Are you looking for a way to start selling online?
Do you dream of becoming an internet entrepreneur but fear the commitment?
Drop shipping is an ideal way to start with selling online. It doesn’t require you to hold any stock, invest large sums of money into the business and allows you to run it quite easily alongside your other commitments, a full time job or a more flexible lifestyle.
You can start the shop in your own capacity, time and easily learn as you go along. You can experiment with different markets, products, manufacturers and, you actually don’t have to be right the first time.
All because you actually don’t have to put any money down on stock. In a drop shipping business you are free to do what you want.
But, there is a downside too. Because of this freedom, you are prone to fall into the many of drop shipping traps which can delay or even prevent your online success.
Let’s look at some of them in detail.
Since you don’t need to invest in stock, it is tempting to try different products to see which one works best on the market.
You can start off in one niche and quickly move to another if you feel the first one doesn’t sell as well you hoped for.
And, here is where the problem lies.
Trying and constantly changing products and moving markets means that every time you pretty much start from scratch. You lose time and ultimately, money as well.
And even if a particular product works, your success will most likely be accidental, as opposed to being built on a solid business research and knowledge. Ultimately then, so will be your entire business. And such businesses generally do not last long.
Even if you select your niche or product range through careful research, you are still prone to make a big mistake with it.
It is a common misconception that you need to build a large store, offering products from every producer on the market.
Unfortunately that’s not the case, yet such thinking can lead to many future problems.
Naturally, it is good to have a good selection of products in your store, however, you don’t need to offer every single one.
Many manufacturers and products will not meet your business criteria. They might be allowing for too low margins. Or their shipping prices are too high. The product might not be to the highest standard or their return process leaves a lot to be desired.
Instead of contacting every manufacturer, start by working out a criteria for accepting a product to your store. I personally look at price, margin, product popularity, return process and shipping and accept only products that pass those criteria.
This means that I also don’t offer the entire range of every manufacturer I work with, only those products that fit my criteria.
Shipping can become a real killer for a drop shipping business.
First of all, these days customers expect free or very low cost of shipping. Yet, in a drop shipping business, you hold very little control over it. Since it is not you who ships the goods out, you have hardly any say over what shipping company is used nor can negotiate your own prices with shipping companies.
Also, manufacturers use different shipping companies to ship their goods out. This can lead to many discrepancies between the price you are charging your customer and what you actually pay for shipping.
Some manufacturers offer a flat, per product shipping rate. This is an ideal situation in which you always know how much you pay for the goods to be shipped out.
However, others will use actual prices from carriers like UPS or FedEx. This means that the price is calculated based on the weight and the size of the package as well as the destination it can go to.
The biggest problem with that is that your manufacturers might ship from different locations, meaning that the cost of shipping to your customer will be different in each case.
The most common solution Ecommerce stores owners employ in such situation is putting up a search on UPS or FedEx site (depending on which one your manufacturers use) to find out shipping cost for various delivery zones and estimate an average price.
Naturally,the danger with that approach is that if your estimates are wrong, your shipping cost can eat up your profit.
The second most appealing aspect of drop shipping, after lack of investment is the ability to automate a lot of tasks in the business.
As mentioned already, since your only asset is the website, you can, in theory, run the business from anywhere.
However, it is tempting to put too many tasks on autopilot.
It is one thing to have your emails, follow ups and marketing automated. In most cases, there is hardly anything wrong that can go with that.
However, anything relating to processing the order should be done by hand, regardless of how tempting automating it might seem.
Why? Because only by processing orders by hand you can spot fraudulent ones and prevent them from being fulfilled. By automating the task you can easily have such an order slip through the system resulting in a loss to your business.
Lastly, drop shipping businesses are notorious for poor customer communication.
However, the fact that drop shipping is a business that can be run on a side doesn’t mean that you should distance yourself from your customers.
Customers make no distinction between drop shipping and more “traditional” Ecommerce company. To them it is all the same and if they have a question, they will want to get in touch with you.
You shouldn’t avoid customer contact. Your phone number should be clearly visible on the site, so should your email address. If you can, you should offer some form of live chat or other system to interact with visitors to your site.
Don’t neglect your customers as in many cases, it is the customer support, pre and post purchase, that convinces them to buy from you.
Regardless of all the benefits of the drop shipping model, one thing you should never forget is that a drop ship store is still a business and you should treat it as one.
It doesn’t matter whether you run it as your full time job or on a side of other commitments, you should make every decision regarding your business with one thing in mind, profit.
That also means not taking any shortcuts and planning your every move carefully.
How about you? Are you planning to start a drop shipping business? What are your expectations for it? Leave your comments and questions in the box below.