If you’ve ever researched ways to make money online, you might have come across the term dropshipping.
I’ve always wondered if starting a dropshipping business was a viable way to generate income. So, after doing some research, I decided to open my own dropshipping store.
Within 48 hours, I had setup my store, added about 30 products, run some paid advertising on Facebook, and made my first sale:
I’m excited to continue my dropshipping experiment, but I also wanted to share the progress so far with This Online World.
This post will cover:
- What is dropshipping?
- How to start a dropshipping business: cost, logistics, suppliers, etc.
- My dropshipping concept.
- Paid advertising and dropshipping?
- Lessons I have learned.
Note: This is going to be a very long post, and I am also not an expert on dropshipping by any means 😛
Let’s get to it!
What is Drop Shipping?
Dropshipping is a retail strategy that involves outsourcing your manufacturing and fulfillment process.
As a dropshipper, you will never actually keep your products in stock. Rather, you purchase your stock from another merchant/manufacturer who then ship it directly to your customers.
By dropshipping, all you have to worry about is marketing and sales. Manufacturing, order fulfillment, and logistics are taken care of by the suppliers you source your products from.
Drop shipping really requires arbitrage to be successful. In other words, you need to purchase your inventory for less than you sell.
You also need to reach your customers through marketing before your competition (or supplier) does, as well as hope your customers don’t do too much price comparison or shopping around.
Ultimately, the need to buy cheap inventory leads to many dropshippers utilizing platforms like AliExpress to purchase items in bulk.
Your dropshipping process might look like this:
- You source a product from a cheap supplier on AliExpress. Let’s say, a pair of sneakers that cost $20.
- You create an online storefront that sells this pair of sneakers for $60.
- When someone purchase these sneakers from your store, you pay $20 (the original price) for the supplier to ship the sneakers to your customer.
This costs you $20 but results in $40 of profit.
How to Start a Dropshipping Business:
There is no exact formula for starting your own dropshipping business. After all, as long as you can create a situation of arbitrage (buying low, selling high), you can make money.
However, there are some incredibly useful tips, tools, and strategies that can help you get on the right track with making money online.
This post is going to get rather in-depth, and will cover these core concepts:
- Conducting market research for dropshipping.
- Sourcing your products.
- Setting up your store.
- You initial startup costs.
- Marketing your dropshipping business.
Finding Products to Dropship – Identifying a Niche:
Many dropshipping guides assert that there is a definite price point, product type, or audience you have to market to in order to be successful.
However, dropshipping is ultimately all about arbitrage. You need to rely on your consumers NOT doing any price comparisons or shopping around.
In other words, you need to take advantage of price discrepancies between Chinese/cheap manufacturing costs and North American/European expectations of product pricing.
When considering what niche you are targeting, your products should be distinctively lower in price than their competitive alternatives.
When consumers see your product, they should immediately notice that you are the cheapest option they have come across for a particular good. Not so cheap as to be alarming, but cheap enough to be an obvious deal.
Here’s my first dropshipping sale as an example:
It’s a hunting-themed camouflage baseball cap. I sell it for $11.76 + $10 shipping for a total of $21.76.
The cap costs me $7 to purchase from a Chinese manufacturer.
However, when my target market sees a decent quality cap that’s only $21.76, that is actually much cheaper than many other brand of caps or hats sold elsewhere in the world.
This is a great example of a good item to dropship. I can mark the price up and it still remains competitive.
When you think about a niche to start your dropshipping business, think of your product list and ensure it can spark this sense of excitement and value in consumers.
Additionally, avoid products/niches that are important purchasing decisions.
You want consumers to see a great deal, get excited and purchase. If you sell very expensive items that require consumers to do their own research, you might have difficulty selling.
Sourcing your Dropshipping Products:
From what I’ve read and am slowly starting to experience, there are a few guidelines for sourcing your dropshipping products:
- You need to find reliable suppliers.
- Your products should remain (roughly) between $20-$150 once they have been marked up. You can certainly market more expensive items, but your consumers might be hesitant to spend that much money online.
- You should be able to mark the prices of your product up by 100% to 200%.
- You need to keep things simple. Find your niche and stick to it rather than being a Jack of all trades.
I’m going to use AliExpress in this example since this is where I find my products and suppliers.
AliExpress has many cheap suppliers, a wide product variety, and the quality of some items isn’t bad. They also provide decent shipping rates, customer support, and are used by many other dropshipping businesses.
Here’s how you can go about sourcing your products:
Head to AliExpress and search for your product idea:
In this case, let’s find some more caps to sell.
Sort by free shipping and orders:
This will display products that have been frequently ordered and also offer free shipping
Now, find products that:
- Have 4-5 stars.
- Have as many orders as possible (I aim for at least 50-100 orders).
- Offer ePacket shipping – this is a form of shipping specifically designed for speedy and cheap eCommerce shipping.
- Are cheap enough to remain in the $20-$150 ballpark even after you mark the price up by 100% to 200%.
Here’s an example of a product I would pick:
It has good reviews, plenty of orders, and it’s very cheap. I could easily add this hat to an army-themed clothing store and sell that hat for $15-$20.
