Dropshipping is one of the fastest ways of making passive income.
I know because I’ve done it myself and I recently owned a store which at one point was grossing $800 in daily revenue.
Why should you consider launching your own ecommerce business?
Ecommerce takes about 1-2% of physical retail sales (right now it constitutes about 17% of total global retail sales).
This is bound to accelerate even more because of shifts in buying behaviour due to COVID-19.
I’d be lying if I told you that dropshipping was simple.
You need to manage many things from product selection to marketing to customer service.
It is fairly hands on and time intensive but very rewarding if you are willing to put in the work.
I want to share with you my experiences being in the trenches on what worked and provide you with the best tools, frameworks and processes.
Let’s get to it.
Why Should You Trust Me?
I’ve built a successful store that made $12,327.97 in revenue in a single month at its peak.
This is after just 6 months of learning about the dropshipping model.
I’m not going to disclose the niche and store but I’m sharing a screenshot of the earnings and statistics.
At its peak, my store was making almost $800 in revenue in a single day.
Ultimately, I decided to stop it because of fulfilment and logistics issues due to COVID-19.
I learned many things on my journey and in this guide I will share with you the exact tricks and tactics that I used for this store.
If I can do it you can as well.
But before we get into the “how to”, it’s important to understand the dropshipping business model.
(If you want to skip the “why” just head over to the section titled “1. Select Your Niche”).
What Is Dropshipping?
Dropshipping is when you order an item from a third party supplier and have it shipped directly to your customer.
The traditional brick and mortar model is storing the inventory in a central location, waiting for the customer to come and then fulfilling the request on the spot.
Consider Walmart – one of the largest brick and mortar retailers in the US.
A customer walks into Walmart, buys a packet of crisps and also some home appliances, pays and walks out.
Walmart has to store and display these items in a physical location, wait for a customer to come in and then fulfill the order.
Dropshipping differs in that you do not need a physical space to store your inventory and instead of a person visiting your physical store, they instead visit your website.
Here’s how the dropshipping process works in a nutshell.
- A customer visits your site online
- They browse your product catalogue and find something they like
- They buy the product and place the order through your website
- You get a notification and tell the supplier to automatically ship the product to the customer
- The supplier ships the product and provides the customer with a tracking number for peace of mind
In no instance do you touch or manage the fulfillment of the product. You simply connected a willing buyer and a seller – and you get paid in the process.
How Much Money Can You Make Dropshipping?
With the dropshipping model you can earn in the realm of tens of thousands of dollars monthly in revenue at a profit margin of 20-30%.
Assuming you dedicate 2 – 3 hours a day learning about product selection and marketing
Within a year you could be making $2,000 – $3,000 a month in net profit.
It took me around 6 months to go from zero knowledge to eventually making my first successful dropshipping site that pulled in around $13,000 in revenue at its peak in a month.
I was selling plush toys and cute phone cases.
I’d say that this is still in the lower end of the range as there are some very successful stores such as InspireUplift.
Based on their traffic, I estimate they are doing in the hundreds of thousands and potentially millions of dollars in monthly revenue based on their traffic.
How Much Money Do You Need To Start Dropshipping?
You would need about $500 – $1,000 to start dropshipping.
Most of this money would be going to paid advertisements.
You could in theory rank your dropshipping website organically through keyword research and optimization – however, this is not the typical route for dropshipping.
For my store I used and tested paid advertising on Facebook as well as Google Shopping to get my products noticed.
Marketing will probably be your highest cost because you do not need to purchase any stock upfront.
You may think that paid advertising is a waste but if your marketing costs are lower than your margins you can still make a profit.
Ready to get started? Check out Shopify – it is the best platform for getting a store up and running. I’ve been able to set up stores with it in just a day.
Why Should You Consider Dropshipping?
Dropshipping is a very attractive online business model for generating passive income because there is virtually no barrier to entry.
As long as you have a small amount of capital you can launch your own dropshipping business from anywhere in the world. Here are some of the pros.
1. Highly scalable business model
Compared to traditional brick and mortar stores, you aren’t limited by the physical size of your warehouse.
As long as your website servers can handle it, you can scale your traffic almost to infinity without worry.
This is doable especially if you are running paid traffic like Facebook where you can access 2 billion potential customers.
Even if you had a massive supermarket, you could not receive this many visitors.
2. Low startup costs
In addition to scalability, you don’t need to buy stock upfront or store this stock in a central location.
No need to worry about storage fees for dead inventory.
You also don’t need to manage shipping fees and logistics (since that is included in the supplier price and services).
The only thing you need to pay upfront is the domain and hosting of your website (costs around $30 or less per month).
Your biggest cost will be marketing your website through paid advertising (Facebook, Google, YouTube).
3. Easily change product
With dropshipping, you don’t need to invest money upfront buying inventory.
This means that you can test multiple products simultaneously and even change your product if it doesn’t click with your customer base.
