Dropshipping, an easy business idea to put into practice

Can you imagine being able to run your own business from home? Enjoy the advantages of having an online store and earn money with it, but without the inconveniences associated with managing an activity of this type? Well, you can stop imagining! In this article I am going to talk about dropshipping as an alternative to start and earn money.

This activity can become your profession, but you can also combine it with another job that you do on your own or as an employee. You already know that in the online world nothing is as beautiful as it is painted, so you also have to know the drawbacks of this system.
Ready? Let's go for it!

What is dropshipping?

Ecommerce has come a long way in a very short time. If you look back, surely a decade ago you were also a little afraid of making a purchase in an online store. And yet, nowadays we buy in giants like Amazon or in small online stores without any problem and with total security.

The rise of sales through the Internet has been so great that different formulas for selling products have gradually appeared. Faced with the "classic" model that would be to set up an online store and be in charge of making shipments to customers, controlling the stock and bringing attention to the public, we are presented with alternatives such as dropshipping.

Imagine that you want to create an online store on platforms like Shopify or similar. What do you need? You actually need a lot of things. But there are two key elements: the stock of the products that you are going to sell and a logistics system so that the items reach their recipients.

Well, this is just what you don't need in a dropshipping. We can define it as a form of online commerce in which the store owner acts as an intermediary between the end customer and the supplier.

The online store works here as a showcase. The Internet user arrives, sees a product that he likes and buys it. The store manager sends the purchase order to the supplier, and this is the one in charge of sending the purchased item to the end customer. As you can see, in this transaction the store owner has not had to do anything except show the product to the customer and tell the supplier that he has made a sale. And what he gets in return is a commission.

I define it for you in an even simpler way, it is an ecommerce system based on the online sale of products that are not in stock.

Here you have all the necessary material to do dropshipping.

How does dropshipping work?

Three elements are involved in this system (which is why we speak of triangulation ):

  • the online store,
  • the owner of the online store (the seller),
  • the provider.

The first thing the entrepreneur does is create an online store in which he will make sales. Once he has everything ready, he contacts one or several suppliers of the products that interest him and they sign an agreement.

From that moment on, the supplier's products are uploaded to the e-commerce and the business is ready to start working. Later we will see that this is not as easy as it seems and that there are some important aspects to take into account, but for now this is more than enough for you to understand what dropshipping is and how it works.

Advantages of this this form of ecommerce

Both the investment and the risks are minimal

One of the most important problems that entrepreneurs have to face is obtaining the financing to start their project. If you have already gone through this process, you surely know how difficult it can be to convince the bank that your idea is viable.

The good thing about setting up an ecommerce with the dropshipping system is that the initial costs are minimal. The investment is reduced to buying a domain, hiring web hosting and creating the online store. In fact, if you have knowledge of web design you can save even more if you create the store yourself.

For a price between 1,000 and 3,000 euros you can have your store up and running. This means that the barriers to entry in this form of entrepreneurship are very low.

Since you do not need a lot of money to create your online store , there is not much risk either, since if the project does not go well you will not go bankrupt.

Dropshipping maintenance costs are low

An online store does not have too many expenses. But if you have opted for the dropshipping system, you will have even less costs. The most common are:

  • website maintenance,
  • domain renewal and hosting.

Possibility to work remotely

The only thing you need to run a business of this type is a computer and an Internet connection, so you can work from anywhere. You have the possibility to manage your store comfortably from home .

But you could also afford to go away for a few months to travel the world, continuing to run your business without any problem. And if you like this lifestyle, you could become a digital nomad .

No need for stock

One of the main drawbacks of having an online store is that you must have a minimum stock. This implies spending on products that you do not know for sure if you are going to sell and, in many cases, renting a storage room or an establishment in which to store those items.

To this we must add that good stock management is not always easy, especially if you are not used to this type of logistical task.

The good thing about dropshipping is that you sell out of stock, so you don't have to risk wasting your money buying products and then selling them. Add to this that you get rid of all the complications and concerns associated with managing the merchandise you have stored.

Calm down! You will not have to worry about the warehouse or the stock of merchandise.

It is very easy to start a dropshipping

Even someone who does not have any knowledge of this subject can start an online store of this type. As I mentioned before, the investment is minimal, and you can also outsource absolutely everything.

