Of all the ways to make money online, dropshipping has the biggest potential. It is highly scalable, and there will always be new products to sell. People buy stuff all the time, and your role is to supply them with what they are looking for.
This article will give you a better grasp of how dropshipping works and how much money you can make. It will help you understand why dropshipping is the best way to make money online. More importantly, you will also get to know some of the best tools you need to succeed in dropshipping.
What is dropshipping?
Dropshipping is a retail business. You sell physical or tangible goods. But instead of buying the product before selling it, you sell it first before buying it.
Confused?
Think of your dropshipping store as a product brochure. You have no product with you, yet you are selling the products to your target customer. The customer pays you for a product, and only then will you buy the item from the supplier.
What’s convenient about the whole process is that you do not need to ship the product yourself. It is the supplier who will do this. The product, whatever it is, won’t go through your hands. It goes straight from the supplier’s warehouse to your customer.
Here is a step-by-step process:
- Select products and suppliers
- Build your store
- Upload the product images and descriptions to your store
- Advertise the store and products (higher price than what the supplier charges)
- Customers buy your products
- You contact the supplier about the order and pay for them
- Suppliers ship the orders to your buyers
Customers will never know that you never had this product in the first place. The one big challenge here is money. After a customer pays for the order, you will not have that money right away. You have to wait days for it.
Supposing you use PayPal, you must wait three to five business days for the PayPal funds to get to your bank account. During this waiting time, you must pay your suppliers for the products so they can ship them as soon as possible.
Profitability of dropshipping
How profitable is dropshipping? The quick answer is this: you decide. You can buy a product for $5 and sell it for $10, giving you a margin of $5. If you are good at marketing, you can sell the same product for $19.99, giving you almost $15 in profit.
Below is an image of a product that is highly popular on Amazon.
The phone case sells for $39. Did you know that it only costs $7.65 on AliExpress? Below is the source image.
Many people in the world do not know what AliExpress is. It is the Chinese equivalent of Amazon where manufacturers sell their products in retail.
If you dropship this product, you can charge your buyer $40, yet you will pay only $8 to the AliExpress supplier. Your profit is $32. It is up to you if you want to offer free shipping or charge it separately.
Theoretically, if you sell 100 of these in one month, you have a gross margin of $3,200. What if you get to a point where you sell thousands of products?
This is why dropshipping is the best way to make money online. It is scalable, and your financial success does not depend on the time you spend on it. People will buy your products even if you are on vacation, doing house chores, or even if you are asleep!
Steps to Start Dropshipping
It is easy to start a dropshipping business, but you must focus your time, money, and energy on the right things.
Here is a quick look at what you need to do step-by-step:
- Decide on a niche and product
- Find a supplier for it
- Build your store
- Advertise your store
- Make sales
- Scale or expand
Rinse and repeat steps 4 to 6. Below is a more detailed explanation.
Step 1: Decide On a Niche and Product
A niche is a product type or a group of products that share the same characteristics. A good example is “kitchen.” This niche means all the things you sell have something to do with the kitchen.
You can break down this niche into sub-niches, like kitchen gadgets, kitchen appliances, kitchen chemicals, and more.
Before you start building your store, you must choose a niche. You will want to think about:
- Something you are passionate about and deeply understand
- A niche where there is a demand for the products
- The number of products and suppliers available
- The cost and profitability
It is not advisable to build a general dropshipping store where you sell all sorts of goods. Focus on one niche and become an expert on it. It makes your store look credible and trustworthy.
To illustrate, think of a store that sells kitchen gadgets and gym equipment. There is no consistency and cohesiveness. A customer who visits that store will never feel comfortable parting with his money.
Step 2: Find a Supplier for It
Not all manufacturers want to dropship. Some do not even want to ship items to an address different from the address of the real buyer, which is you. You must find a seller who knows what dropshipping is, one who is also willing to work with you in this arrangement.
Many online tools allow you to do this. These websites are like marketplaces. But instead of functioning as a seller-to-consumer market, they function as business-to-business.
Here are some examples:
- Tradelle
- Spocket
- AppScennic
- Dropified
Suppliers sign up for an account on these sites, and then they upload their products. Dropshippers also create an account and then import or transfer the products to their store.
The benefits of using a tool like Tradelle are:
- No more manual transfer of products from supplier to your store
- You can automate your store (from sales to fulfillment)
- They are suppliers themselves
- You can ask them to source products you want to sell (if not available on the tool)
Tradelle also provides you, the dropshipper, with a tracking number, once the item is shipped. You can give this tracking number to your customer or use it to give the buyer updates on the whereabouts of the item.
3. Build Your Store
So, you have selected your niche, products, and supplier. The next step is to build your store. The most common options are Amazon, Etsy, eBay, WooCommerce, and Shopify.
- Amazon – you build a storefront and pay a subscription or a sales fee
- Etsy – you can only sell “handcrafted” products
- eBay – works like Amazon but they offer an auction type of selling
- WooCommerce or Shopify – you build an independent store (your own website)
There is no right or wrong choice here. All of these platforms are great for e-commerce. However, you may want to build a standalone store, so you are not at the mercy of a platform’s rules.
It is not that difficult to build a website store from scratch. Yet, there is a learning curve. If you want, you can spend as little as $49 and get a premium Shopify dropshipping store. Tradelle offers this kind of service.
4. Advertise Your Store and Make Sales
One of the toughest aspects of dropshipping is marketing. You need to learn how to create an image ad, video ad, and ad text.
You can advertise on Facebook, Google Search and Shopping YouTube, Reddit, and many other platforms. The platform you choose depends on the product you sell.
We will not get into the details of advertising, as this is a totally different ball game. As a general rule, do not go all in on this or you will lose money. Take advertising a step at a time until you become an expert.
Two Tools You Need to Get Started in Dropshipping
As a beginner, the only two tools you need in dropshipping are a store builder and a dropship system. For the store builder, it is highly recommended that you use Shopify.
For the dropship system, Tradelle is the best you can find in the market today. What does Tradelle do, anyway?
With Tradelle, you can:
- Find winning products that are graded by the system
- Work with suppliers (both Tradelle and third-party ones)
- Import product details from Tradelle to your store
- Source products from suppliers
- Automate your store (orders go straight to the supplier)
- Fulfill orders with tracking numbers
The product search function is the best tool inside Tradelle’s dropshipping system. Below is a sample screenshot.
At a glance, you can see how much profit you can make from this product. Below the numbers are links that will take you to the supplier’s site, the Facebook ad for the same product, and the product pages of sellers of the same item on Amazon.
This image is not the entirety of it. If you scroll down, you will find more product details such as potential audience size, demand, competitor count, which regions or countries have the highest interest levels, and more.
Tradelle is an all-in-one dropshipping solution. As mentioned earlier, they can also build a store for you for only $49, which is a steal. Most Shopify store builders (freelancers) will charge you hundreds of dollars for the same service.
Summary
Now that you know how dropshipping works and why it is the best way to make money online, consider signing up for a trial account with Tradelle. It is free and you will have access to all the powerful tools you need to succeed in dropshipping!