In order to fully understand what dropshipping is, I would suggest reading Shopify’s dropshipping guide, which says:
Dropshipping is a retail fulfillment method where a store doesn’t keep the products it sells in stock. Instead, when a store sells a product, it purchases the item from a third party and has it shipped directly to the customer. As a result, the merchant never sees or handles the product.
The biggest difference between dropshipping and the standard retail model is that the selling merchant doesn’t stock or own inventory. Instead, the merchant purchases inventory as needed from a third party — usually a wholesaler or manufacturer — to fulfill orders.
It also highlights the many benefits of starting an online business using a dropshipping business model, while also explaining several of the disadvantages. It’s become such a popular way to operate, as the benefits outweigh the disadvantages in most situations. In order to give you some additional real-life dropshipping tips, I asked some experts to share their best tips for those looking to start a dropshipping business.
Establish clear communication and 30-day payment terms.
I own and operate an e-commerce website and provide dropshipping services of our products to other e-commerce sites. The most important tips for a dropshipping model is clear and continual communication with the dropshipper along with 30-day payment terms.
You should expect inventory updates from the dropshipper daily or even hourly so that the product you are offering on your website is available. Along with sending the purchase order (PO) to the dropshipper, also send the shipping label so that you can control shipping costs within your business account.
This will also help prevent errors if a customer wants rush shipping. If you send the rush or overnight label to the drop shipper, it ensures the package will get sent with the proper label. Also, get the tracking number for each order and communicate that to the customer. Do not ask the dropshipper to communicate directly with your customer because they could steal your customer database.
Clarify the dropshippers return and warranty policies, making certain they match your company policies. Try to get 30-days net on your payment terms. Most dropshippers are going to require immediate payment, but it’s worth a try to get 30-day terms to help your cash flow.
Finally, sign an agreement with each dropshipper that covers all of the above points.
Jill Y. Dybdahl, LollyZip, LLC
Understand the benefits of operating lean and bootstrapping in the beginning.
I own a boutique camping, survival gear and outdoor accessory shop that operates using a drop shipping model. My best tips would be the following:
- Know your wholesale partner and understand how they operate.
- Use bootstrapping methods to grow the business initially, such as royalty free images, social media marketing and SEO to get discovered.
- Leverage family, friends, coworkers and your business network to soft launch to. They can also be ripe for reviews.
- Keep your catalog manageable to suit the enthusiast market you are trying to reach.
- Place your website link in places it would make sense. Negative reviews of competitors, forums and video content comments, for example.
Brandon Forrest, Forrest Unlimited
Pick the right platform for your online store.
Some interesting data we pulled from our marketplace:
- Most small businesses choose to build a storefront with Shopify (49%) or create a product page on Amazon (50%), but rarely are they doing both (only 4%).
- Those that go the Amazon route are looking for eye-catching images and snappy copywriting, while Shopify users are looking for SEO, web development and digital marketing.
- The closure of Amazon Webstore in 2016 has driven more small businesses to Shopify.
Abby Forman, Fiverr
Master the basics.
My number one tip for dropshipping is to find a way you can get a leg up on the competition. Since other competitors can easily dropship too, you don’t have the advantage of being the soul source of those products. Find your competitive edge over everyone else, whether it’s SEO, Facebook ads, website design or customer service. You need something that separates you from the rest – don’t expect your store to just take off by itself.
I’d also recommend focusing on that one thing until you’ve mastered it. It probably won’t work out for you if you just put up a few ads on AdWords and test out Facebook ads for the first time or hope that your on-page SEO works without link building. Everyone else has that general knowledge too and margins aren’t typically large enough when dropshipping to be average.
Also, once you get big enough, stop dropshipping. The margins will always be better if you ship out the products yourself. You can also do half and half with your own inventory as you scale.
Christian Sculthorp, Vaporizers Direct