What is Dropshipping about and How Does it Work?

While dropshipping can be a lucrative business venture, it’s not without its challenges and pitfalls. In this article, I answer ‘What is dropshipping about and how does it work?’ As well as the pros and cons of this business model. So, let’s dive in and see if dropshipping is the right fit for your online business!

What’s Coming Up

This post may contain affiliate links which may earn a commission at no additional cost to you. As an Amazon Associate, I earn from qualifying purchases. See my Affiliate Disclaimer here.

What is Dropshipping?

Dropshipping is a great option if you want to sell products online. You don’t have to invest in inventory, stock products, or manage a physical store or warehouse.

Instead, you purchase inventory from a third-party supplier to fulfill your sales orders. Not everyone has a spare garage to store boxes and boxes of stuff!

It works particularly well for high-demand products. These are products that are always sought after – I’ve created a list of these for you further in this article.

Dropshipping means you can potentially run your business from anywhere; a tropical island, an idyllic Spanish village, a co-working space…

How Does it Work?

In a nutshell, you create an online store, market the products, and handle customer service. The supplier stores and handles the products and shipping. You’re like the middle person between the wholesaler and the customer.

So, you create a platform to sell products, like a website, blog, YouTube channel, or social media channel.

Next, you search for the right suppliers for the products you want to sell. Electronics, clothing, make-up, perfume, camping gear, health products, washing machines – anything!

Once you find the supplier and the products you want to sell, you’ll list the products and sell them. The supplier ships the products.

Find the Right Niche

The trick with dropshipping is to find a niche that’s low competition. Let’s say you’re targeting solo adventure travelers as a niche. So, you’re clear about who your customer is and the types of products they need.

For example, when your customer places an order for a solo tent, you purchase the tent from the supplier who then ships it directly to your customer.

You’ll choose the types of products that help solo adventure travelers, e.g. GPS trackers, first aid kits, hiking boots, sleeping bags, and raincoats. The supplier holds the camping equipment and ships it for you.

Your role is to do the marketing, and sales, and get your platform out to the world. Facebook and Instagram reels and short TikTok videos are very effective channels to promote your business.

How Much Can I Earn?

You make money from the difference between the price you pay the supplier to the price you sell the product to the customer.

You also have to take into account the money you’ll spend on marketing and business expenses.

Tips: Check what the competition is selling the same item for and what customers are comfortable paying. You also need to decide if you charge customers for shipping or offer free shipping, which is more enticing for customers.

Profit Margin

Most dropshippers aim for a profit margin of 20% and more (after costs).

According to Bestfulfill Dropshipping Products are described as:

Low Ticket $0-$100 value items

For example, kitchen utensils, simple tools, screwdrivers, wrenches, toys, and car accessories.

Cost-Based Pricing: For low-ticket a common fixed percentage profit markup is 300%. You multiply the supplier’s price 3X (300%).

So, you buy the LED lights for $15 which includes handling fees and shipping and sell them for $45.

You could earn $0-$1,000 per month initially.

This is a popular entry-level price point for dropshippers. You have to sell a lot to make money, and you need to market a lot, but you don’t need a strong brand.

Medium Ticket $100-$200 value items

For example, clothes, shoes, homeware, and electronics. You don’t have to sell as many items but you still need to market a lot.

Cost-based pricing and value-based pricing: You work out the 300% markup but also what value the customer places on the item. This is the perceived value.

You could earn $500 – $2,500 per month initially.

High Ticket $200+ value items

For example, high-value items, more expensive and top-end clothes, camping equipment, solar panels, cars, and electronics. Your branding is important at this level.

Cost-based pricing and value-based pricing: Like the mid-level items you work out the 300% markup and the value the customer places on the item.

When I google “How much do Versace make their clothes for?” there’s no answer. People don’t want to know – they expect to pay big money for highly sought-after fashion.

Here’s a comment: “Versace makes tons of products in places like Turkey, Italy, Spain, and even China for phone cases and small accessories.” Valentino’s “production is divided between China, India, Turkey, the Czech Republic, and Egypt.” These fashion houses weigh up the quality and price of production and then the price relates to the perceived value of their brand.

You could earn $5,000-$10,000 per month initially.

Tips for Dropshippers

Use an e-mail service like Get Response or Mailchimp to capture your customers’ e-mail addresses and send regular updates. Competitions, latest products, and news. Because recurring sales are easier to achieve than finding new customers all the time.

Find suppliers who you can trust with quality and reliability.