You can leave the creation of the website in the hands of a specialist, find someone to take care of the marketing and even pay someone to do the minimal management that this business needs. In other words, if you want you can have your dropshipping and make a profit without having to invest any time in it. Although this, of course, will cost you more than making the arrangements yourself.

It is an easily scalable business

I end this review of the advantages of dropshipping with one that I find particularly interesting, and that is that it is an easily scalable business. From the beginning you can sell anywhere in the world, and as you reach agreements with suppliers you can have more and more products in your store.

In fact, you can also diversify and, once you have your store running, you can create others to sell different or complementary products.

Disadvantages of dropshipping

So far everything you've read sounds good, right? But you know that I like to be as objective as possible on these issues. And that is why I have no problem when it comes to highlighting the negative aspects of the formulas to earn money that I am talking about in this blog. So make yourself comfortable or comfortable because we are going to see the inconveniences or disadvantages that this system has.

The profit margin is limited

When I explained what dropshipping is, I told you that as the owner of the store you barely do anything. The important work, which is related to stock control and shipment of products, is managed by the supplier.

Having fewer responsibilities also means having less earnings. As you can imagine, you will not get the full amount of the sale made through your store, but only a commission.

Also, you don't always have the freedom to set prices. And in those cases where you can do it, you find that there is so much competition that you have no choice but to lower your prices if you want to make sales, which further decreases your profit margin.

You have limited control over quality

An entrepreneur who has a traditional-style e-commerce is lucky to be able to see and try first-hand all the products that he is going to make available to his customers. This lets you know whether or not they are of sufficient quality.

In the case of a dropshipping owner, this possibility does not exist, because the entrepreneur never gets to see the product, so he cannot really know if he is selling a quality product or not.

The only way to see the product would be for you as the owner of the store to place an order with the supplier (paying for them) and send those items to your home. But since online stores usually have a fairly extensive catalog of products, this is not feasible.

Customer service issues

In a dropshipping you are not in charge of stock and shipping, but you are in charge of a management task that is quite complex: customer service.

The final consumer does not know that they have made their purchase through an online store that works with this system that we are analyzing. So, if you have any questions or complaints about your order, they will contact you, the owner of the store.

In this case, you encounter the problem that you cannot know at that moment what is happening with your order, so you will have to contact the supplier. This makes it take longer to solve the incidents. It is something that customers do not like at all and that could lead them to issue criticism that affects the reputation of your business.

Managing shipping costs is complex

It happens in those cases in which you work with several providers. It may happen that a customer orders products from different suppliers in your e-commerce that are also located in different parts of the world, so the shipping costs will be different.

In a competitive environment where consumers want to pay as little for shipping as possible, not being able to offer a clear policy on how much shipping will be from the start can cause you to miss out on sales.

You have to work on SEO, and that is not something easy

Unless you are lucky enough to be able to pay a specialist to take care of everything related to online marketing and web positioning, you are going to have to do this job yourself.

And I warn you that it is not an easy task. Getting a website to rank on the first page of Google takes time, as well as knowledge about SEO.

What I want to tell you with this is that if you don't know about positioning, you will have no choice but to invest in hiring a professional in the field, and this may be an expense that you have not taken into account. If you do not do so, you will not get the website to be found by your potential customers and therefore you will not make sales.

Depends on the service offered by the provider

When undertaking in this sector it is normal to want to look for a provider that offers interesting products and a good commission. But don't forget to check their reputation.

As the owner of the store, you will be responsible for the errors made by the supplier. If the merchandise does not arrive on time, arrives defective or the proper guarantees are not applied, customers will go directly against you. An angry customer can ruin your reputation, which would lead to a significant drop in sales.

Therefore, in dropshipping you do not depend only on your work. You also depend on a third party that you will never be able to control, and this is not a good thing.

How to start and how to run a dropshipping business?

Choose a market niche

This is one of the most important decisions you must make before embarking on the world of dropshipping. The first thing you have to be clear about is what you are going to sell in your store and if that product is in demand.

A good way to resolve your doubts regarding this topic is to do a small market study. Analyze the demand for the product, but also the competition that already exists and the average price of those products. If it is a very low price, you may earn very little with each sale.

