What Is E-Commerce Dropshipping?

E-Commerce Dropshipping

Final: E-Commerce Dropshipping

E-commerce dropshipping is a business model that allows people to sell online without stocking goods. The value of the global dropshipping market in 2021 stood at $155.6 billion, and it is projected to reach $1670.1 billion by 2031. So, the drop shipping industry has enough room for anyone looking to become a drop shipper.

This article examines e-commerce dropshipping, explaining its pros and cons and how it works. It also covers tips on being a successful drop shipper and the best e-commerce platform for dropshipping.

 

Key Highlights

  • Dropshipping is different from traditional e-commerce businesses because the drop shipper does not store products
  • To scale a dropshipping business, you need to use technological tools
  • Dropshipping does not need a lot of capital to start
  • The dropshipping process starts with supplier research and ends with the customer receiving their product
  • You can use either a self-hosting or hosted platform for your dropshipping website

 

What Is E-Commerce Dropshipping?

About 23% of all online sales are fulfilled by dropshipping.

Source: Fundera.com

 

Dropshipping has been around longer than most people know, going as far back as the ‘60s and ‘70s. It began with the rise of catalog sales and evolved with the invention of the internet. Today, it is commonly known as e-commerce dropshipping.

So, what is e-commerce dropshipping? It is a business system where sellers sell products they do not keep in stock. Instead, they buy goods from a third-party based on customer orders and have them shipped directly to the buyer. The purchase could be from a wholesaler or a manufacturer.

The primary difference between dropshipping and traditional e-commerce business is the custody of goods.

  • A typical e-commerce business has products in stock and sells directly to the customer when they place an order.
  • A dropshipping business serves as an intermediary between the buyer and the seller.

Also, a drop shipper can patronize a traditional e-commerce business on behalf of a client. With dropshipping, you don’t have to worry about where to store products. Instead, you only have to list them on your dropshipping website. The manufacturer or wholesaler delivers to the buyer.

Pros and Cons of Dropshipping

Pros

  • Does not require inventory, so you don’t have to worry about buying and storing products
  • Easy to set up once you have defined your niche and built your e-commerce and dropshipping website
  • Low overhead costs since you do not buy inventory or rent a storage space
  • Flexibility, as you are not restricted to a single niche, and can sell different products
  • Easy to grow since you don’t have to worry about having stock or meeting orders

Cons

  • Lower profit margins, especially if you have to pay more to use your preferred brand instead of your supplier’s
  • You do not have control over the quality of the product and shipment quality
  • Hard to track inventory, especially if your supplier does not have integrated retail management software
  • Dropshipping is very competitive
  • Not all suppliers are legit, leading to legal liability problems

 

How Does Dropshipping Work?

The average success rate of a dropshipping business is between 10% and 20%

Source: Appscenic.com

 

Here’s how the dropshipping business process works:

Search for Wholesale Suppliers

The first thing you must do is search for wholesale suppliers in your region. So, suppose you reside in the U.S. and want to target North America. Then, you must locate the wholesalers of the products you want to list on your website.

You can also research the manufacturers of those goods to determine if they ship directly to customers. Examples of global online suppliers include SaleHoo, 1688.com, AliExpress, Worldwide Brands, Doba, Sunrise Wholesale, Wholesale2b, Megagoods, etc.

If you’d rather not do the research yourself, there are apps you can use to connect with suppliers. The application will link to a supplier based on the products you want to sell. Once you have found a supplier, contact them and enter into an agreement. Final: E-Commerce Dropshipping

Create a Dropship Agreement With the Supplier

The dropship agreement should clearly state your relationship with the supplier or manufacturer. Also, it should contain the type of product you want to sell and how it will get delivered.

Furthermore, the agreement must state the payment structure for both parties, branding, and who is responsible for refunds. A dropshipping agreement protects the interest of the drop shipper, the manufacturer or wholesaler, and the customer.

