Dropshipping Guide: What Is It? How does It work across various platforms?
Does the name *Dropshipping* point to its archaic existence?
It is actually not a very old business model and is the market trend these days. Currency, every other startup tends to opt for dropshipping, and the reasons are pretty understandable as well. The low startup cost, no requirements for physical inventory maintenance, and minimal risk are the top reasons for the popularity of this exciting business model – in case you didn’t already know.
Therefore, we have decided to dig deeper into this e-commerce business model and bring you almost everything you need to know to understand the process well before you actually get started with it. We have created an FAQ-based guide about dropshipping’s ins and outs and how it works across different platforms, and the best items to dropship on other platforms.
Here’s the complete guide at a glimpse:
For ease of understanding, we have divided the guide into sections. The first section of this text targets the answer to all the basics, and the second section will cover important dropshipping platforms – eBay, Oberlo, Amazon, AliExpress, and Facebook. Feel free to pick one section at a time and save the other for another appropriate time.
So let’s see what the dropshipping is all about:
Section 1: All About Dropshipping
This section will cover basic concepts about the dropshipping businesses for you to understand the model better. By the end of this section, you’d be well informed about:
- making the right choice for your dropshipping business and the products,
- the financial aspects and implications of this business model,
- the legalization of dropshipping,
- and, how does dropshipping differ from affiliate marketing and the whole business model?
For the sake of convenience, however, let’s take it from simple to complex. So, we expect to be on the same page by the end of this section.
(Feel free to skip to your level if the concept is not much alien to you.)
Let’s go burrowing:
Dropshipping Basics – FAQs:
What is product sourcing? How to source products?
For a given business to sell a specific product, the process of attaining that product is called Product sourcing.
There is more than one way to source products. For instance:
- Be the creator of the product or self-provider yourself
- Work on a joint venture with a manufacturer
- Partner with a drop shipper
If you want to dig deeper into the subject of product sourcing, this blog post by Shopify does justice to the subject. However, today’s guide is all about the third method of product sourcing.
What Is Dropshipping? How Does It Work?
Dropshipping is a business model where the owner works as an intermediary between a buyer and the seller. This is the method of selling products online without inventory.
Here’s how this retail fulfillment method works:
1- A buyer contacts an e-store for the required products.
2- The e-store owner transfers the product to its manufacturer without owning the products.
3- The manufacturer then delivers the product to the buyer while the buyer doesn’t pay the product price to the manufacturer.
It is essential to understand here that the e-store charges the price of the product to the buyer charging his own markup on top of the retail price.
Is dropshipping profitable?
Dropshipping is the kind of e-commerce that has been on the rise for years now. In the year 2020, not only did it survive as a business model despite the pandemic having taken the world by storm, but the trend of increase continued consistently.
Therefore, not only for the year 2020 but for many years down the road, this model has the potential to succeed and increase in volume. One of the main reasons behind this progress is the associated profitability.
However, if you do not find dropshipping profitable and working for you, you certainly need to re-evaluate your niche-selection decision. The most profitable dropshipping niches won’t ever let you down.
How Much Money Do I Need To Start Dropshipping?
Unlike what this model looks like, it is NOT FREE. However, dropshipping doesn’t require massive fortune as well.
It is a low-cost model because there’s no warehouse involved. You don’t own the brick and mortar store, so none of those maintenance costs apply to you. However, that certainly doesn’t mean there are no other costs involved.
Again, how much does dropshipping cost?
Here are the four main cost components for dropshipping. Looking at each one individually would help us guesstimate the total costs:
1) Web Domain price
2) The apps you need to run for managing your e-store
3) The cost of items you buy from the suppliers (it is not very high because you do a test buy only to get an idea of how the purchase will work for your buyer) unless you agree to pay the amount for each purchase after receiving the amount from each buyer. And that would be a hell of a *keeper* supplier if he agrees on those terms.
4) Marketing cost – mainly Facebook ads cost.
