is the most preferred option by the E-commerce store owners and many of the app developments in this arena happen with these platforms in consideration.

Proper marketing plan:

For an E-commerce/dropshipping business to succeed having a robust marketing plan is an absolute necessity. Research well on the options that will be most suitable for the products you are looking to sell and the regions of the sales being targeted at. Some of the options are:

- Social Media Marketing: The platforms like SocialPilot and Combin might be helpful in that

- Email Marketing: The platforms like Automizy, MailChimp, SendInBlue will be helpful for the same

- PPC Advertising

If feasible, focus on selling through multiple channels like Amazon, eBay, and others. Also, focus on getting more customer ratings for your products.

Keep a track of the data:

After all, this would be a technology-based business and hence the data analytics would play a vital role in the decision-making. Having a clear picture of the data would facilitate stronger decision-making. The aspects that can be monitored are:

- How the customer had landed on your website,

- The activity by him/her on your website that can be monitored through platforms like Beeketing,

- The analytics of your website through Google analytics or Diib citing the sources of the traffic

Focus on customer satisfaction:

Customer satisfaction is the soul of the E-commerce business’ success. It starts from the moment the customer has gotten introduced to your brand and visited your website. If you could delight them with assistance in choosing the products that are suitable for them, it would certainly leave a strong impression on their mind. One of the ways to do it is by having a chatbot like installed through which the responses to an enquiry across any of the platforms like website, messenger, or social media pages are automated and the conversion is faster.

Countries for dropshipping:

According to the e-commerce platform, the USA, Canada, Australia occupy the first 3 positions followed by New Zealand, the UK, Spain, Germany, Austria, Portugal, France, Italy, Norway, and the UAE.

But you may do your research specific to the location you want to start selling in.

Success stories:

Success in a dropshipping business is multi-factorial. It can depend on the right timing of starting, the choice of your products, consistency, customer satisfaction, and several other factors. If you are looking for some inspiration through the stories of the people who have made it big in this business, here are some of the stories:

1. A drop shipper called Irwin Dominquez, an accountant turned entrepreneur achieved the sales of $1mn in sales within just 8 months of starting his business.

2. 2 dropshipping business partners Aloysius Chay and Galvin Bay had sold up to $60k worth of products in a day within a year of starting their store.

3. Marc Chapon from Spocket too had started making $60k within a year of starting his business. He had clocked the sales of $178,492 in 3 months from the October 10th, 2018- January 7th, 2019


According to the estimates of Nasdaq, consumers will be making 95% of their purchases online and the data of Statista states that the experts expect the global E-commerce sales to double between 2018-2023 breaking the $6tn mark. With this expanse that the online business is having in the current scenario and would be having in the future, it is certainly no doubt that it would be the most opportune time to start your online store.

Copyrights © 2024 Inspiration Unlimited eMagazine

Any facts, figures or references stated here are made by the author & don't reflect the endorsement of iU at all times unless otherwise drafted by official staff at iU. This article was first published here on 19th September 2020.
Kunal Jain
Kunal Jain works as an Outreach Specialist at iU

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