DROPSHIPPING 2022: WHAT IT IS AND HOW TO START EARNING MONEY
Dropshipping 2022 is the perfect way to get started in ecommerce without risks.
Online sales already exceed 3.50 trillion dollars every year. So don't wait any longer and discover how to make money with dropshipping.
In this article, you will learn all about how to start a dropshipping business. We will explain what a dropshipping business is, how to find the right business ideas and how to start it properly. Don't miss it!
What is a dropshipping business?
Dropshipping is a very popular business model that consists in selling products through a supplier in charge of the storage and logistic management of the order.
The great advantage of dropshipping -some people write it as "drop shipping" or "dropshipping"- is that it does not require inventories or initial investments. Once you have made a sale, your supplier will ship their products from their warehouse, directly to your customer's door.
While a normal store has to buy the product in advance and store it until it can offer it for sale, dropshipping allows you to sell products without having to buy and store them beforehand.
Up to 33% of the entire e-commerce industry uses dropshipping as a primary inventory management model.
Dropshipping is not new. In fact, a company like Zappos started using it in 1999. And other e-commerce giants like Amazon and Sears have also been using this business model for a long time.
Anyway, if the big brands don't get your attention, look at the regular guys, like this Mexican who has made his way in this complicated sector. People like Marcelo share their success stories as dropshipping distributors every day in the different forums dedicated to the ecommerce world.
But the most important fact is this: today, up to 33% of the entire ecommerce industry uses dropshipping as its primary inventory management model.
Small-scale ecommerce entrepreneurs love dropshipping because they don't need to maintain inventory, which translates into less upfront investment. In addition, not having to manage stock also allows you to focus all your efforts on what's most important: attracting new customers.
How dropshipping works
Now that you know what dropshipping is, let's move on to our next explanation.
To start a dropshipping business you must first understand how dropshipping works:
- As a dropshipper, the first thing you should do is to set up a dropshipping store with Oberlo, where you will display the products you want to sell.
- If people like your products, you will probably make sales. Sales that you will charge directly, even if you don't have the product in your stock.
- When you make a sale, as a dropshipper you have the obligation to complete the order by sending an order to your supplier. At that moment, you have to pay the supplier for the product at cost price.
- Once you make the payment, a process is initiated whereby the supplier is responsible for shipping the product to the buyer.
- The key to this business is that the final selling price is higher than your cost price, so that margin will be the profit left for you.
Seen in this way, understanding how dropshipping works seems very easy, since it is enough to make a good promotion to make sales without advancing any money. But throughout this article you will see that not everything is a bed of roses in dropshipping.
The good thing is that if you dropship with Shopify, and use applications such as Oberlo, the management of your online store will be greatly simplified. And not only that, as it also streamlines the whole process because this application works as a connective tissue between suppliers and your online store, where products are displayed and customers can buy them.
The dropshipping application with Oberlo also facilitates the import of products directly from suppliers to the store; and helps manage any changes in inventory or prices, so that there are no discrepancies between what is displayed in the online store and the actual characteristics of the item in the market.
How is dropshipping done?
There are three key players in the dropshipping model: the supplier, the merchant or retailer (you) and the customer.
The dropshipping supplier's role includes creating products, managing inventory, shipping products to customers on behalf of the retailer, replacing defective products and restocking.
When starting a dropshipping business, you, as the retailer, sell the supplier's products on your website under your own brand name. You will be responsible for choosing and marketing those products. In addition, you will also be responsible for handling customer inquiries and complaints.
Finally, making money with dropshipping is possible because the customer buys the products directly from you as a retailer. The relationship with your supplier is kept confidential.
Can you make money with dropshipping?
I'm sure you're wondering how much you can earn with an online store.
Dropshipping can be the most profitable business model of all, since you are not responsible for manufacturing and shipping costs.
And, because you take no investment risk, if your idea fails you can quickly move on to test the next one - no losses!
So, yes, you can make money by dropshipping, as many of our successful merchants continue to do.
Step 5: Promote your dropshipping business
To make money with dropshipping, you have to promote your business like there is no tomorrow.
This is a crucial step in your business plan.
If you are going to start dropshipping, you probably have a super tight budget for your store. So here are some ideas to set up your dropshipping business with little or no money:
- Facebook advertising: it can be tempting to spend $500 on Facebook ads. But you should keep your budget low at first so you can experiment. You don't even know what your best-selling product will be at this point. Create several ads to determine which product sells best. By choosing segments that eliminate Canada, Australia, the United States and the United Kingdom, this will keep your ad costs lower.
- Content marketing: If you are on a tight budget, take advantage of content creation to increase traffic to your store for free. You will gain more visibility and position yourself as an expert in your niche.
- Affiliate marketing: If you can't afford to pay influencers, you can offer them an affiliate commission. This way you reduce the risk that the influencer may or may not be suitable for your dropshipping business.
- Social media marketing plan: Social media is a perfect and free way to gain visibility and traffic. So take advantage and don't wait any longer to use social media to promote your dropshipping business.
Step 6: Analyze your results and improve constantly
Once you have spent time creating your website, branding and marketing, you can start analyzing the results of your hard work.
For example, if you use third-party tools for email marketing or social media reports, set up automatic weekly or monthly reports so you can analyze this information regularly.
Why start a dropshipping business?
Starting a dropshipping business with no money is a great step towards entrepreneurship.
We explain its advantages and why starting dropshipping in 2022 is one of the best decisions you will make.
- You will only pay for the products you sell.
- You won't have to bear the cost of creating and shipping products, inventories, etc.
- Most of the order processing steps are automatic and require only one click.
- The dropshipping business opportunities are endless, you just need to take the first step.