Oh, and if you are planning to cut short on that cost, how else do you plan to tell the world that you own a cool business with these cool products that they need? So, this is probably as important as owning a virtual shop.
So, back to the original question – how much does it cost to start a dropshipping business?
While it might vary from business to business or your choices for each of these factors, these components make it roughly around $500 – $1000. So yeah!
How To Find The Best Dropshipping Products?
How to find products to dropship is by far the most tricky question people planning to get into product sourcing business face. What you decide to operate in could really make or ruin your future. So this would probably be the most critical decision after you have decided to get into this business. All the more reason, finding dropshipping products can be tricky.
There are a plethora of products available to sell but are they all worth it?
The sanest answer is a simple “No.”
Therefore, you have to spend a significant amount of time and effort to do your research to find the right products that sell well.
Okeh, so that sounds right, and well, fun (add a *non* before fun) but how do you really find the best dropshipping products?
There are more than one ways you take to find trending products. So, here’s how to find drop shipping products:
- See trending products through Google trends.
- Do niche research – pick a niche of products that appear trending and converting, such as fitness.
Now, say you have come down to fitness. What do you do next?
Develop a product range that revolves around fitness, such as gym clothes, shoes, and other accessories.
- Competitor research is another way to find your product. (Get inside your competitor’s head and see what they are doing – go through this cool buffer guide to learn how.)
After picking up a product category, see who are the leaders in that category and what types of products they are offering. Google can be your best friend to find competitors.
- Social shopping sites are another way to find products that can sell.
Social shopping sites gather customer reviews on different products.
- The last and the most feasible option is to search social media groups such as Facebook groups that are dedicated to product reviews.
You can pick the products to operate in a single territory or can go beyond borders if you can offer great prices and shipping costs that your customer is willing to pay.
Using a combination of these methods, you can find the best dropshipping product ideas for your next venture quite easily.
Now that you know how to find new products for dropshipping let’s head to the products that would be your savior for the year 2020.
What Products Should You Dropship In 2020?
Covid-19 has had a massive impact on the business horizons of 2020.
(And if you need a guide to keep your business running during such a pandemic, we have got you covered).
Therefore, what products to sell in 2020 is a question keeping many business owners awake through the year’s long and struggling nights.
As mentioned earlier, trending products are your best bet, and you can never go wrong with them irrespective of the year and the business world’s situation. For your information, here’s what you can deal in:
- The hottest selling products in the year 2020 are tech-related, such as phone accessories and smartwatches.
- Pet products are also the best sellers, among others.
- In contrast, shapewear, beauty, and health-related products have also made it to the best dropshipping niches for the year.
However, is a product in trend really an excellent option to deal with for your dropshipping venture?
“Why not?” you’d say.
The only problem with a trending niche is its competitiveness. If you have something better, newer to and highly useful to offer, you can put those $500- $1000 to better use with less competition. Else, come up with a strategy that is sure to knock your competitors off.
What Are The Bad Products For Dropshipping?
Like we have already established, not every product you plan to deal with would receive the same reception in the market. Some products might not have any market at all. Others would sell well.
So, how do you decide what product would be an excellent option to sell and what won’t be? How do you draw the line between a good and a lousy product for dropshipping?
Here are some general guidelines to render a product bad for dropshipping:
- Products that are heavy or large are not suitable for dropshipping.
- Fragile items dropshipping is a bad idea because they can get damaged during shipment.
- Other than that, copyrighted or counterfeit products are bad options for dropshipping.
- Selecting a niche that you cannot easily advertise on social media can also be a bad idea.
What Is White Label Dropshipping?
As a dropshipping e-store, you do not need to invest your time branding the product as your own. White label products are those products that the supplier himself brands as his own.
A white label drop shipping item comes with the logo of its supplier and other details such as phone number (and the address, in some cases). Therefore, even the customer is aware of the fact that the product displayed is not manufactured by the store displaying it online.
What Is Private Label Dropshipping?
Unlike white label dropshipping items, private label dropshipping items get sold on your e-store as your store’s brand. You get unbranded products from suppliers and sell them under your brand name by private label drop shippers.