If you want to get more in-depth, be sure to check out additional information on the product such as:
- Their return policy.
- If the supplier offers tracking information.
- How long the manufacturing/fulfillment process takes (the shorter the time, the better).
- How their product photos look (you’ll need good photos for your marketing efforts).
Conduct this process several times for each product category you plan on dropshipping.
Gather a list of about 20-30 items you want to dropship just to make sure you have enough variety to launch the initial version of your store.
You are now ready to start your business!
Setting up a Dropshipping Store:
Personally, I recommend using Shopify as your dropshipping store platform.
Shopify is affordable, offers sleek designs that support eCommerce, and can implement some necessary dropshipping tools and plugins.
Shopify is also great for dropshipping because it allows you to process payments very quickly, provide customer support, and effectively manage your shop.
Once you have decided on your dropshipping niche, here’s how you can setup your storefront:
- Head over to Shopify and sign up with my link to receive a free 14 day trial!
- Create your account and store name. Don’t overthink this.
- Select a free theme to use for your storefront.
- Start importing your products with Oberlo
How to use Oberlo for Dropshipping:
There are plenty of guides on how to use Oberlo, and I’m not going to go very in-depth since the process is actually very simple.
Just head to the Shopify App Store, search Oberlo, and download the app.
Then, download the Oberlo Chrome extension.
When you find a product on AliExpress you want to dropship, you can use this plugin to import the product into your Oberlo dashboard:
The product you want to dropship will now appear on your Oberlo product import list (accessed at https://app.oberlo.com/import).
Here, you can edit your product information, price, product variants, and included images.
AliExpress suffers from keyword stuffing and poor grammar, so be sure to do a thorough review of your information and fix any errors:
As you can see, I’ve edited how the product will appear on my store to make it more appealing/logical.
You can also choose your price point, as well as how great of a ‘sale’ your product is on for:
In this example, I’ve chosen to sell the cap for $16.10, which is also cheaper than the comparison price of $19.32 (which I randomly made up).
When you are ready to publish a product to your storefront, just hit push to shop.
That’s all there is to it.
How you design your storefront and categorize your merchandise is up to you.
Chances are, you’ll need to play around with your shop settings to make your storefront look appealing, but this isn’t too difficult.
Oberlo’s free plan allows you to import up to 500 products. This should give you plenty of room to design a dropshipping business that can become profitable.
Setting up a Dropshipping Store – Additional Costs:
While Oberlo is free, there are 2 main expenses you must also factor in for your dropshipping business.
Firstly, you need to buy a domain name for your website.
If you maintain a free Shopify store, your website URL will be yourstorename.shopify.com.
This is simply unacceptable. You are operating a store, and you need to remain professional.
Purchase your domain name through the Shopify dashboard. It will cost around $15-$18.
Secondly, you need to purchase a Shopify plan.
The Basic Shopify plan is sufficient for starting a dropshipping business. To break even each month, you’ll only need to sell 1-2 products which is certainly possible.
If you can’t afford a domain name and monthly Shopify plan at the moment, I would suggest conducting your product/market research and creating content for your website (like blog posts) until you are ready to purchase.
My Dropshipping Strategy:
A lot of dropshipping guides don’t disclose their own products, market, or progress.
As usual, I want to be transparent and actually teach people something. Feel free to copy my idea if you want…I do love a good competition!
My dropshipping business is Buy Hunting Gear.
Edit 5/27/2018: I’ve unfortunately put my dropshipping store on hold unfortunately since I’m too busy with work/school, but it will definitely make a return one day!
It specializes in hunting apparel, accessories, scopes, and spotters:
Currently, I have about 30 products and am planning on adding more products as time goes on:
Here’s why I picked the hunting niche for dropshipping:
- Hunting season is starting.
- Hunting gear is overpriced (in my opinion) in the United States and Canada. Companies like Dick’s Sporting Goods practically have a monopoly on certain hunting products.
- I can mark the prices of my products up by 100% to 200% and still remain competitive.
- There are dozens of great suppliers on AliExpress to choose from.
- These products aren’t high-involvement purchases.
Additionally, I predict that sales of hunting related goods will actually increase in the future.
As gun laws potentially become more strict and limit the sale of semi-automatic weapons, I think the rifle market and hunting industry might see an increase in consumers who just want to shoot shit in their spare time.
Dropshipping Marketing Strategies I Use:
Long story short, you need to use Facebook and Instagram.
My first sale came within 48 hours as a result of Instagram. Instagram is already generating additional traffic as well:
I suggest creating a Business Instagram page that describes what you do, links to your website, and also has high quality pictures of your products:
I’ve been operating my page for 3 days, and I have gained 150+ followers by posting photos with relevant hunting hashtags, following people who like hunting related pages, and commenting on other people’s photos.
I expect to slowly grow my Instagram page and eventually drive some sales from the platform.
You can also setup your Instagram to automatically post to Facebook when you submit a post, which effectively automates your Facebook marketing process.
Just be sure to also set up your Facebook page to represent your business in a professional manner.