Start Accepting Orders

Once the contract is ready, you can start accepting orders from customers. When a buyer orders a product, send them a confirmation. The confirmation lets them know they successfully placed the order and you are processing it. Ensure you include the estimated date of delivery.

Send the Order to the Supplier

The next step is to forward the order to the wholesaler or manufacturer. Include the specifics of the order, like the product, number of items, delivery address, etc. This will limit the chances of the buyer getting the wrong product. If you want your business’s branding, include it in the order. But note that it will attract additional costs.

Final: E-Commerce Dropshipping

If your supplier does offer branding services, you can ask them to refrain from branding the product. It all depends on the terms of your dropshipping agreement. Once the wholesaler gets the order, they will ship it to the buyer. The process ends when the buyer receives the product.

Before commencing the process discussed here, you must have a live e-commerce dropshipping website. Also, you must remember that dropshipping will not make you rich overnight. You must continuously dot your i’s, cross your t’s, and put in the work. Positive reviews also grow businesses, so you must have a seamless process and deliver quality products to customers.

 

All the Dropshipping Tools You Need

When starting a dropshipping business, there are tools you must use to scale your enterprise and keep up with the competition. They include the following:

  • E-Commerce Store Builders

These are tools that provide inventory, payments, shipping support, etc. E-commerce store builders are fast and easy to use. When  going for an e-commerce store builder, ensure it is scalable, affordable, and user-friendly. Examples are Shopify, WooCommerce + WordPress, Wix eCommerce, etc.

  • Supplier and Fulfillment Automation Tools

These tools help to manage the fulfillment process and optimize the supply chain. With this software, drop shippers can increase customer satisfaction, reduce human errors and save time. Examples of supplier and automation tools are Oberlo, SaleHoo, CJDropshipping, WooDropship, etc.

  • Product and Research SEO Tool

A product research tool, like Alishark, helps you research and identify the best products to sell on your  dropshipping website. It provides you with all the information you need to decide whether or not to sell a product. Also, these tools give insight into the type of goods your target market wants.

On the other hand, a keyword research tool shows you the keywords and phrases to use in your product description. It analyzes the terms people enter into search engines and uses that data to create the keywords list. Examples of product and keyword research tools are Google Trends, SellTheTrend, Google Keyword Planner, Ubersuggest, Yoast SEO Plugin, etc.

  • Project Management Tools

These tools help you manage and coordinate tasks effectively. You can also use it to track sales and structure your workflow. This software is crucial as your business grows, especially when dealing with different suppliers. Examples of project management tools are Asana, Todist, Trello, etc.

  • Tracking and Analytic Tools

These tools gather information on those who visit/use your site. Also, the software arranges the data to help you learn and understand the actions of your dropshipping website visitors. Examples of tracking and analytic tools are Google Analytics, Hotjar, etc.

  • Marketing and Social Media Tools

About 27% of online retailers dropship.

Source: Appscenic.com

Finally, you need marketing and social media tools to place your business in front of your target audience. With over 4.26 billion people on social networks, you can’t afford not to advertise your business on these platforms. Examples of marketing and social media tools are Buffer, Omniscend, etc.

 

Tips to Be Successful at Dropshipping

Globally, it is estimated that only 10 to 20% of dropshipping businesses succeed.

Source: Shopify

If you start a dropshipping business without a plan, you will find yourself drowning soon. Thankfully, there are steps you can take to make your dropshipping business a success. They include the following:

  • Select a Trending Dropshipping Niche

A niche is a specific segment of the market. Study other drop shippers in your country or the global industry to learn what they are selling. You can also research the products people buy more at a particular time.

For example, Malaysian drop shipper Tze Hng Chan made $19,000 in 2020 within two months by selecting a niche. He discovered bubble tea was breaking into the Asian market and started selling bubble tea plush toys.

  • Build a Professional E-Commerce Store

Being a drop shipper does not mean you should not spend time building a professional e-commerce store. Take good product photos, edit them, and write excellent product descriptions using keywords.