You can even use dedicated dropshipping product sourcing tools to see what products are trending on marketplaces such as AliExpress.
This way you don’t need to act on hunches and can instead rely on real sales data to make informed product decisions.
4. Generate a passive income stream
Passive income is when you don’t need to put in much daily effort to maintain a consistent stream of cash.
It will require some upfront time investment as well as diligent monitoring (especially if you are using paid traffic).
Dropshipping can be very passive because you do not need to manage any of the day to day logistics.
Instead, everything can be managed from within your computer and if you have detailed standard operating procedures (SOPs), you can even outsource this to a virtual assistant (VA).
5. No need to manage inventory
You don’t need to worry about ever going out of stock or paying excess inventory fees when dropshipping.
Since the stock is shipped directly to the customer from the supplier’s warehouse you don’t need to buy the product and ship it to a central location.
Inventory fees can be high especially for other ecommerce business models like Amazon FBA (they can charge upwards of $1 per month per product for long term storage costs).
You can forego all these issues with the dropshipping model.
What Are The Cons Of Dropshipping?
No business model is the perfect and as is the case with dropshipping it has its fair share of cons. Here is a list of some of the most common disadvantages of the dropshipping model.
1. Lower profit margins
One of the benefits of ordering products in bulk is that your per unit cost is much lower – this makes your profit margin much higher.
In the dropshipping model, because we do not order in bulk we typically have to pay the supplier a higher rate.
This is one of the hidden costs of dropshipping.
In order to make the same amount of profit per item as a brick and mortar store you would have to sell more products – or you may have to charge the end customer a higher price.
2. Harder to do quality control
In general, it is more difficult to assess the quality of your product unless you have a very close relationship with your supplier.
On AliExpress, it is difficult to verify product quality and logistics reliability unless you order and test the product yourself.
When you have multiple products to test, this can be a time consuming process.
You usually only find out about product defects after customers are using it and from them.
This is not good for your brand or image.
3. Shipping times are long
Because you are typically sourcing products from countries such as China, there is a long product lead time – typically at least 2 weeks or more.
This can discourage customers from ordering from your website.
The only way to prevent this is to provide them with constant email updates as well as a tracking number to reassure them.
You will also be competing with the likes of Amazon (who have next day delivery with Prime) – so you need to differentiate your product.
4. Competitors can saturate the market
Dropship is arguably a churn and burn business – when you find a product that is selling well, competitors are likely to copy you and squeeze profit margins.
This means that every 3 – 6 months you need to find a new marketing angle or replace your product to be competitive.
This means that the model isn’t as passive as you think.
Trendy products such as the “fidget spinner” die out quickly and if your store is branded around these kinds of products, it’s difficult to pivot once the fad passes.
5. Not as passive as other online business models
Compared with other models such as blogging or affiliate marketing, you need to provide excellent customer service with dropshipping.
This could mean replying to emails, refunding or resending products back to the customer.
If you don’t know how to outsource these aspects of your business properly, you could spend all your time on mundane tasks.
This means that even though it is more profitable than most online business models, it is not the most passive.
Who Is Dropshipping For?
Now that we’ve gone through the pros and cons, you should have a better idea if the dropshipping business model is suitable for you.
It is perfect for people who don’t have a lot of cash to burn and who want to get their feet wet in the online ecommerce space without having to worry about the more nuanced aspects like fulfillment and inventory management.
It is not for those who want to have a truly hands off passive income stream as it does require consistent maintenance and oversight – especially if you are running paid ads. If you are looking for a set and forget method this isn’t the right model for you.
Digitization and the spread of social media has provided fertile ground for savvy marketers to enter the dropshipping space.
You are only limited by your creativity.
Find the right product, angle and audience and you will be handsomely rewarded.
Dropshipping is a great business model for these groups of people.
1. Digital Nomads
Digital nomads are those who are location independent – they are typically freelancers who work with multiple clients across multiple projects billing their time and expertise out.
If this is your profile then dropshipping is the perfect model for you.
With dropshipping, you no longer have to trade time for money.
Instead, you are investing in a digital asset and a skillset that can make you money over the long run.
You don’t even need to touch the product or manage inventory and can work from wherever you want.
You will still be able to maintain your remote working lifestyle but instead you will be your own boss and dictate your own hours.
2. Budding Entrepreneurs
If you are looking to make your first buck online and want a low cost business that you can sink your teeth into and scale then dropshipping is perfect for you.
The only thing you need to start is a domain and a website – as well as hard work, determination and grit of course.
Since the costs to create a business are so low – you don’t need to put up a lot of capital upfront. This makes it perfect for budding entrepreneurs.
You also don’t need to concern yourself with logistics, fulfilment, import and export taxes, customs fees since that is usually taken care of by the supplier.
This allows you to sharpen your skills on the two most important things – product and marketing.
3. Sellers Looking To Enter Multiple Niches
Dropshipping gives you the flexibility of testing multiple products (often simultaneously if you have a big budget).
