E-commerce sales in the US are growing at an average rate of 1.7% a quarter. This sector is set to keep on growing, as physical brick and mortar stores see a decline in visitors and sales. So how can you tap into this lucrative market?
One way is with a drop shipping business, though it is a competitive field. To ensure your success, we give our 6 essential tips for your drop shipping business plan.
1. Pick a Niche
You will be spending a lot of time with your products, so they need to be something you are passionate about. At the same time, they also have to be profitable.
These two factors can make it hard to select something to sell. Brainstorm a list of products for your drop shipping business and decide what will be the best going forward.
2. Check the Competition
You will rarely be drop shipping a product others are not already selling. There are also huge retail giants who you will also be competing against. If a product does not have competition there will probably be a reason, such as high shipping costs, low profit or a lack of demand.
Check the competition and see what they are doing. You may be able to spot a gap in their marketing you can exploit, or learn from their mistakes.
3. Research Suppliers
This should be one of the biggest areas to work on when you get started drop shipping. Getting the wrong supplier can ruin your business.
As most suppliers are overseas, ensure you have excellent communication with them. Make sure you ask plenty of questions and get to know how they operate. You should also make an effort to understand cultural differences when doing business.
4. Have a Solid Marketing Plan
As you are entering a competitive market a successful drop shipping business needs a solid marketing plan. It should exploit areas other companies have overlooked. You may target specific demographics or have a unique slant for your brand.
5. Get a Detailed Financial Plan
Make sure your financial details are solid and cover every aspect of start-up capital, profit and loss. This is not only useful if you want to secure funding but can help you get an idea of how much you stand to earn. If you are not sure about predicted profits, then always air on the side of caution and put the minimum expected amounts.
6. Include Outside Assistance
If you are new to drop shipping, then there are several ways to automate and delegate tasks that keep your business going. You can find more info about third party assistance and automation here. Don’t be afraid to include them in your plan and state who you will be using.
Starting a Drop Shipping Business Plan
Now that you know how to construct a drop shipping business plan, do your research. You can edit and change the document as you go. Don’t be afraid to make revisions before you get a final plan.
This article is one of many to assist you. From marketing to SEO, we can help your business thrive in the digital economy, so be sure to check out our other resources before you go.
Drop shipping is a retail business model; however, it differs from traditional models in that the owner only purchases product from a vendor when an order has been placed by a customer. This eliminates the need to own or store inventory and opens up a wide range of opportunities for entrepreneurs. Drop shipping refers to a process in which products ship directly from supplier to customer, rather than shipping to the business itself first, thus streamlining the process.
The core benefit of drop shipping is that it saves on resources and time. When you don’t have to pack and ship your own products, you can devote resources to other core business processes. Working with drop shipping partners “is not only a product acquisition model, but also includes product fulfillment,” according to Shopify.
How Does Drop Shipping Work?
The drop shipping model is relatively simple. It consists of the following steps:
- A customer places an order with an online business.
- The business receives the order and forwards it to the drop shipping partner.
- The drop shipper packs and sends the products in the order directly to the customer on behalf of the business.
- The customer receives the products ordered.
Pros and Cons of Drop Shipping
Aside from the central benefit of eliminating costs associated with storing, packing and shipping products, here are some of the key benefits of drop shipping:
Lower capital requirement: Due to the nature of the business model, utilizing drop shipping helps cut typical business spending. It’s a cheap way to start a business because it keeps startup costs low. It also does away with inventory management practices, typically one of the most prohibitive costs for new businesses.
Wider product selection: Because it gives you access to new products, niche items and best-sellers, Volusion says that drop shipping “can effectively increase the variety of products your online business sells.” E-commerce incubator A Better Lemonade Stand also points out that it’s easy to diversify inventory by merely adding new items to your store.
Reduced risk: Without drop shipping, businesses take on a great deal of risk when purchasing inventory due to the potential for excess inventory or under-ordering, Volusion notes. Drop shipping frees you from purchasing items you may not be able to sell.