  • Take Advantage of Online Ads

Don’t rest on your oars after listing products on your dropshipping website. Use Facebook ads and other social media marketing strategies to advertise your products. You can learn from Cole Turner, who leveraged the power of Facebook advertising to scale his business and make $2 million between 2019 and 2020.

  • Provide Excellent Customer Service.

Customer reviews make or break a business. Therefore, ensure you build trust with your clients and provide excellent customer support. Answer their message promptly, and solve their problems timeously.

The Best E-Commerce Platform for Dropshipping 

PlatformShopifyBigCommerceWix
DescriptionShopify is a leading e-commerce platform for drop shippers. It offers a lot of benefits for different levels of drop shippers.BigCommerce is the best for established drop shippers who want to scale on their platforms. Using apps from BigCommerce App Store, you can convert an existing BigCommerce site to a dropshipping store.Wix is affordable, easy to use, and an excellent fit for those with a small dropshipping business.
Features
  • It is easy to use and has fast loading time
  • Shopify has complete website pages, including About Us, Return Policy, Privacy Policy, Shipping Information, and Shipping Calculator
  • It offers many integrations with different dropship suppliers
  • There is a fourteen-day free trial
  • There is no sales limit
  • There is no limit to the products you can list
  • It comes with its own hosting
  • It makes it easy to integrate with dropshipping suppliers
  • There is a 15-day free trial
  • BigCommerce does not charge transaction fees
  • Unlimited product hosting, but there is a sales limit
  • Users can create gift cards and get reviews from customers
  • User-friendly with a drag-and-drop interface
  • A lot of free themes
  • It has marketing automation
  • It integrates to the Modlyst marketplace making it easy to find dropshipping products
  • It is easy to add products
  • Users can connect with multiple suppliers from a single location
Customer SupportShopify’s customer support is available via phone, email, and live chat 24/7. It also has a community forum and knowledge base to help users find answers to frequently asked questions.BigCommerce has a live chat available 24/7. However, there is usually a long wait. So alternatively, you can access the active online forum and several videos and tutorials.Wix has 24/7 phone support. It also has phone support for specific hours of the day, from Monday to Friday, and it is available in different languages. Those with Russian tickets get email support.
Price
  • Basic: $29 monthly
  • Shopify: $79 monthly
  • Advanced: $229
  • Standard: $29.95 monthly
  • Plus: $79.95 monthly
  • Pro: $299.95 monthly
  • Connect Domain: $450 monthly
  • Combo: $850
  • Unlimited: $1,250
  • Vip: $2,450

 

Self-Hosted vs. Hosted Platform

Final: E-Commerce Dropshipping

A self-hosted platform is one where you  use a private web server to run and maintain your e-commerce dropshipping website instead of an outside service. On the other hand, a hosted platform involves using a hosting company’s server. So, for self-hosting, you are in control, while the hosting company is in control for hosted websites.

This section covers the pros and cons of each hosting platform.

Self-Hosting Platform

Pros:

  • You can control a self-hosted website and decide what feature to add and remove.
  • You can use as many free and paid plugins as you want
  • You can use as many themes as you like for a self-hosted website
  • It is easier to engage in search engine optimization and use SEO tools with a self-hosted website

Cons:

  • A self-hosted website costs a lot of money and going with a cheaper options means limited tools
  • Running a self-hosted website requires technical skills, and you constantly have to update and make changes yourself
  • You will handle the maintenance of self-hosted website yourself, and outsourcing it costs money
  • There is no customer support when you experience a problem.

An example of a self-hosted website is one using a VPS hosting plan. The owner will buy third-party hosting from a hosting service like HostArmadaor InterServer. If you are using WordPress, it must be WordPress.org, not .com, to qualify as self-hosting.

Hosted Platform

Pros:

  • Hosted websites are set up on paid platforms and are cost-effective
  • You can test a hosted website to see if it is a good fit before buying a plan
  • It is easy to create a hosted website, and there are in-built tools for regular updates
  • You don’t have to maintain a hosted website personally. The host company will handle the maintenance of your website.