Make sure you know the returns process for each supplier before you publish your returns policy.

Shopify recommends you create a FAQ article to answer common customer queries. Also, sign up for helpdesk software so you can easily manage e-mails and issues. For example, Help Scout and Zendesk. These save you lots of time.

Successful dropshippers have extensive experience, and knowledge and work out what strategies work for them. They also understand the power of social media marketing.

Bestfulfill says: “dropshippers know how to use PPC ads effectively, do SEO for long-term business growth, use influencer marketing, and website tools like cart abandonment.”

Popular drag-and-drop website builders are Shopify and Weebly. You can set up your online store and grow it.

Weebly offers special features to encourage upselling. These all show tantalizing, related products as the shopper progresses through the checkout process. See here where the tool recommends the best socks to go with the shoes you’re buying!…

Weebly Upsell Options - What is Dropshipping About and How Does it Work?

SEE MORE

Pros of Dropshipping

easy to set up and run from anywhere in the world
you don’t have to hold stock
save time and money not having to do the shipping and handling
low capital requirement and overhead costs

Cons of Dropshipping

you’re not the only one selling the products so will have more competition
dropshipping can limit opportunities to build a brand and differentiate your products
you may wind up competing on price

Top Dropshipping Suppliers

SaleHoo
Spocket
Doba
Modalyst
Wholesale2b
Worldwide Brands
AliExpress Dropshipping
Worldwide Brands

What are Low Competition and High Demand Products?

Alidropship (source) recommends the following low-competition, evergreen products. Evergreen products retain interest long-term. Rather than the latest trainers that are on trend this year and gone the next.

1. Solar Energy Products, like windchimes, and outdoor lights.

2. Eco-friendly Products, like children’s toys and homeware. Sub-niches are eco-friendly dog chew toys and eco-friendly pet travel products.

3. Home Office Equipment. Everyone’s working from home nowadays! Top picks are laptop tables, computer accessories (webcams, mice, etc.), and home office clothing.

4. Health and Beauty. This is a strong niche, every year. Makeup has a wide range of brands. How about vegan makeup? Luxury makeup? Makeup for sensitive skin?

5. LED lights. This may not sound very exciting but has very low competition keywords and very high interest. “LED lamps allow people to save energy and get a bright beam of light without any gases and health hazards.”

6. Bathroom Accessories. Homeowners focus on the bathroom and kitchen for renovation. Products include faucets, soap dispensers, vanity units, and sinks.

7. Kitchen Accessories. High demand and low competition. bowls, grills, air fryers, knives, oil dispensers (and so many more).

Other evergreen, low-competition products include Smart Home Devices, Gaming Accessories, Car Parts and Accessories, Toys, and Travel Accessories.

What’s Print on Demand?

Want to sell your own unique designs? One way to get around the fact that other dropshippers are selling the same products as you… why not sell ‘Print on Demand’ products! You could create an online t-shirt store that offers your own unique, modern designs.

Platforms like Printful make it easy to get started with this idea. Printful is a print-on-demand dropshipping service so you don’t have to handle the merchandise. They create and ship.

Your job is to create your designs and share them with Printful
Decide what you want to sell – T-shirts, hoodies, flip-flops, cups, etc
Printful will print your designs on your chosen products
Set up your online store
List your cool unique products
Market like crazy!
Printful ships the products to your customers
Capture e-mails and keep in touch regularly with your customers

Keeping it Original!

The beauty of print-on-demand for dropshipping is that your designs are original. You don’t have to order big bulk amounts of product – only what your customers have ordered.

You’re not competing with other dropshippers. And you can clearly brand your business and differentiate it from all the others.

Printful has been around since 2015. They have a strict quality control process and offer a 20% discount so you can order product samples. You need to see what the products are like before you sell them. This is important for the integrity of your business.

Printful also ships worldwide for you so that opens up a wider customer base.

Wrapping Up – What is Dropshipping About and How Does it Work?

Dropshipping can be a profitable and low-risk way to start an online business. With low startup costs and no need to store lots of products.

You can sell a wide range of products without the hassle of shipping and handling.

With the right strategies, a dropshipping business is a great way to generate income. You could work from anywhere and achieve financial independence.

Research your niche and look for dependable suppliers. Adapt your strategy and stay competitive in this ever-evolving e-commerce landscape. Good Luck!

Photos by Mike Petrucci, Declan Cronin, Sayan Majhi and Dane Deaner on Unsplash