This makes it perfect for sellers looking to enter multiple niches. You aren’t restricted by the amount of inventory you hold but by your creativity.
If you are selling kitchenware for example, you could expand into multiple sub niches such as blenders, knives, mandoline slicers to name a few.
Because your store is themed around kitchenware, you could enter each of these markets without adjusting your branding or marketing.
4. Experienced Retailers Looking To Validate An Idea
Say you are an experienced retailer and have a product to sell but you are not sure if it will work in your marketplace.
It wouldn’t be wise to buy the product in bulk and rent out a warehouse. After all you don’t know if it will sell.
Setting up a dropshipping store around the product targeted at your local market will allow you to see demand for it.
You don’t even need to fulfil the product if it’s not in stock – you can instead use the store to validate your idea and refund customers after.
5. Side Hustlers
According to Fortune, 49% of Americans under the age of 35 have a side hustle.
You won’t need to leave your house, manage inventory or even leave the comfort of your laptop. It is an excellent way of making money on the side.
The best thing about the model is that it does not cost a lot to get started.
There are also many fantastic tutorials and online videos where you can learn marketing techniques and strategies for your products.
So you are only limited by the amount of effort you can put in.
1. Select Your Niche
Before sourcing products it’s important to choose the right niche to enter. Here are certain niches that are evergreen and always do well (with some examples):
A very competitive but very rewarding niche.
People always strive for great physiques and in this broad niche you could sell a variety of products including protein powders, dumbbells, general fitness equipment.
You can even choose to niche down into yoga mats.
One very successful example of a fitness dropshipping website is Gymshark, they started off in 2012 doing dropshipping using Shopify but then expanded into a real brand once their site took off.
They primarily sell mens and womens gym clothing as well as other fitness accessories.
In 2019, Gymshark earned $231M in revenue and made $24M in profit.
Selling general clothes and accessories can work well – after all people always need to change their style.
One way of tackling the apparel niche is niching down further – think shoes.
Then think even further – think unbreakable shoes for heavy duty.
Enter Indestructible Shoes.
Indestructible Shoes started off as a dropshipping store but now makes an estimated $24M per year in revenue.
They differentiate themselves through their unique marketing angle – there is a Facebook video where the shoes can be used to walk on top of steel spikes.
You can expect impressive returns when dropshipping beauty and fashion products.
After all, who doesn’t want to look stunning?
Under the beauty and cosmetics section, there are lots of products you could sell – foundation, extensions, and eye shadow kits.
The cosmetics industry alone is projected to be worth a staggering $716.6 billion by 2025.
Established in 1997, FragranceNet has been offering dropshipping and wholesale options to consumers for more than two decades.
They deal with men and women’s perfume, as well as skincare, haircare, and makeup products.
In 2019, the personal care retailer, FragranceNet, raked in approximately $193.7m in global net sales.
It comes as no surprise that gadgets are some of the bestselling dropshipping products.
Products under $10 that are either cute or helpful to the owner sell well.
It’s a big plus if they are small in size as they’ll be cheaper to ship to your customers.
Such gadgets include keychains, smartphone covers, and silicone baby glove teethers.
After moving to Sydney in 2011, Chris Peters found Google Maps very handy for moving around the unfamiliar city.
He loved cycling, but there were no suitable mounts to attach his smartphone on the bicycle handlebars.
He decided to make his own, and Quad Lock was born.
The company deals with phone mounts of all kinds in addition to accessories such as chargers and sensors.
The Shopify dropshipping store, Quad Lock raked in an estimated $6 million in 2019.
Dropshipping pet products is a lucrative but competitive venture.
Pet owners prefer purchasing from familiar stores, so you’ll have to find a unique angle over your competition.
Use social media to create a welcoming community around your brand.
Some of the products you can deal with include pet knit socks, indestructible chew toys, and rechargeable LED flashing collars.
In 2008, Rashi Narang founded Heads Up For Tails, a pet products company based in India.
As the pet supply store grew, the company noticed an increase in demand from locations where they didn’t have stores yet.
After weighing their options, HUFT chose Shopify as their e-commerce platform, began dropshipping and the rest is history.
Today the HUFT website has a wide range of products such as leashes, grooming products, and treats.
In 2019, HUFT minted an estimated revenue of $4.5 million.
2. Source Your Products
After niche selection, the most important thing to consider when dropshipping is product sourcing.
If you want to compete with the likes of Amazon you need a stellar product in order to differentiate yourself.
This is especially true if you do not have a strong brand to begin with.
Here is a list of factors that you should consider when sourcing your products.
When thinking about suitable dropshipping products for your business, pricing might be the difference between an instant success and a slow-growing upstart.
To make the most profit, pay close attention to the retail and wholesale prices.
Lower prices boost sales at the expense of profit margins.
Higher prices, on the other hand, bring in more profit at the cost of sales.
Over time you’ll find just the right balance.
The size and weight of items directly impact the prices of your products.