Cons:

  • Some hosting platforms have hidden costs. Others charge for updates and additional features after one year, despite providing free hosting.
  • There is a restriction on the functionality of hosted websites. You cannot fully customize it to your preference, as the money paid determines the features and theme you access.
  • The host company can make changes to your website, which can interfere with your design.

An example of a hosted e-commerce dropshipping website is one built using WordPress.com. Also, if you share hosting with other websites, you are using a hosted platform, not self-hosting.

 

How to Set Up a Dropshipping Store

This section is a step-by-step guide on how to start an e-commerce dropship business.

Step 1: Pick a Dropshipping Business Niche

Final: E-Commerce Dropshipping

The first thing to do is choose your dropshipping business sector. You can’t just pick any niche you like. It must be a sector that is trendy and will make you money. Therefore, it is best to combine passion and profitability.

Research the products your target audience and demographic are buying and create a list. Some niches that constantly trend are fashion, jewelry, beauty, tech, backpacks, and fitness. A case study that shows the power of choosing a niche is Tim Kock.

Kock created a pineapple bracelet dropshipping business that failed. He entered the watch niche and made nearly $7,000 within eight weeks. In his words:

[Niche] validation is one of the most important steps when starting your own online business. This process will allow you to understand whether there is demand for your idea (product). If you skip the validation process, your business can end up being a waste of both time and money.

~ Nick Kock

You can use tools like Ubersuggest and Google Trends to research trending products and find your niche. However, note that you must find a specific product within a niche.

For example, suppose fashion is a trending niche. You can choose to sell denim only or denim and sneakers. The important thing is finding a product that sells.

 

Step 2: Conduct Competitor Analysis  

Final: E-Commerce Dropshipping

Before you came on the scene, dropshipping businesses already existed in your niche. Therefore, you must find out who your competitors are, what they sell, and how they run their businesses. Again, there are tools to help you with this.

For instance, if you want to sell denim, go to the Google search engine, and enter the search term ‘dropshipping businesses selling denim’. The first ten results are the top sites offering denim dropshipping.

You can also make the search term location specific to see your competitors in your country. Tools like Ahref and SemRush are great for conducting competitor analysis.

Step 3: Find a Supplier

Final: E-Commerce Dropshipping

Without a supplier, you cannot have a dropshipping business. Therefore, you must carefully research your supplier to ensure you have good quality products. AliExpress is a great place to find a supplier and speak with at least five or six suppliers before choosing one.

Make a sample order from each of them and compare the results focusing on product quality, shipping time, and packaging. If you want to sell branded products, also use it as a criterion when choosing a supplier.

Step 4: Build a Dropshipping Store/Website

Final: E-Commerce Dropshipping

  • Start by picking a domain name, focusing on one that ends with .com.
  • Next, sign up on a dropshipping platform or build a website using self-hosting or hosted software.
  • When your website is ready, start listing products, beginning with 10-25. You can increase the number as your business grows.

Step 5: Market Your Dropshipping Business

Final: E-Commerce Dropshipping

Use different digital marketing channels to market your site and products. Take advantage of Facebook ads, Instagram, TikTok, email and content marketing, etc. You can also connect with an affiliate marketer or use influencer marketing. Finally, keep optimizing your site using paid and unpaid SEO.

Best Practices for Setting Up a Successful Dropshipping Store

Do the following to set up and have a successful e-commerce dropshipping business:

  • Provide value to your customers
  • Have a solid marketing and SEO plan
  • Choose a niche and focus on a product within that sector
  • Have a long term plan for your business
  • Offer quality products and services to customers
  • Enjoy the process and don’t get stuck on the details

 

Dropshipping and Customer Service

89% of consumers will likely make another purchase after a positive customer service experience

Source: Salesforce

 

Excellent customer service is crucial to keeping your customers loyal to your business. It will also help you gain their trust and get positive reviews. There’s also the part of referrals, with satisfied customers marketing your business through word of mouth to family and friends.