What is blind dropshipping?
Blind shipping or blind dropshipping is dropshipping whereby the identity of the supplier is kept from the customer.
How Much Can I Make With Dropshipping?
Before you get into the details of profits, you need to get one thing straight: Like any other business model, you can face loss in dropshipping as well.
How so, though?
- If your ad-spend is much more than your price markup.
- Or you have picked a highly competitive niche where sustainability becomes a matter of putting more and more money.
However, it is not always the case.
Countless dropshipping businesses are minting huge profits. You could be one of them too. And why can’t you be!
However, while there’s no benchmark to how much you can earn, there are mathematical calculations (simple mental maths) behind the scenes.
Say, a markup price of $10 will leave you with around a $5 profit (again, that’s not a fixed amount and varies widely depending on your process costs) after covering all the costs involved.
What it simply means is – for a sale of 1000 units, you get a profit of $5000.
How long you take to sell 1000 units (and earn about $5000) depends upon the strength of your business and your chosen marketing approach. But, dropshipping (and good marketing) certainly offer that kind of profit-earning potential.
How To Set A Marked Up Price For Dropshipping?
A pricing strategy covering all the shipment and promotional costs of dropshipping is the only way to survive. Should you be willing to make profits too (hopefully, that’s why you are putting all these efforts into your business), you need to be smarter and better with numbers.
The overall pricing strategy for this business model is known as FMOC that stands for Fixed markup on cost. When implementing this strategy, you decide to charge a fixed markup on all the products you offer.
There are 2 ways you could do it, and there is no right and wrong strategy here:
- Either you can decide to take a fixed markup of – for example – $10 on each sale.
- Or, you can choose a 10% markup on whatever you sell.
How To Find Dropshipping Suppliers?
Finding a dropshipping supplier is hands down tricky.
So how do you do it?
Let’s take a look at all the possible “hows”:
- You can always take help from services such as Oberlo.
- However, a manual search allows you to find manufacturers who are not much visible on the internet.
- Another way is to do your research on Google through extensive searching of keywords. It needs deep digging because manufacturers usually don’t pay heed to content or SEO, so popular keywords may not always work. You’d have to go drilling all the relevant keywords to find potential dropshipping suppliers.
Can I Dropship Without A Website?
Yes, you can!
You don’t always need a website to run a dropshipping business. There are e-commerce platforms that only require you to set up an account and dropship.
The question, however, is – should you dropship without a website? Should you opt for such an e-commerce platform?
Apparently, there is nothing wrong with that, as long as you are making your profit. However, it is the question of your identity that might not develop that well being a part of another e-commerce platform.
On the other hand, being a part of such a platform takes off the effort and responsibility of branding your name and marketing your product.
So, at the end of the day, you decide if the pros out-compete the cons in your case or vice versa.
What Is The Advantage Of Using Dropshippers?
Now, that question might have been confusing you a lot. And if it did so, we have got you covered. When there are suppliers and customers available in the same market, why is there a need for an intermediary?
The answer is:
- Sometimes, the suppliers do not have enough exposure to their potential buyers.
- At other times, buyers don’t have an accurate idea of where they can find the desired products.
Therefore, this model cuts the hassle of research for both the suppliers and the buyers.
For a business owner, the low cost of startup and inventory management are the prime benefits.
Suppose you’re someone who can meet both the parties, you can seek this benefit.
For example, you are an expatriate in a country where many potential products suit people back home. In that case, you can try finding your suppliers and start a dropshipping business.
The sky’s the limit!
Is Dropshipping Legal?
Yes, dropshipping is legal. The business model itself is absolutely legal.
The only problem you can face is dropshipping an illegal product.
What Are Drop shipping Legal Requirements?
There are more than one legal requirements of dropshipping:
- First thing first, you need to open an LLC (limited liability company) in the US. It is not necessary to be a US citizen to open it. It only requires a fee to get your company registered as an LLC.
