Ever wonder how some online retail operations are able to make their money? Many of these stores utilize an eCommerce strategy called dropshipping.
By definition, dropshipping is an order fulfillment method that allows owners to sell directly to their customers without needing to stock or even handle the merchandise themselves.
With dropshipping, you no longer need to invest in the infrastructure needed to stock up on inventory. The customer can purchase items at retail price from you while you pay the manufacturer the wholesale price of the item. The manufacturer will take care of handling and shipping the item to your customer for you.
Shopify is a popular eCommerce platform that can easily be used by aspiring entrepreneurs in order to start up their online stores. It’s a lower-risk approach for independent business, allowing them to try out different ideas and product lines without needing to invest the much-needed capital to stock up these items up front. Dropshipping using Shopify is a quick and simple affair at a glance. Simply choose an idea, get in touch with a supplier, build your eCommerce store, and register your business with the government. Of course, there’s a lot of details involved with each step of the process.
First of all, you need to have a good working relationship with your chosen supplier. You need to understand how their products work, and the best way to market them to your prospects. While it’s easy enough to build your own online store, you will be competing with thousands of other stores on the website. You will have to find a way to make your store standout and be the number one choice for customers looking to buy your supplier’s products.
Yes. You can still make money dropshipping with Shopify. The challenge is, your profit margin per individual product dropshipped can be rather low. Think about it this way — you’re still paying the manufacturer or supplier wholesale in order to get the item out. The profits you earn is basically the amount skimmed off the top of what the manufacturer earned.
And as mentioned before, there’s also the competition involved. Dropshipping has a very low barrier to entry, leading to a lot of players entering the field. You may be able to make significant gross profit from the sales you make, but when you add in your marketing costs, maintenance, sales management, and even your office hours, the amount could significantly go down.
Not to mention cost problems on the item side. There’s just some products which you need to cut into your profits in order to maintain a competitive edge. Fail to do so and your competition can easily undercut you. It’s a tricky balancing act, especially when you add in the fact that your supplier may not necessarily provide you enough discounts on their wares to help with the cost of doing business. You may not get an exclusive deal with them either.
As with any business venture, you need to implement the right strategies and practices in order to get the most out of your dropshipping business.
So now that we know the potential challenges involved when starting a dropshipping operation, what are the strategies we can use to mitigate them to ensure the business succeeds?
Having a solid grasp of your target market does wonders for your operation. This is especially essential when you’re just testing to see which products will stick. In this case, you can mitigate the risk by fulfilling orders as a side business first before making it a main event. If it sells, you can now acquire more of that item to eventually make it a main feature.
This could take some time but it’s going to be better than stocking up an unpredictable product and eating up more losses later on.
When it comes to selling merchandise especially from overseas, one of the main costs you have to take into account is shipping. Under a dropshipping strategy, your supplier will be in charge of sending out the item directly to your customer, but there’s also the complication regarding some harder-to-reach areas. In this case, you can test out new locales first, see if your suppliers can reach those areas.
Ultimately, how good your supplier is will determine how smooth your operations can go. You can’t just partner with just any supplier, you need to find one you can establish a good business relationship with. Remember that your supplier will be the one determining product quality, timely deliveries, and even legal compliance.
Check and see how well your suppliers handle the following:
Dropshipping is not a get-rich-quick scheme. As with any business, it needs due research and planning before you can even get your business started. Your supplier needs to be competent enough when it comes to their product offers and customer service and you need to be savvy enough to stand out when it comes to your marketing, advertising, and managing an online presence.
Fortunately, tools like Shopify have done wonders to help people get started with dropshipping. There is also a whole wealth of resources out there to get started. Try to start by using it as a complement to a traditional business model you’re currently using. Should you do it competently enough, it will really enable your business to earn more thanks to the money saved and audience reached. So, don’t be afraid to give it a try. The results may surprise you.
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