304 North Cardinal St.
Dorchester Center, MA 02124
You’ve probably heard the word dropshipping bandied about in business circles, but you might not know what it actually means. If you’re new to the idea of dropshipping, rest assured that you’re not alone—while many people have heard of it, few people really understand how it works and how it can help them make money online. With this article, we hope to answer your most pressing questions about dropshipping and offer tips on how to make money with this unique business model.
How much money can I earn?
This is an important question. The first thing you should know is that dropshipping isn’t for everyone. It has its pros and cons, just like any other business model. For example, if someone didn’t want to deal with orders or customer service (for instance), then they probably wouldn’t be a good fit for e-commerce in general—and they certainly wouldn’t make a good fit as a drop shipper. So before we get into how much money can be made with dropshipping, let’s take a step back and see who dropshipping is right for.
While it’s possible to start making money online quickly, becoming successful at it takes time. Fortunately there are many ways of tracking your progress towards success so you can see how well your efforts are working! These range from free tools like Google Analytics which can help track your traffic sources but also paid tools such as SEMrush which allow you track all sorts of data about your marketing efforts such as what ads are performing best (if you are doing PPC campaigns) or even keywords searched in Google that lead people to your site.
What are my costs?
Drop shipping is an arrangement where a retailer does not keep goods in stock, but instead transfers customer orders and shipment details to either their supplier or a third party logistics provider. Here’s how you can find out your costs of dropshipping by using simple formulas Your wholesale cost + any applicable shipping charges = your per-unit retail price. If you sell one item for $20, then your total cost is $20 + freight charge if it’s shipped from China (most suppliers ship from China), so that would be about $24-$25 ($20 wholesale + ~$4-5 for freight). This means that if you sell it on Amazon FBA at $30-$35, you can still make money! At first glance it may seem like Amazon takes half of your profit margin away with their fees (which they do), but remember: The more items you sell , especially at a profit , are going to make up for those fees sooner than later!
Is it really as easy as they say?
Before you sign up for a dropshipping business, it’s important to take some time and think about whether it’s something you can handle. With a dropship business, there are no real startup costs. You don’t have to buy physical products. There’s no marketing strategy, website design or graphics development required since all of that is provided by your dropship provider. Because of that, there really aren’t any barriers of entry into getting started with a dropship business; anyone who has an internet connection and wants to run their own store without dealing with inventory or logistics can simply set one up on Shopify (free trial available) or a similar e-commerce platform.
Am I going to be sitting around all day waiting for packages?
Starting a dropshipping business is actually a lot of work. Unlike retail, you don’t have to be at your store or kiosk to make sales. But that also means you need to do everything else yourself, from designing and creating products, taking photos, maintaining social media accounts and so on. Even if you outsource certain parts of it, running an online business will take up a lot of your time each day. If you’re going into dropshipping expecting not much more than passive income, then perhaps reconsider. Starting and running an online store can take quite a bit of time (and effort).
How will this affect my credit score?
If you take out a loan or use your credit card too much, that may have an impact on your credit score. On one hand, taking out a loan helps you establish good credit—you borrow money from a bank and pay it back over time. When you make payments on time, your financial habits look responsible. So if you need to take out a loan for business purposes, do so (just be sure to pay it off as quickly as possible). However, opening several lines of credit in quick succession could give lenders pause. It signals that you might be less reliable than someone who takes on debt only when they really need it; multiple unnecessary accounts are often seen as risky for lenders.
Do I need employees?
The most basic version of a dropshipping business has no employees and is usually run by one person. This can be fine if you’re starting out in your business and learning on your own, but when it comes time to scale, you may find yourself needing help. Be sure that you understand all aspects of running a company if and when you bring others into it—especially financials, taxes, inventory management, marketing strategies, etc. You may want to hire employees who have experience with dropshipping or ecommerce in general so they can hit the ground running instead of having to train someone from scratch.
Can I advertise?
Many companies will pay you for advertising space on your social media feeds. Some of these companies will even make a bonus commission if you successfully generate a lead. There are many ways to advertise; you can pay someone else with your business’s advertising budget, or create and place your own ads. Before creating and placing ads, consider your target audience; use statistics to determine where most of them spend their time online. If a particular website gets lots of traffic from people in your desired demographic, try placing an ad there. Just remember not to spam! Remember: Advertising is about telling people what they want to hear—not just shouting into an empty room.
Can I sell food and drinks online?
Food and drinks are a little tricky because some cities have strict regulations about shipping food. Your best bet is to talk to a lawyer or your local zoning board about what you can do—and what you can’t. With that in mind, if you’re serious about starting an online food delivery business, there are plenty of sites that list recipes that are great for making large batches (think soups, smoothies, sauces) which would be ideal for shipping and easy on your customer’s stomach. Although it might not be right for everyone or every city, it can certainly be a great first step into e-commerce if you think it could fit your brand! For more advice on how to start selling food online check out our full guide here.
Can I sell cosmetics online?
The main reason so many business owners have failed when dropshipping is because they’ve chosen their supplier without knowing what they were doing. These entrepreneurs don’t know how much money should be invested in inventory, or how much time should be spent sourcing and negotiating suppliers—and that means it’s likely that you won’t either. While every situation is different, there are two questions you can ask yourself to determine whether a dropshipper is right for your business: How much investment capital do I have? and Are there enough potential sales to support me? If you only have a few hundred dollars in capital and would like a set it and forget it business model, then dropshipping may not be right for you.
Can dropshippers provide returns, refunds and exchanges for me?
If you want to make dropshipping work for you, it’s important that you start strong. The best way to do that is by taking a minute or two at each store you decide on (and any new stores you add later) and figuring out your first order: Do some digging through their products and figure out what you would sell if every product in their catalog was available. That way, when you order from them, it will be easier for customers to find an item they are familiar with since they’ll already have an idea of what they’re looking for.
Where do I get products from?
It’s always a good idea to start off small when you’re first starting out. It doesn’t make sense to spend more money than you have on your initial order; it could put you in a bad financial position. Plus, it makes little sense (and isn’t profitable) to invest heavily in inventory that may not sell quickly enough for you to get your money back. However, don’t limit yourself too much either! A good rule of thumb is that if an item costs less than $5, buy at least five units. The higher your unit cost (how much each item is costing you), the lower number of items you should initially buy; unless your profit margin is very high.
How do I choose a supplier that’s right for me?
This is where you’ll spend most of your time in order to get things going. When first starting out, I would recommend sourcing products from all over. This will allow you to see who provides great service and who doesn’t—and it can also help you find niches that are more profitable for you. Once you’ve built up experience, drop shipping will take less time as you know what suppliers have good quality products and which ones aren’t worth your time. A simple way to find suppliers is using Alibaba (if dropshipping). You can enter any product and they will show a list of suppliers that offer that product on their website.
What should my first order be from each store?
Some online stores allow you to order a tester box for free, but most won’t. You’ll have to actually order something, which will cost at least $10–$20. When you’re just starting out and don’t know if dropshipping is for you, it’s best to just order an inexpensive t-shirt or keychain as your first item. After that, it’s easy: every store lets you return items that don’t sell within a certain amount of time (usually 30 days), so if they don’t sell within a month or two, move on and try another store. If they do sell, check on them periodically and start building up your inventory! Then you can keep those items in stock while looking for more products from other stores.