A bulkier and heavier item leads to:
- Higher shipping fees
- More packaging charges
- Increased handling charges
- A higher risk of shipping damage
When you venture into dropshipping, start with smaller products to avoid the hassles associated with bigger and heavier products.
The profit will be smaller, but you’ll have less to worry about.
3. Cross-sell & Up-sell Potential
Cross-selling and up-selling are key marketing tactics that when put in place, can boost your revenue by up to 30%.
An excellent example of cross-selling would be selling smartphones alongside phone cases or selling digital cameras with memory cards.
Up-selling is very much psychological. You draw people’s attention with a low priced offer then show them better products at a higher price.
For example, Solostream charges $59 for one theme compared to $99 for access to all their themes.
Getting full access for an additional $40 sounds like a great deal, right?
Both techniques also have a couple of benefits as illustrated below.
4. Repeat Purchase
Selling short shelf-life products is sensible because customers will come back for more, leading to more sales and building client loyalty.
While you may buy some coffee or toothpaste every so often, it will be a while before you purchase a new television or washing machine.
Keep this in mind while choosing the products you intend to sell. Repeat purchases lead to larger customer lifetime value over time.
5. Impulse Buy
Inducing impulse buying is a fantastic way to boost your sales.
Have you ever been grocery shopping when you decide to chuck in that chocolate bar into your shopping basket? That is impulse buying.
Not all products are applicable to impulse buying. You’ll not just walk into a store for some Haribos and walk out with a rendering computer.
So, what characteristics should the impulse products have?
They should be:
- Low cost
Let’s go beyond the theory and ask ourselves – how do we actually find the best products?
There are a range of product sourcing tools specifically geared towards dropshippers.
Here are some my top 3 based on experience:
A. Seller Pulse
Seller Pulse is a fantastic tool that allows you to search the AliExpress database directly and discover products that work which are not oversold but trending up.
Their software allows you to monitor up to 100 products and set sophisticated filter criteria.
For example, you can filter the entire universe of products by items which have sold at least 500 times in the past week but have fewer than 5000 sales over its lifetime.
This way you can pick out products before they become saturated. It is one of the best data driven tools out there.
They have a free plan which limits you to 40 requests per month but you can upgrade to the $39/month plan for unlimited searches.
DropPoint is the next on the list.
Instead of going for a product centric approach – DropPoint focuses on the Facebook ads which receive the most engagement.
The product search features are not as sophisticated as Seller Pulse but I found my $800/day product by scrolling on the platform. So there are some hidden gems.
Everyday it provides you with a list of product ads which are trending the most on Facebook.
This is great for inspiration and you can even “steal” these ads and modify them to your liking if you are pushing the same product.
Price point wise it is much cheaper than Seller Pulse at just $5/month so it is a complete bargain if you manage to find your winner. It does not have a free option unfortunately.
C. AliExpress Dropshipping Center (Free)
If you are on a budget but want a good product research tool then look no further than AliExpress Dropship Center.
This uses the latest data from AliExpress so that you can source products and even arrange them by order amount as well as price.
You can even distinguish between which products are being sold via dropship vs normal channels and have direct access to customer feedback and reviews so that you can verify quality.
I highly recommend this tool if you are just starting out and do not want to shell out on expensive software.
The best thing is that this is a free tool.
3. Vet Potential Suppliers
Once you have decided on your product – it’s important to gauge who the top suppliers are.
This step should not be neglected.
Whilst it is difficult to vet suppliers online without physically being onsite, I will provide you some tips and factors that you should look for to increase the likelihood of finding the perfect supplier.
1. Compare Against Competitor Prices
It’s important to compare prices between different competitors.
The lower you can buy your product, the more profit you can make or the lower you can push your price down to make your product attractive.
Be careful though.
You want to ensure that you have a quality product.
If all competitors are priced in the $30 range but you see a product that is $5, it is most likely a poor product.
Look for a balance between price and quality.
Establish what price ranges are the norms for your specific product.
Select the most appropriate competitor to supply your product.
2. Research Public Feedback
When you assess products on Amazon, you’d most likely look at the quality and number of reviews.
Public reviews are a good indicator of product quality and if the product really delivers on its promises.
If you are looking on AliExpress, also check the 1 star reviews – if they mention that the product has not arrived then most likely the supplier has a logistic issue.
If these reviews mention the product breaking then the product most likely has a quality issue.
Look for anything above a 4.7 star on AliExpress since some reviews can be faked.
3. Test Level Of English & Responsiveness
When sourcing for a supplier, what you want is a partner with a high degree of customer responsiveness.
Ideally, you want a supplier who can respond to queries around the clock.
Look for suppliers who can respond to your queries in under 24 hours – this way you can fix any issues with them quickly.
You can test this by asking them an initial question about their product before purchasing and seeing how quickly they get back to you.
You also want to find a supplier with a good command of English for smooth communication.