I have also dabbled with $20 of paid advertising on Facebook, with mixed results:
I ran a slideshow-style advertisement for some hunting caps. I targeted men in the United States and Canada between the ages of 20-50 who have liked specific pages related to hunting, such as Elk Hunting or Deer Hunting pages.
Here are the results:
- No sales – Someone has a cap in their shopping cart at the moment, but even if they purchase, I have lost money with this ad campaign.
- 41 actions taken – 41 people interacted with the advertisement.
- Mediocre relevancy score – I could have refined my targeting or run a different product that appeals more to hunters.
Ultimately, I am happy to have tested paid advertising. I will run 1 more advertising campaign for $20. Hopefully I can drive some sales through Facebook.
If you want to try your hand at advertising your dropshipping business, be sure to enable Facebook Pixel Tracking before you advertise.
This will allow you to re-target customers who have seen your advertisements on Facebook before and visited your website, and these customers will theoretically be more likely to purchase your products.
Also, anticipate having to spend $50-$100 before you begin to get an understanding of what works and doesn’t work for your target market.
Lessons I’ve Learned from Dropshipping:
- You can start dropshipping in 24-48 hours: I put in roughly 10 hours of work before launching my website.
- You will have to A/B test: Until you get dropshipping down to a science, always split test your product choice, advertising efforts, and marketing strategies. I plan on refining my second advertising campaign to be even better.
- Don’t over prepare: You can spend months researching products to dropship, but this won’t drive sales. Plan and prepare, but don’t be afraid to pull the trigger (haha hunting jokes).
- Use coupons: Your profit margin is going to be massive, so don’t be afraid to create a Shopify coupon and advertise it on your Instagram/Facebook page. I have a 5% off coupon but might increase this.
Can you Make Money Dropshipping?
There are plenty of dropshipping success stories that prove the best people in this business can succeed.
Peter Koch from the website Seller At Heart has a great series on how to start a business on Amazon by purchasing products from Alibaba. He shares his own experiences, insight, and results.
While this isn’t exactly dropshipping, it’s a similar concept and I highly recommend giving his series a read.
At the end of the day, a retail arbitrage business model can succeed if you know how to conduct product research, find reputable sellers, and efficiently advertise to your target market.
How Hard is it to Start a Dropshipping Business?
I’m editing this post as of 7/3/2018 to give an update on my thoughts about the dropship business model and how viable this side hustle is.
Dropshipping absolutely works.
It is possible to start a dropshipping business with almost no startup cost and successfully scale your business through a mixture of social media promotion, SEO, and paid advertising.
How do I know this?
Well, there are many dropshipping success stories, and I’ve seen enough companies advertising their obviously AliExpress-sourced products on Instagram (for months at a time) to know there are some big businesses out there that spend a lot on advertising…if they weren’t profitable, they wouldn’t realistically be advertising so heavily for months on end (unless the investors have very deep pockets).
However, starting a successful dropshipping business is not easy.
I have now realized that I was too greedy in my initial store launch for Buy Hunting Gear.
The dropship space is crowded; gone are the days of easy 100% profit margins on countless niches and products.
If I could redo my dropshipping experiment, I definitely would have lowered my margins on every single item in my store to remain competitive on pricing.
I had dozens of customers add their products to carts or reach checkout, but only 1 person actually converted. I blame myself for underestimating just how competitive the market was and how willing people would be to shop around and compare prices.
I think starting your own online store provides many valuable lessons, and you may even make money by starting a dropshipping business.
However, you will need to put in a great deal of effort and time for several months before your store can begin to run on semi-auto pilot (and even then, if you scale, you will work).
I currently don’t have an extra hour or 2 per day to focus on dropshipping, and this is ultimately why I have put the store on hold for the time being.
I felt I owed everyone a more detailed explanation as to why this money making experiment has stopped, so there it is!
Hopefully I can take another crack at starting a dropshipping business sometime in 2019!
Is Dropshipping Unethical?
I grappled with this question after making my first sale.
At the end of the day, all retail business models operate upon the concept of arbitrage. If they didn’t, no business could remain afloat.
Therefore, I don’t think it is wrong to act as a ‘middleman’ and mark your products up, even if it is a 100% to 200% margin.
However, I think it is necessary to remain transparent with consumers.
On Buy Hunting Gear, I provide brand names in my product descriptions and explain that I am ordering them from a manufacturer.
I might not plaster the fact that the products are made in China all over the website, but hey, look up the brand name of something before you purchase.
I also outline additional information in my About and Shipping sections that explain what to expect with shipping times, how to go about returns or cancelling orders, and how customers can give feedback.
Dropshipping is a real business model. As long as you are honest and provide quality customer service, I don’t think there is anything wrong with this practice.
I hope you have found this post to be informative and useful!
I am just getting started with dropshipping, but if this experiment works it will definitely become a new part of This Online World’s content.
If you want to read some other money making projects I’ve started, I’d suggest you check out my phone farming guide!
Additionally, if you want to start your own dropshipping business, I would highly recommend Shopify.
You can also use my referral link to get a free 14 day trial on Shopify while supporting my blog 🙂
Thanks for reading! Best of luck with your dropshipping adventures!