The point that you should be careful about is the selection of the state for the business. Many US states can charge you high taxes, while others do not. It would be best if you researched the US state rules and regulations before registering as an LLC.
The next step is to set up a payment method for your company’s e-store. The best way is to give two options to the customers.
- One is through credit cards.
- The other is Paypal.
Both of these options work fine for international payments. However, if you’re targeting to operate in a limited territory, you need to choose a local payment option for that.
What Are The Possible Drop Shipping Scams?
Like any other online business model, dropshipping can also have scams. It can be on both the supplier’s end and the intermediary’s end.
- False marketing claims are amongst the most common dropshipping scams. The products delivered are not up to the promised quality.
To minimize this scam, a drop shipper needs to test-buy a product before confirming the order.
- On the supplier’s end, some intermediaries can operate as the manufacturers themselves, not mentioning the fulfillment source.
To avoid this type of scam, the buyer needs to search for the business’s location and seek the location from where the order gets processed. This is just an additional measure to ensure a transparent transaction.
What Is The Difference Between Dropshipping And Affiliate Marketing?
While dropshipping lets you decide a price for the product. Affiliate marketing, on the other hand, doesn’t give the price decision in your hands.
When operating as an affiliate marketing business, you receive the commission from the products sold through your website’s referral.
While dropshipping requires you to get all the customer information and provide customer support after sales; affiliate marketing doesn’t require any of the two.
What Is The Difference Between Wholesale And Dropshipping?
Wholesale is acquiring bulk quantities of a product and then selling it at low prices to retailers.
The difference between a wholesale business and dropshipping is the upfront cost.
The wholesaler buys the inventory upfront in the wholesale model, while in dropshipping, the intermediary doesn’t pay an upfront price.
That’s all about the dropshipping basics. We’ll head to the giant drop shipping platforms now to see the potential and the process for each of them.
Section 2: How to drop-ship on eBay, ShopifyAmazon, AliExpress, Facebook, and Oberlo.
As you already know, we’ll cover the process of dropshipping on the 5 giant dropshipping platforms.
Starting with eBay, we will see in detail what it requires to dropship through eBay. Let’s begin with the first and the foremost question – that also happens to be the most important one:
How To Start Dropshipping On eBay?
With a hefty revenue of over $10 billion, eBay is heaven for C2C sales. The good news is that eBay offers its dropshipping program as well with eBay dropshipping suppliers.
Here are the necessary steps involved in start dropshipping on eBay:
1. Registering A Seller Account On eBay:
The first step to get started is to register yourself as a seller on eBay. However, it incurs upon you a listing cost.
However, there is an important point to remember based on your location:
Make sure that you register on the eBay website of your own country because eBay operates with different domains in different countries.
2. Contact The Suppliers Of The Products You Want To Sell:
Do the product research for what you want to sell on eBay. Contact potential suppliers of the products on eBay.
After finding your suppliers, you have to change your seller setting to a retailer.
3. Listing Your Products On A Marked Up Price:
Now that you’re working as a retailer on eBay, you need to make the product listings.
Now, “what is a product listing?” you ask.
It is the description of the product that goes on an e-commerce site.
You need high-quality photographs either from the wholesaler or best to use your pictures or even product reviews to create a high visibility listing.
Remember that setting up a markup price – that is low enough to entice buyers and high enough to generate profits – is your primary goal.
So choose your battles wisely.
4. Give Your Customer Details of Your Suppliers:
Giving the detail of your customers to your supplier is a vital part of completing the selling process.
Your wholesalers will need all the customer information you have received to deliver their orders. If you have trust issues and want to keep the customer’s information to yourself, you would have to supply the goods yourself. This would essentially destroy the dropshipping process and bring more load on your shoulders.
With that being the end of a necessary process, let’s get to another important question:
What Are The Policies Of eBay For Dropshipping?
eBay’s most prominent policy for starting a dropshipping business is not to buy products from a retailer that directly ships to your buyers.
You cannot buy from other online retailers.