Miscommunication with your supplier might lead to an expensive mistake.
That’s something you want to avoid, especially when you are just starting.
4. Ask For Sample Tracking Numbers
Honesty and integrity are some of the most important virtues you can have in business.
Unfortunately, not everybody in business is as honest as they seem.
Some suppliers dupe clients into thinking that they use the agreed-upon shipping method while they are in reality using slower and cheaper methods.
Make it a habit to always check the tracking numbers to ensure that you’re getting what you paid for.
You can ask them for sample tracking numbers from previous parcels they have sent and use the Parcels website to check how long it took.
5. Order Product Samples
Dropshipping allows you to sell merchandise to your customers without holding any inventory.
The best thing about dropshipping is also its biggest weakness.
One of the disadvantages of dropshipping is the inability to monitor the quality of products you are selling.
That is why you should always ask for product samples from potential suppliers to test the products yourself before you start selling.
This also allows you to test the supplier’s shipping time so you can set realistic expectations for your customers.
4. Design Your Store
Have you ever visited a store and never went back just because of how messy it was?
That also applies to e-commerce websites.
The cleaner your store, the easer it will be for customers to purchase items.
Your store has to be:
- Quick loading
- Easy to navigate
- Mobile-friendly (This is very important)
Here are the main steps for setting up your store.
1. Buy Your Store Domain
Choosing a domain name is the first step in getting your website up and running.
Choosing the right domain name is crucial for your success.
In addition to defining your site, the domain name also communicates key information to both humans and search engine bots.
For the best results, pick a domain name that is:
- Short and clear
- Creative and memorable
- Simple to read and pronounce
Be sure to include one or more keywords that define your site in the domain name.
You can use a domain name generator such as Namemesh to help in brainstorming.
2. Select Your Theme
Selecting a slick theme will have a noticeable effect on the conversion rate of your website.
There are a couple of things you should keep in mind when picking a theme for your web store.
The theme should:
- Be easy to install
- Have a high degree of customization
- Be Responsive and work well with devices of all kinds
- Be light and compact with faster load times
- Look professional and classy
- Have support and regular updates
Since the number of dropshipping businesses keeps increasing daily, you need to stand out from the rest of the competition.
A website is one of the most effective marketing tools for a dropshipping store, get it right.
When using platforms such as Shopify, you can use the free Debut theme to start.
I’ve seen 6 figure dropshippers using this theme on their stores so it is proven to convert.
3. Add Products To Your Store
After setting up your store and with a product and supplier figured out, it’s now time to add products to your store.
Instead of just using the stock photos and product descriptions of your supplier, take things into your own hands to position your business for success.
Consider taking professional photos of your product if the quality isn’t up to par.
You will need to create intriguing and detailed product descriptions paired up with the best photos you can find.
You’ll also have to include the delivery times and incorporate an order tracking system to reassure your customers.
Appropriate pricing and offering free shipping will give you an edge over your competition.
4. Create Abandoned Cart Email Sequences
Abandoned cart emails refer to automated follow-up emails sent to potential customers who exit a website after adding products to their cart without making a purchase.
When correctly done, automated abandoned cart emails bring in a large percentage of sales to web stores.
A good strategy is sending multiple emails.
One email per day for five days works just fine.
Clients who receive multiple follow-up emails are more likely to checkout than those who receive only one email.
Just be careful not to spam them.
In my experience, offering time based personalized discount coupons increases conversion rate.
12% of my store’s revenue is from abandoned cart email sequences.
5. Install Facebook Pixel
Over the years, Facebook has created various tools to help markets.
One of the most important ones is Facebook Pixel.
Facebook Pixel is a code that tracks visitors to your site. This enables you to run highly targeted marketing campaigns.
If you are planning to run Facebook Ads, you should have the Pixel installed beforehand.
Facebook’s tracking pixel enables you to:
- Track how many leads, registrations, and sales your ads generated
- Know how much revenue the sales brought in
- Create audiences for retargeting
- Come up with lookalike audiences
- Optimize Facebook for conversions
- Run dynamic product ads
5. Facebook Ad Strategy
After setting up your website and adding products, now it’s time to start advertising your products.
I chose to use Facebook as an advertising platform because of it’s massive reach (2.45 billion active users) and ability to hyper target specific audiences (using custom audiences).
I’ve also personally seen success on this platform on my store so I want to share with you the methods I’ve used.
Advertising without a strategy is like printing dozens of flyers, tossing them off the window, and hoping somebody will catch them.
There are a couple of essential things to do even before setting up your first ad.
1. Set Up Your Facebook For Business
Creating your Facebook Business page is pretty simple.
First, you have to log in to your personal Facebook account.
Don’t worry about this, as your personal account information will not be accessible to the public on your business page.
Once you have logged in, go to pages then follow the few steps.
Step 1: Select the type of page you want to make (Business or Brand)
Step 2: Enter your business information and read Facebook’s policies
Step 3: Add profile and cover images
Step 4: Create your username
Step 5: Add your business details (Description, contact, location, etc.)
