What is Dropshipping?

What is Dropshipping? It is a supply chain management method in which the retailer does not keep goods in stock but instead transfers the customer orders and shipment details to either the manufacturer, another retailer, or a wholesaler, who then ships the goods directly to the customer. [Source – Wikipedia]

In other words – it is a passive income opportunity which does not require much upfront investment.

4 things you need to know

What is dropshipping all about?

Every day more people are ordering products online. Many people are even doing their grocery shopping from behind a computer screen, but we often don’t think of where those products come from or how they get to our door. Dropshipping is just one of the ways in which an online retailer helps to bring products from your computer screen to your home. In this article, we will go over 4 things you need to know about dropshipping, but first what is it?

What is dropshipping?

Imagine a giant warehouse with endless shelves and boxes and people with forklifts hustling about and moving those boxes around. Now, as a person who wants to sell those products, imagine if you didn’t have to pay for the overhead of the warehouse or the cost of the forklifts or even the salaries of the individuals moving those boxes. That’s what Dropshipping is.

Dropshipping helps an online retailer to sell products without having to hold inventory. Instead, products ship directly from the manufacturer.

Fundamentals of dropshipping

So there are some fundamentals

  • A dropshipper can be either a retailer or a wholesaler.
  • An agreement is reached between the dropshipper and the manufacturer that allows them to to use their products for their online retail or wholesale store.
  • This agreement may include a dropshipping minimum or an upfront fee.
  • Dropshippers pay a certain percentage of every sale to the manufacturer.
  • A dropshipper can use products from multiple manufacturers from around the world all on one online store.

4 things you need to know before you start!

#1 Finding products is easy, Finding Quality products isn’t

Dropshipping is fairly popular in today’s day and age. Many people have caught on to the idea of generating passive income through dropshipping and so the market is now flooded with individuals trying to dropship through their online store. Because the market for these dropship products is so high, it had made finding a quality product –especially one’s not being sold by dozens of other online retailers— extremely time consuming and difficult.

Places to look for dropshipping products:

  • Giant online dropshipping stores such as Oberlo offer their products to be dropshipped from your store for a subscription fee and a share of the revenue. Think of this as your all in one service.
  • Ali Express is a wholesalers’ paradise that also includes manufacturers who are willing to dropship products.
  • There are website that will also offer you directories with the names of legitimate and trustworthy dropshipping manufactures. This enables you to explore the various products these manufacturers have to offer and contact them individually. This can be an expensive choice though and can run you around $200/yr for access to the directories.
  • Lastly, you can find a product you like yourself and contact the manufacturer directly.

#2 It is best to find your own manufacturer

The majority of people who want to start their own online retail or wholesale store probably don’t have the money for a subscription service or for the names of legitimate manufacturers. You’re in this to make money, right? Not spend more of it!

Finding the right product on a subscription service can be a gamble, even after you have shelled out the cash for the service, you might not find what you’re looking for.

For these reasons, it is best practice to find a product you like first and then trace that product back to its manufacturer. This is difficult, but far more rewarding as you can align products with the theme of your site and be proud of your sales.

#3 Be professional

When sending inquiries to manufacturers, be professional:

  • Create an email address that jives with your website name. If your name is John Smith and you have a website called “Plymoth Rockstar”, make sure your email is something like jsmith@plymothrockstar.com.
  • When writing a letter, make sure your grammar is correct and you spend some time telling the manufacturer about who you are, what your selling, and why you are a good fit for a business partner. Include details like the current date, your business and web address’, and contact information.
  • If you have a good resume, you may wish to include this in your email as well so that the manufacturer has an idea of your overall professionalism and experience.

#4 Beware of dropshipping from China

If you’re selling products in America, dealing with manufacturers from China can be a huge hassle. Here is a list of just some of the problems you may encounter when dealing with Chinese manufacturers:

  • Language barrier: sometimes your manufacturer may interpret what you’ve said incorrectly and so your products aren’t shipped correctly or you get charged for the wrong thing.
  • Shipping can take a  long time: China is half-way around the world and because of this, products can take a long time before getting to your customer. This can aggravate customers and cause you to lose sales.
  • What happens if something goes wrong? If the wrong product was shipped accidentally, this can cause real concern with your customers. Unlike with an American Manufacturer where the product can be reshipped and returned in just a few days, a product shipped in error from China can take months for the right product to get into the hands of your customer.
  • Tariffs: depending on your agreement with your manufacturer in China, you might have to be concerned with tariff charges. These import charges can become your responsibility and they may not even be discussed, so be cautious of this and make sure to account for them.

Dropshipping can be a great business and source of passive income if set up correctly. Take heed of what you need to do to set up your online store and dropshipping business ahead of time and things should go smoothly later down the line so you can focus more on sales and growing your business.

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