Now, it might not sound that important, but the policy has a significant background and thus a substantial impact on eBay’s future.
eBay applied this policy to restrict the shipment from stores such as Amazon because it created disapproval in the customers’ minds. It was disappointing when they received Amazon products while they ordered from eBay.
Therefore, eBay made this restrictive policy, and now it can even ban an account over the breach of this policy.
Let’s take an important “what” into consideration now:
What Dropshipping Business To Start On eBay?
As explained in section 1, trending products are the best when it comes to dropshipping, so eBay follows the same rule.
From E-cigarettes to smartwatches, you can pick any product that is not huge in dimensions. Fitness products such as fitness trackers and yoga mats or smoothie blenders can work well.
There’s no hard and fast rule to select products to sell, but an existing customer base on eBay could make you successful as a drop shipper.
What is Shopify?
Shopify is an e-commerce platform to run your business of practically any size from. Working on Shopify, you set up your online stores that your potentials could visit and purchase from.
Here’s a list of 65 successful Shopify stores that you might find useful.
Can You Dropship On eBay Through Shopify?
Shopify has partnered with eBay as a sales channel where both the businesses provide access to their supplier base of over 170 million.
There’s a setting in your Shopify account to manage eBay as a sales channel.
So, is dropping on eBay worth it? You could say better now based on your learning and research findings. And that marks the end of our discussion about dropshipping on eBay.
Let’s start the same discussion about Amazon now. Starting with the most important matter for the platform, first:
How to dropship on Amazon?
There are some easy steps involved to start dropshipping on Amazon.
- Set up a seller account on Amazon. Amazon gives you two choices, i.e., to open a personal account or open a professional account. Choose the professional account.
- Do product research. Find categories that are high in demand with low competition. This step can be achieved by using different tools.
- Find the products on Aliexpress. Search for the selected products on Aliexpress and contact the suppliers.
- Make a listing of the selected products. After taking the product details, make a listing of the features that can attract buyers. There are optimization techniques to create listings that can sell on Amazon.
You can promote your Amazon listing by running PPC campaigns on Amazon.
And that’s the whole dropshipping procedure on Amazon – summed up.
Time to move to the next important question, now.
What To Sell On Amazon?
The most popular products that you can dropship through Amazon are books.
Yes, Amazon started with books. Interestingly, this niche is still significantly less competitive.
Baby products that aim to target new parents are another excellent option for selling on Amazon.
Other successful products on Amazon include jewelry dropshipping and activewear.
And that’s all about dropshipping on Amazon. Let’s head to AliExpress, now.
How To Dropship On Aliexpress?
Aliexpress dropshipping uses the Shopify account because of the integration of the two.
The process remains the same as:
1- Research products going through the available product categories, such as women apparel.
2- After that, you need to find suppliers who are not selling fake products.
3- The delivery option from AliExpress includes ePacket delivery that is free, so try to find out suppliers who are using ePacket suppliers.
4- Lastly, you will promote the selected products on your Shopify e-store through crafting appealing descriptions.
There’s a chance that the products take almost 20-30 days, as most of the suppliers are based in China. You need to give the estimated delivery time to your customers.
And that’s the whole Aliexpress process, summed up.
Now, time for a critical question for those with pressing concerns about their existence as a dropshipping business – in competition to these big dropshipping giants.
How to find the best selling products on Aliexpress?
There are multiple ways you can find the best selling products on AliExpress to give an instant boost to your business. For instance:
- Finding the products ranking in the best-selling and hot-sellers category on AliExpress for each week.
- Go through the review sites like Tollo to shop to find the best sellers.
Use products search trends on platforms, such as:
- Google trends
- Pinterest and others.
Why would people buy from my store instead of Aliexpress?
Dropshipping is all about marketing the product correctly and then providing customer support.
People will buy from an e-store because the e-store is advertising better and on more channels.
Customer support is the other point that may not be offered by the supplier in the direct dealings.
So, as long as you have a product with high sales potential and you have unique ideas to market the product, you don’t have anything to worry about.
After some crucial questions on Aliexpress, let’s get digging Facebook now.