Step 6: Add your story. On your homepage, click see more in the left menu, then click About, and then Our Story
Step 7: Create your very first post
2. Configure Dashboard
To care for your customers the best way possible, you have to know how to manage the following aspects of your page.
Go to settings then Messenger.
Here you’ll be able to add auto-replies and away messages to ensure that visitors get a response when they try to contact you.
Make it a point to respond in real-time whenever possible, especially when starting.
Notifications come in handy as they enable you to see how people are interacting with your page.
Notifications help you respond to visitor comments promptly.
In the settings, you will be able to control who sees your page, add or remove admins, and approve apps to be used on your page.
3. Create Your First Ad on Facebook
It is finally time to take a leap of faith and make your first Facebook ad.
After coming up with your game plan, the first thing you have to do is choose your objective.
Some of the goals include:
- Brand awareness
- Store Visits
In our case we want to optimize for conversions.
Follow this up with selecting your audience then choosing where you want your ads to be displayed. Ad placements have their pros and cons.
In the next stage, it is time to set your budget, schedule your Ads, and choose if you want your Ads to be optimized.
You will then choose your ad format and add some details at the bottom, such as your Call to Action (CTA) and URL descriptions.
4. Leverage Lookalike Audiences
Getting ROI from your paid ads relies on your ability to target only relevant, qualified audiences.
Imagine if you could clone your buyers? That is what a Facebook lookalike audience does.
Lookalike audiences are a fantastic way to leverage Facebook.
When Ads focus on lookalike audiences, they prioritize users who behave most like the users who are already in our lists.
That means they have a high chance of converting.
Be sure to regularly upload new customer lists as they lose their effectiveness after a long time in use.
5. Retarget Existing Visitors
The truth is that only a few visitors convert to sales the first time they visit your website.
A retargeting campaign is what it sounds.
Retargeting campaigns give you a second chance to convince visitors to buy something on your web store.
When properly optimized, they have the power to make hesitant visitors give your brand or product a second take.
Retargeting campaigns also come in handy to show new offers to your existing customers.
6. Scale Your Backend
In dropshipping, scaling your backend refers to creating an infrastructure to handle a large amount of expected traffic, sales and customer support efficiently and effectively.
If you are processing more than 30 orders per day then it is important to scale your backend.
Automated dropshipping via scaling your backend enables you to:
- Save time
- Save money
This doesn’t always have to involve technology.
You can outsource specific tasks to reliable freelancers.
While you’ll still have to supervise them, consider hiring people who are more experienced in the job than you.
Here are some things to consider.
1. Integrate Ticket Management Software
A ticket management system is a unique dashboard that helps you to organize and handle all your customer requests.
In dropshipping, a ticket management system is essential as it enables you to prioritize customer requests in order of complexity and importance.
The lack of such a system in place means more time taken to resolve customer queries.
In time, this might lead to a bottleneck in your business as well as unhappy customers.
2. Hire & Train Customer Support Agents
One of the biggest hurdles drop shippers have to deal with is losing control over their own store’s customer service as they scale.
So you put up a couple of ads, and your site took off.
Initially, it was easy to handle support emails and reply to both social media comments and reviews.
After some time, you will be the bottleneck in your own business.
That is where customer support agents come in.
You can ask family members or friends to help, but you will eventually need a team of customer service experts.
In e-commerce, the easiest way to wow a customer is to respond sooner than they expect. Customer agents allow you to do this at scale.
Strive to offer a fast and satisfactory customer experience seven days a week.
3. Manage Taxes & Cashflow
The sooner you learn how to manage your cash flow, the greater your chances of growing a successful ecommerce business will be.
Cashflow is the lifeblood of a business. It will determine the growth and stability of your business.
With great power comes great responsibility, the more money you make, the more taxes you will pay.
A good cash flow plan takes into account the tax obligations the business has to meet when it generates a specific amount of income.
Here are four steps that will make tax planning to maintain a good cash flow:
- Understand your tax obligations
- Strictly set aside tax money each month
- Check your projections often
- Get help from tax professionals
Consider using software such as Quickbooks to manage your cash flow if you don’t want to hire a full time accountant.
I’ve written a detailed guide on the best accounting software, if you want to do deeper research.
4. Find A Private Supplier
Finally, it is time to accomplish what you set out to do, selling products under your brand.
Private label dropshipping means the products are made by manufacturers but shipped under retailers’ brands.
Private label drop shipping comes with a couple of advantages, such as:
- More control over product quality
- Improving customer loyalty
- Low capital risk
- Less risk of infringement
- Speedier logistics
To start private labelling, you have to, first of all, find a reliable private label supplier to partner.
To find suppliers, you will have to search at sites such as AliExpress, Alibaba, and Thomasnet.
After finding suitable suppliers, contact them, and see if they can be able to manufacture your product.