Advantages and disadvantages of dropshipping
Although it is an accessible, profitable and easy to implement business activity, therefore with many advantages, it can also have some disadvantages that you should be aware of.
We believe it is important that in an article explaining what dropshipping is we also analyze what are the advantages and disadvantages of dropshipping.
The main advantages of dropshipping:
- You don't need to invest a lot of money: the initial investment in many online stores is one of the big barriers that put back many entrepreneurs. If you have little money to start with, you will love dropshipping.
- A business with less fixed costs: as there is no need to buy stock, the store will not have many fixed costs, except for the web, hosting, Internet connection ... And variable costs are linked to sales. This means that variable costs only increase when sales increase.
- It has a great potential for growth: another reason why many dropshippers get into this is because with effort and professionalism the business can easily scale and can become a great business.
- You don't have to prepare the orders: one of the most tedious and less valuable tasks are those related to the management of orders, packaging, shipping to the courier company, etc.. You avoid all this with dropshipping because your supplier takes care of it. You only have to charge your customer, pay the supplier and give the shipping order.
- You will hardly have staff costs: almost all dropshipping stores only have as workers the entrepreneurs themselves. The management is less complex; and since you don't need to have a warehouse, you don't need to have employees to take care of the management.
The disadvantages of dropshipping:
- You depend too much on suppliers: if you choose to work with a supplier that is not serious or does not fulfill its commitments, you can find yourself in trouble. Keep in mind that as a dropshipper you will be ultimately responsible for the transaction. This means that if a customer buys a product from you and it arrives late or is defective, you will be the one who will be responsible for exchanges or returns. In certain occasions, dropshippers have to keep a defective product at their own expense (because the wholesaler sometimes neglects the matter and it is up to them to return the money to the end customer).
- There is more and more competition: it is a business that has attracted many seekers of quick and easy money, so competition is fierce. And these wars between competitors usually end with price cuts in order to generate orders. In addition, in many cases, your own supplier also sells directly to the retailer, so it is possible that it will end up competing with you.
- You have to do a lot of positioning work: if you don't control search engine positioning well, don't use SEO tools, or don't have money for online advertising campaigns, it's better not to get involved, since sales -at least at the beginning- can only come by doing SEO and SEM well.
- You make less money than with a normal online store: margins are lower than if you sell products that you have previously paid for and stocked on your premises. As you make less money, you need to make more sales to get the same profit as with a conventional online store.
Dropshipping: How to get started in 6 steps
Step 1: Choose your dropshipping niche
The truth is that what you sell, matters.
So, to help you choose, we at Oberlo have created lists of trending products. Here are a few ideas:
If you prefer to use your own dropshipping business ideas instead of consulting our lists, you can use:
- Google Trends. It is ideal for finding out if the popularity of a niche over time. However, by itself it is not enough to determine whether a business is viable or not. Some niches may be on an upward trend, and not have enough search volume to guarantee profitability.
- Google Keyword Planner. Helps you see the volume of one and competitiveness of keywords within your niche. However, with the free version, you will find that the ranges are very wide, so consider paying for this or other SEO tools.
- Browse popular websites within your niche. This can help you understand what trends you should currently include in your store and see what products are currently selling best.
- Check product order volume. Within Oberlo, you can search for products based on their order volume to discover the popularity of a product. But don't dismiss a dropshipping business simply because their order volume is not as high as other products, as it may simply be because they are newer products.
Step 2: Analyze your competition
The second step to getting started in dropshipping and starting a profitable business is to find out who your competition is, what they sell and how they promote their products. There are many ways to do this:
- Search for the name of one of the products you want to sell on Google. The first ten results will give you a good reference of your competition in a certain location. If you are selling products in a different location from where you are located, you can use third party tools to collect data. Use tools like SEM Rush or Ahrefs to get information about search results in different locations around the world.
- Analyze social networks. Look for Facebook ads within a niche and social media pages for successful brands. How many followers do they have? How do they market their brand? How much of a following does their brand have? What can you do differently to stand out? What can you copy?
Familiarize yourself with your competitors' content and look for patterns on what works best. We recommend that you subscribe to your competitors' newsletter, to keep up with their content.
Step 3: Choose a dropshipping supplier to start dropshipping with
On Oberlo you can see reviews, ratings and how long the supplier has been on the platform, which will help you choose a good supplier.
When you have a list of five to six potential suppliers, contact them and ask them about minimum order quantities and shipping times.
We also recommend placing a test order and comparing results. Compare delivery times, product quality and packaging.
Step 4: Create your dropshipping store online
There are some important elements that you must take into account to make your dropshipping business. Among them:
- Choose your domain name. This is important if you want to make money with dropshipping in the long term. You can use free business name generators to simplify the process. Opt for general names to avoid having to change it in the future. Also, avoid using your name as the domain name for your store in case you decide to sell it in the future.
- Sign up for Shopify. Shopify is the most complete e-commerce platform on the market. With features, tools, resources and apps being added regularly, you will find that it is very easy to use and therefore manage a business on their platform. Also, if you have any questions, you can contact a Shopify expert, who will personally advise you for free.
- Install Oberlo: Oberlo allows you to find online dropshipping products easily. You will be able to find the perfect products for your marketplace in a few clicks.
The reality of starting dropshipping in 2022
So, there you have it! We've covered everything about how to start a dropshipping business.
Just one more thing. Getting started in dropshipping takes time and effort, so shy away from e-commerce gurus who tell you that you'll get rich in a matter of weeks. Dropshipping may be an economical way to start, as it requires little investment, but the high competition means that to succeed you have to put a lot, a lot of effort. So take heart in your adventure and get to work!
If you have any questions, don't hesitate to leave a comment or contact the Oberlo team on social media.
And remember, the best way to find out how to get started in dropshipping is to start a dropshipping business.