If you were told that a product was being drop shipped to you, you’d be forgiven for thinking a giant crate was about to parachute down onto your front lawn. In reality, drop shipping is actually just a way of shipping goods that keeps costs low for online shopping retailers.
In a nutshell, a drop shipping store doesn’t actually hold any inventory in a warehouse. In fact, they usually don’t even have a warehouse! Everything sold by the online retailer is purchased from a third party and shipped to you directly from that third party.
This results in significant cost savings for the owners of online stores and means that almost anyone with a computer and some sales know-how can start earning an income from selling online.
What’s the history of drop shipping?
Back in the day if you wanted to open a store you’d need a decent amount of capital to make it happen. For starters, you’d need a physical location, complete with a storefront, stockroom and all the overheads that come with it. Then, of course, you’d need to purchase stock, and with a bit of luck, turn that stock into profit.
Meanwhile, mail order companies were approaching things quite differently. Their thinking was, why invest in brick and mortar to display products when you can just ship products directly to the customer instead? The only catch was that the mail order companies needed to advertise their products in catalogues, and those catalogues attracted printing and distribution costs.
Despite their separate challenges, both methods worked well. In fact, you could argue that they catered for entirely different types of consumer. And as long as those customers continued to buy enough products to cover the overheads, both business models could continue to flourish.
Then along came the internet (cue menacing lightning flash outside) and with it, the evolution of online mail ordering and the birth of online shopping retailers such as Amazon and eBay. At some point along the way, someone connected the dots between affordable online stores and cheap international suppliers and just like that, drop shipping was born.
Which products work best for drop shipping?
Drop shipping often relies on an investment into social media advertising, pay per click (PPC) and other paid marketing means to put your web store in front of customers. For that reason, most drop shipping companies will typically sell products that are easily affordable to the masses to maximise the number of potential sales. Typically these products include:
Health and Beauty
This includes everything from skincare and makeup to toiletries and sanitary products. Such items can usually be bought from an international wholesaler at minimal cost and shipped relatively cheaply due to their low weight. As an added bonus, most customers will usually need an ongoing supply of these products, so it’s quite easy to develop a loyal base of repeat customers.
Clothes are in demand all year round. So if you can sell decent quality clothing and cater to the changing seasons, it’s quite possible that you will enjoy repeat orders from loyal customers long-term. Clothing is also a great niche to get involved in if you have an eye for fashion and predicting trends.
Computer accessories such as USB drives, portable hard drives and laptop batteries can often be bought at wholesale prices. This not only allows you to sell computer products for a higher profit but also gives you the opportunity to put together special bundles and deals.
Cell Phones and Cell Phone Accessories
The latest cell phones are always in high demand, and due to their slim design, they are often lightweight, helping you to cut down on shipping costs. As you might expect, you also have a great opportunity to sell related accessories such as phone cases and chargers along with the cell phones.
What are the pros and cons of drop shipping?
At this point, you might be thinking that drop shipping sounds like a pretty easy way to make money online, but like all businesses, there are pros and cons to consider.
Pros of drop shipping
- Minimal capital needed to get started, with no need to purchase or rent a physical store. Usually, all you need is a Shopify store or something similar to start selling.
- Easy to get started, with no warehouse to manage and no need to get involved in the handling or shipping products.
- Ongoing costs are low, with many drop shippers running their web store from the comfort of their home using a cheap internet connected laptop.
- Great flexibility, meaning you can run your online store just as easily from the beach as you can from a dedicated home office.
- Scaling up is easy since selling more products will only increase the supplier’s workload, not yours. So no need to worry about stretching yourself too thin if the business really picks up.
Cons of drop shipping
- Low-profit margins, particularly in highly competitive niches where other drop shipping companies re-invest their gains from lower overheads into charging rock-bottom prices to secure business.
- Frequently going out of stock due to inaccurate inventory communication from suppliers, or a breakdown in the technology, or integration of the technology that’s supposed to handle that inventory communication.
- Providing customer service for products that you’ve never used, or even handled in person. This can be frustrating for customers who quite rightly expect you to have good working knowledge of the products you are selling.
- Supplier communications, often leading to frustratingly back and forth email conversations that can go cold for weeks at a time. This is particularly annoying if you’re just starting out and need to secure a supplier to get going.
- Issues with delivery charges, such as selling a product from one supplier and an accessory from another, resulting in two separate delivery charges for the customer. Whether you opt to cover these delivery charges yourself is something you need to consider.
Successful drop shipping companies to learn from
The following online shopping companies are well-worth checking out, especially if you’re looking for some inspiration to start your own drop shipping web store.
Jeffree Star Cosmetics
This online store uses a Shopify store to sell a range of cruelty-free cosmetics and beauty products with an estimated 26,100 visitors per day.
With a wide range of clothing for both men and women and just under 25,000 visitors per day, you’d be hard pushed to tell Fashion Nova apart from any other online clothing retailer.
A polished, modern looking online shop packed with high-end cell phones and accessories is the reason why Spigen attracts around 20,000 visitors per day.
Common drop shipping mistakes to avoid
As with all business ventures, there is a lot to learn along the way. Here are some common drop shipping mistakes to avoid:
- Don’t take on a supplier that charges subscription costs. There are plenty of other suppliers out there that don’t expect this of you.
- Don’t be pushed into placing bulk orders with suppliers, even if they claim the product is the next “big thing”. As the old adage goes, if it sounds too good to be true then it probably is.
- Don’t stick with a single supplier, always have more than one for your web store, just in case a supplier goes out of business or raises their prices.
- Don’t expect easy money. There are many success stories out there, but rest assured that those drop shipping companies worked hard to establish their customer base and will have a tried and tested sales strategy.
Drop shipping definitely lives up to its hype, with real money to be made if you can establish a profitable online store. And with such a low investment needed to give drop shipping a try, it’s relatively risk-free to take a punt.
Just remember that real success still rests on your ability to capitalize on a profitable niche and target the right audience with your products. With a bit of luck though, you’ll get it right and enjoy the many rewards that come being a successful drop shipper.
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