You will also give them instructions on how to place your brand in the products.
Common Dropshipping Mistakes
1. No Proper Return Policy
Have you ever bought something online, then just changed your mind and canceled the order because you spotted a better deal?
That’s bound to happen to your dropshipping business sooner or later.
Having a proper return and refund policy is vital for your dropshipping business.
A good set of instructions on how to return products on your website can be what makes you stand out from the rest of your competition.
Keep in mind that people are more likely to leave reviews after having a bad experience.
You want to avoid that by having a proper return and refund system in place.
2. Selling Copyrighted/Trademarked Goods
Selling products that have registered trademarks or registered copyrights without a license beforehand is a big no.
These include goods with company logo’s (e.g. Nike, Disney), characters (e.g. Spiderman, Groot), even phrases (e.g. gives you wings, just do it)
Even if you meant no harm, dropshipping trademarked goods could get you in a lengthy and costly court battle that you want to avoid.
Obtaining a license to sell such items could cost you anything from a few hundred dollars to thousands of dollars, depending on the company in question.
3. Poor Customer Service
Poor customer service can lead to the downfall of even the most successful company.
Businesses that elevate customer service into an art form have an advantage over their competitors. Think Amazon.
The five customer service skills that drive every dropshipping business are:
a) Be genuine: Take time to personalize conversations
b) Be trustworthy: Avoid making promises you can’t keep
c) Be empathetic: Understand your client’s feelings and be compassionate
d) Be innovative: Understand your customer’s problems and offer a remedy
e) Be accountable: Handle client problems to the fullest extent of your abilities
4. Skimping On Supplier Due Diligence
In simple terms, supplier due diligence refers to the action taken by a business to know its partners before agreeing to a transaction or a contract.
In the modern-day, suppliers assume a critical role in the supply chain.
Carrying out due diligence on potential suppliers helps you run your business more smoothly as you understand who you are doing business with.
Key things to consider include the supplier’s financial stability, corporate social responsibility, and business terms.
Even before engaging the supplier, have a look at their feedback from current and past customers.
Should problems arise in the future, you want an ally in your supplier, not a foe.
5. Weak Logistics
If a supplier delivers a product late, makes a mistake with the order, or damages the product during shipping, be ready to take the blame from the customer.
Without total control over the inventory and customer service, issues may not be as easy to resolve as you anticipated. That is why you need to carefully select your suppliers.
Posting very optimistic delivery dates is one of the most common dropshipping beginner mistakes.
Various things you have no control over can happen during the shipping process, so always leave a safe allowance.
6. Quick Buck Attitude
Contrary to popular belief, dropshipping is in no way a get rich quick scheme.
Sure, dropshipping enables potential entrepreneurs to enter the retail world with little to no money. It should, however, be treated like the serious gig it is.
Even though dropshipping has some lucrative benefits in comparison to traditional retail, you have fierce competition to deal with.
To be successful in dropshipping, you have to be patient and have a lot of dedication.
The initial stage might be demotivating, but hang on, your business will pick up soon.
It took me 6 failed stores to see my first store which made back all the money from my previous losses.
So keep grinding.
7. No Automated Systems
One day has 24 hours.
That might seem like a lot of time, but we never seem to have enough time to accomplish everything we set out to do.
Automating a business enables you to keep making money online while living a normal life.
Automated dropshipping is using technology to do tasks that you would usually have to do manually when managing your business.
Imagine waking up in the middle of the night to reply to a Facebook message.
Facebook has an instant replying service that will respond to your customers whenever they send a message.
Automating your dropshipping business is easier than it sounds.
There are lots of free apps and software that could make running your business a lot easier.
If you’re not keen on completely automating your dropshipping business, consider hiring freelancers or a virtual assistant to help run your business.
In a previous section, I spoke about different ways of automating dropshipping so you can check out some ideas there.
Successful Dropshipping Case Studies
I want to share with you some very successful brands which started out as dropshippers. Hopefully this inspires you to see how far you can really get with this model.
WayFair is probably the biggest brand in the US that had its humble beginnings as a dropshipping store.
In 2002, two university graduates founded a little business called Wayfair.
Little did they know that one day it would be the largest online-only retailer of home goods, all thanks to dropshipping.
As of June 2020, the company offers 18 million products and has more than 16,200 employees.
For the twelve months ended June 30, 2020, Wayfair generated an estimated $11.5 billion in net revenue.
Wayfair may not yet be a household name like Amazon but it’s on its way there.
InspireUplift may not have been around for as long as Wayfair, but it has achieved a lot in the few years since its founding.
The company was created in 2015 under the name Hype Dojo before rebranding to InspireUplift in 2017.
InspireUplift is a general store dealing with more than 700 products.
Almost all their products have stellar reviews, in-house videos, and low prices, relying on high volumes to make huge profits.
InspireUplift brings in approximately $4.8 million – $5.6 million in a month.