How To Dropship On Facebook?
Dropshipping on Facebook is pretty straightforward.
If you’re already using Facebook for selling products, you need a Facebook store or a Facebook business page to increase your reach.
The basic structure remains the same where you upload products for selling from different suppliers who can fulfill the orders. With a business page, your chances of promoting your e-store increase. You can use Facebook ads to design a promotional campaign.
With that simple process, let’s cover some of the financial aspects of dropshipping on Facebook;
How Much Does It Cost To Dropship On Facebook?
Working with Facebook is easy enough, right?
But all the easy setups have a cost. While the business account set up is free on Facebook, the promotional prices are humongous.
Your ad budget should be 20 times the sales price of your product.
It makes your task rigorous to make more sales to cover all the costs. However, Facebook can prove to be an excellent market if your targeting is on-point.
And that’s all about the dropshipping process on Facebook. Let’s get to the last platform for today, with the first important question:
What is Oberlo, and how does it work?
Oberlo is an intermediary dropshipping app between Shopify and AliExpress that allows you to import products directly into Shopify from AliExpress.
Once you have the products in your Shopify stores, you can receive orders directly, without caring about owning the inventory. Your suppliers would take care of delivering the products themselves while you’d be bagging profits out of their work.
High Oberlo reviews and customer satisfaction, as well as a highly- economic Oberlo pricing plan, make it the best option available out there. However, some Oberlo alternatives are giving it a tough time.
Oberlo for WooCommerce – Woocommerce dropshipping plugin – is also an Oberlo alternative. Oberlo WooCommerce allows you to export and sell your desired products to a compatible eCommerce store and sell them.
How To Dropship On Oberlo?
A subsidiary of Shopify, Oberlo, helps you set up your e-store by connecting you to suppliers from its supplier directory. Here’s how the process begins:
1- You make a business profile on Shopify, where you can make your e-store. It leads you to use the resources of Oberlo, which is a supplier directory.
2- On Shopify, using different user-friendly tools, you build a thematic e-store. It does not require you to have the technical know-how to design an e-store on Shopify. The Shopify apps do all the designing and editing part for you.
Shopify took it to another level with Oberlo when they gathered potential suppliers for your e-store. Oberlo mainly connects you to famous Aliexpress suppliers. These suppliers send unbranded items to the buyer initially.
Once your sales volume rises on Shopify, you can customize the packaging by negotiating with the suppliers.
You need to purchase the product from the Aliexpress suppliers, and then they ship the product on your behalf.
The only thing you need to keep an eye on while using Oberlo is the e-store maintenance and finding the products that sell.
Now, for another critical question about the platform:
What Is The Cost Of Dropshipping With Oberlo?
The primary cost of starting your dropshipping business with Oberlo is USD 29 per month for registering with Shopify. There’s no subscription fee for the Oberlo plugin.
- A custom domain is available for about $1.5 per month.
- Marketing costs incurred are around USD 250 per month.
- Additional costs include acquiring plugin apps that help to boost business.
All in all, the overall monthly cost remains under $500, as discussed earlier in section 1.
And that marks the end of the section covering Oberlo.
Now, let’s quickly recap what we have seen, read, and learned in section 2 so far:
In this section, we have seen some essential dropshipping aspects – including the process of dropping shipping – on each of the following giant dropshipping platforms:
Dropshipping is a low-risk e-commerce model that is going to stay in the market for long – or this is what the dropshipping success stories suggest. A discussion on dropshipping reddits would show the process to be relatively old as well as still promising. Reddit dropshipping categories also have interesting dropshipping success stories to share.
However, with a low barrier to entry, the competition becomes fierce and sustainable growth becomes challenging. But persistently putting in the effort to achieve goals can open more significant avenues for those who strive for success.
Take the best route you can, seeking guidance from this detailed guide. But if you are stuck somewhere, feel free to contact our marketing experts. Our marketing and advertising experts have taken the drop shipping for many businesses by storm. You could be the next dropshipping win story in our archives.
Happy dropshipping 🙂