Tools like Google Trends or Google's word planner can help you see what's in style, and even detect needs that aren't covered right now.

Choose a dropshipping provider

Now that you are clear about what you are going to sell, it is time to look for the most suitable supplier or suppliers. There are many specialized websites on this subject, but Oberlo is one of the best.

In these lists of suppliers you can see opinions about them and find out about important aspects such as the commission they pay for each sale, the shipping costs that apply and the contracting conditions they offer.

Keep in mind that in the store owner – supplier relationship, the dropshipping owner is always the weaker party. You will have little chance of negotiating with suppliers, especially at the beginning of your professional career. In most cases they will offer you a standard contract.

Watch out for this! No matter how standardized the contract is, read it well. And if you have doubts, consult a specialist. Never sign anything you do not 100% understand .

Create your online store

At this point, it is time to shape your idea and create the online store. First you will have to buy the domain, then you will choose the hosting and then you will start working on the web .

This is the most technical part, and if you don't know much about ecommerce, you may have problems with the design of the page. Therefore, my advice at this point is to make a small investment and leave the creation of your web store in the hands of a true professional. You will save time and trouble.

Start promoting your business

It seems that you already have everything ready, but in reality it is not so. Once the web is created, the really hard part begins, working on online marketing and SEO so that the page is well positioned and can be found by people interested in acquiring what you sell.

This implies working in different areas:

  • SEO (search engine optimization)
  • SEM (search engine marketing)
  • influencer marketing
  • Social networks
  • email marketing
  • content marketing

See if this work of promoting your website is important, which is what you are going to dedicate most of the time you invest in your online store.

Monitor results and make adjustments

With your online dropshipping store up and running, another task that you have to perform on an ongoing basis is monitoring the results. It is about analyzing your website and the volume of sales to see if the efforts you are making in marketing are effective. If you see that something you do is not getting the expected results, you have no choice but to take action and make changes.

Monitor your online store and make accounts from home.

Some tips to enter the world of dropshipping on the right foot

So far the part that we could consider more technical, but I did not want to finish this article without giving you some tips that can be very useful if you finally decide to try your luck with this way of earning money.

Spend time on your project

One of the keys why this system is being so successful is that it allows you to launch an online store in a very short time, but when it comes to rushing, they are never good advisers.

What I advise you is to spend all the time you need to research this system and the products you could sell. We are all tempted to set up a store to sell that product that we love so much. But there may be a lot of competition or very little demand, and in that case it would not be a profitable idea.

When it comes to undertaking, you must always be objective. Do a good analysis of the market and make your decision once you have analyzed all the possibilities.

Meet your tax obligations

Don't let the illusion of having your own online store blind you to your legal responsibilities. No matter what you read out there on this subject, if you are going to have a dropshipping you have to register as a freelancer yes or yes, register with the Treasury, and then periodically comply with your tax obligations.

Focus on a micro niche

If it is your first experience with online commerce, it is best that you choose a micro-niche. The more concrete, the better. This makes management much easier. If things go well, you can grow your store over time or even set up another one to sell other products.

Get trained in digital marketing

You are your best investment. The best way for a dropshipping to be successful is for there to be a well-trained entrepreneur behind it.

In order to sell, you must have your website well positioned and have made it known. That is why having knowledge about web positioning and digital marketing is essential to achieve your goals. Train yourself in this matter and you will see how it is easier for you to achieve success.

Having a dropshipping is not within everyone's reach

There is one last thing I would like you to keep in mind. It is true that setting up an online store and applying this sales system without stock is not too complicated, but personally I consider that it is not something that is within everyone's reach.

If you start from scratch with knowledge of digital marketing and ecommerce, it will be very difficult for you to have a successful store. In fact, in this case your only chance to make money would be to outsource everything, and have someone else run the store. This is an interesting option to have an income that would be truly passive, but in order to do so you need to make a significant investment.

My recommendation in this case is that if you want to try it, do it in the simplest way possible. Creating a micro-niche store and working with a single provider. You may not earn a lot of money at first, but you can learn as you go. And with all the experience you gain, you can set up a much more ambitious dropshipping in the future.

So, do you dare to try the dropshipping business?

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