Unlike our previous examples, Nerdwax is a niche-based store that sells a wax-based product that is specially formulated to keep your glasses in place on your nose.
In the middle of the night in April 2014, Don Hejny launched Nerdwax on Kickstarter, and it soon became a global sensation.
Don Hejny turned down two Shark Tank offers and went on to build a million-dollar business on Shopify.
It comes to show how you can still be successful on a very small market if you have an innovative idea.
4. Boundary Supply
$1.2M in 30 days just selling backpacks. This is what Boundary Supply achieved.
Boundary Supply is a dropshipping store that is focused on the backpacking niche.
Boundary Supply created their custom products, got funding from Kickstarter, and never looked back.
Later on, they launched yet another backpack company called The Errant which brought in more than $1.2 million on Kickstarter.
Boundary supply has an estimated monthly revenue of between $600,000 and $1.2 million.
Personalized products are some of the best performing items in dropshipping.
Gossby is an excellent example of a personalized goods dropshipping store.
Gossby has a unique personalization model that has allowed them to dominate the niche.
Gossby sells print on demand mugs.
What that means is customers can create a character representing themselves or others using illustrated character items found in their store.
The creation is then printed on to a mug and shipped off to the excited buyer.
Gossby personalized print on demand products makes up to $650,000 in a month.
Dropshipping FAQ (For Beginners)
1. Can I sell globally?
When you start a dropshipping business, you can sell anywhere and everywhere. While you can target customers from across the world, there are a couple of factors to consider, as explained here.
2. What are typical profit margins?
As with traditional retail, the profit primarily depends on the price of goods and the volume of products sold. On average, good dropship profit margins range between 15% and 20%.
3. How much tax do I pay?
Just like all normal jobs, you are obligated to pay income tax to your government.
As for sales tax, this depends on a couple of factors, including the location of all three parties, and if the dropshipper or supplier has nexus(an obligation to collect sales tax)
Usually, the dropshipper is required to pay taxes for international delivery.
4. How can I promote my site?
There are so many ways to advertise your dropshipping business. The more common methods include Facebook Ads, boosted Instagram posts, and influencer shoutouts on Instagram.
You could also do Pay Per Click (PPC) Ads on Google, Reddit, Pinterest, and Twitter Ads. Additionally, you could start your own YouTube channel, conduct webinars, and get active on social media and forums.
5. How do I select suppliers?
After selecting the products you want to deal with, head over to Google, and look up the major suppliers for your desired product. You want to see their location, support (e.g., email, phone, chat,etc.), minimum order quantity, and if they are tech-savvy.
You should also look at their online reviews to see if they are punctual and reliable.
Platforms such as AliExpress also have their own review systems and if you are looking to bulk buy stock – Alibaba is a great place.
6. How much can I make?
If you put the work in learning SEO, Facebook Ads, and finding good suppliers, you can make approximately $2,000 – $3,000 in a month in net profit.
If you keep putting on the hard work and persistence, you will be making $5,000 or more in a month after half a year or so. I hope the previous examples I’ve given have highlighted how far you can take the model – a million a month isn’t out of the question.
7. What amount of capital do I need to start?
Technically speaking, you could start a dropshipping business with $0. After all, you don’t require an actual store or any stock to start dropshipping.
To give yourself a head start, come up with at least $150 to set up a domain, hosting, a content management system, and a dropshipping software.
You may need an extra $500 to start testing ads to get traffic quickly. So I would say a good amount would be $500 – $1,000.
8. How do I start dropshipping?
There are a couple of steps you have to follow to build a successful dropshipping business.
a) Select a niche
b) Conduct competitor research to know what you’re up against
c) Secure a supplier
d) Build your e-commerce website or register with existing dropshipping sites
e) Come up with a solid customer acquisition strategy
f ) Analyze all the data coming in and fine-tune current campaigns
This article covers all basics of the dropshipping business model. As outlined, it is indeed an actual job that requires hard work and dedication.
Dropshipping is a low-risk business model that especially suits Gen Zers and millennials due to the reliance on internet marketing skills.
With the wealth of information online it’s possible to self educate without buying expensive courses.
Because you don’t need to either stock or handle the goods you’re selling, you need minimal capital and can sell as much as you want.
Dropshipping isn’t a walk in the park. You’ll need to put in a lot of effort, especially in marketing your products.
One fantastic benefit of dropshipping is that it is very safe to try out.
Because it requires little to no investment, you can walk away if two months down the line, you discover that dropshipping isn’t for you.
Even so, you’ll only have lost a minimal amount of money, while on the other hand, you’ll have gained essential knowledge in e-commerce.
When you start your business, closely monitor all the data and metrics relating to your business.
Be ready to make small changes here and there, and you’ll be on your way to success.
I hope this article was useful and motivated you to set up your very own dropshipping business.
I was able to see success myself just after 6 months of knowing nothing about the model and build an $800/day store. If I can do that, I’m sure you can as well.
Let me know in the comments if you decided to take the plunge.