Flexibility: Dropping shipping allows you complete location independence. This means that you can operate anywhere that has an internet connection instead of worrying about storage space.
Scalability: You can easily scale your business up and down because you don’t have to manually fulfill each order. Selling 10 or 10,000 units requires roughly the same amount of work.
There are also complexities and potential drawbacks associated with drop shipping. Here are some of the disadvantages to the model:
High competition: More people tend to choose drop shipping because of the benefits listed above. This increases competition, meaning that businesses should have a selling point that differentiates them from the competition.
Low margins: Slim margins mean that businesses have to be able to move a lot of product in order to make enough profit. In addition, it can be difficult to execute paid marketing campaigns to attract new customers.
Limited brand control: Because it utilizes third-party shippers, drop shipping limits businesses’ ability to control branding and customer experience.
Despite these disadvantages, drop shipping is the right choice for many entrepreneurs. For example, entrepreneurs who are looking to test new products before investing a large amount of time and money into them will benefit from the flexibility of the drop shipping model. Entrepreneurs who are just starting out in e-commerce may find drop shipping to be a great business model because it is relatively low-touch and gives them a chance to gain valuable experience, A Better Lemonade Stand notes. However, it is important to note that, as is the case with all business decisions, you should think critically and understand your specific requirements before choosing drop shipping to build a successful online business.
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If you’re seeking to start an online business, you might’ve already come across drop shipping. Basically, it is a modern model for doing online business, that requires a handful investment upfront. But the question that arises in every startup entrepreneur’s mind is, will it really work for me and how to start with drop shipping?
But before we jump into further details, it’s important to find the answer of “what is drop shipping?”
What is Drop Shipping?
Drop shipping is a type of retail fulfillment method, where a store purchases the products directly from a supplier instead of stocking the products in a warehouse, and then ships them straight to the customers. Which means, the seller doesn’t need to handle the products.
All in all, this is a hands-off experience for the seller, as he doesn’t have to store the inventory in advance and it’s actually the third-party supplier who is taking care of the products. The seller is free from all of these headaches. When a customer places an order, it is sent to the supplier and the rest is up to him, as he is the one responsible for holding the product and shipping it to the customer. You only have to pay for what you’re selling. Many entrepreneurs are adopting drop shipping model, as it is hassle free and requires less money. And you can do this all sitting in home with just a laptop and a stable internet connection.
Where to Start Drop Shipping?
By now one thing should be clear in your mind that this business model is sustainable financially and in terms of its longevity. So, the next big question is how to start with drop shipping?
All you need is a website that can host your online store, where you will list the products and get the customers on your website to sell the products. This might sound a bit difficult, but in this day and age, there are a lot of different websites that offer to host your online stores and are reliable as well. Choosing an ecommerce platform like Shopify can ease your burden a lot, as it offers more than just product functionality with its daily user traffic. If you don’t have an idea how to get it live on the board how your website will look alike, just check the following Premade Shopify Stores. We’ll guide you through to make sure you’re not only on the right track but also end up on the right platform to start you drop shipping business. Let’s dig deep in it.
Get Started with Your Shopify Store
As we have discussed above, for every drop shipping business, building your website is a must. No drop shipping business can get started without a dependable platform and Shopify provides you that platform. Being the most widely known ecommerce platform, Shopify offers a lot to its sellers. Being purely a drop shipping platform, it is user friendly and easy to use with its packed features. Adding up to its online store builder, it also allows you to handle the sales, payments and marketing.
Once you’ve decided your niche and are ready to start with Shopify, these are some of the important guidelines you would be following to make your Shopify website start reaching the customers’ screens.
1. Start with A Shopify Account
First step should always be to create an account, so go to the website of Shopify, and click on “Get Started” button. When you’re creating an account for Shopify, it’s better to have the name of your store in mind as well, as this is going to be the first thing asked while creating the account. Shopify will ask for some further information to set up your initial account.