If you have poor reviews from customers, not only will they not recommend you, they will go to your competitors. Therefore, you must provide excellent customer service always, and make yourself approachable.

The following tips and best practices will help you effectively manage your customer service:

  • Engage with customers before they contact you. Send an email after delivery and let them know you are available to help if there is a problem.
  • Treat customers with respect and calmly address their complaints.
  • Work on improving areas of your business with negative feedback.
  • If you have employees, educate them on the customer service standards, especially those who handle phone calls.
  • Invest in customer relationship management software
  • Streamline communications and be available at all times

Note that it is the drop shipper that provides customer service to the buyer. This is because the customer is dealing directly with them and not the supplier. If there is a complaint about a product, the buyer cannot contact the supplier as they did not buy directly from them. Instead, the drop shipper will contact the supplier’s customer service team to find a solution.

 

Conclusion

The e-commerce industry has grown a lot, but business owners still face challenges. The problems range from difficulty in generating consistent leads to finding ways to integrate their products. Thankfully, these challenges are solvable.

Get the right technology for your business and integrate advanced tools. Ensure you are up to date with the latest trends in the e-commerce industry and are constantly improving your site and services. As a drop shipper, follow and implement the steps and solutions discussed in this article to improve and scale your business.

 

Next Steps: What Now?

These resources will help you take the practical next step in your e-commerce business:

 

Further Reading — Useful Resources

Frequently Asked Questions

Which e-commerce platform is best for dropshipping?

Shopify is the best e-commerce platform for a dropshipping business, with over one million sellers in 175 countries. It is an all-in-one SaaS solution that allows you to build your site without technical knowledge and start selling products immediately. Also, it enables integration with supplier tools, has excellent customer service and learning materials, and offers competitive pricing.

Is dropshipping good for beginners?

Yes, dropshipping is a perfect option for first-time entrepreneurs without experience in e-commerce. You can create your dropshipping business on your terms and dictate the time you dedicate to it. Also, e-commerce dropshipping can be a side business combined with other ventures like affiliate marketing, and it is low risk.

How much money should I have to start dropshipping?

You don’t need so much money to start dropshipping. You can start with $100, less, or more depending on your ability to capitalize on free trials and starter plans of e-commerce platforms. However, you will spend more if you choose to build a website from scratch and host it yourself. Ultimately, your needs determine the amount you spend.

How do I find the best products for dropshipping?

There is no best dropshipping product. Instead, you need to find a niche that sells and pick a product. Ensure your chosen product will appeal to your target market and place profitability over your passion. Also, it helps to go with a niche with high search volume but low competition.

Rackspace Customer Support 2024 - How to Contact Rackspace Support

Rackspace is a leading cloud computing services provider. But does Rackspace make technical support a priority? Read this article to learn about a...
5 min read
Mary Emasah
Mary Emasah
Hosting Expert

OVHcloud Customer Support 2024 - How to Contact OVHcloud Support?

OVHcloud offers top-tier cloud hosting infrastructure powered by modern data centers around the world. But what kind of support do they offer, and...
4 min read
Mary Emasah
Mary Emasah
Hosting Expert

DigitalOcean Customer Support 2024 - How to Contact DigitalOcean Support

DigitalOcean is popular as a top-tier cloud hosting provider. Thankfully, their sales and technical support are just as great as their hosting sol...
5 min read
Mary Emasah
Mary Emasah
Hosting Expert

Afrihost Customer Support 2024 - How to Contact Afrihost Support

Afrihost is a one-stop location for a number of services, including web hosting, domain registration, and website building. This article will expl...
4 min read
Mary Emasah
Mary Emasah
Hosting Expert
HostAdvice.com provides professional web hosting reviews fully independent of any other entity. Our reviews are unbiased, honest, and apply the same evaluation standards to all those reviewed. While monetary compensation is received from a few of the companies listed on this site, compensation of services and products have no influence on the direction or conclusions of our reviews. Nor does the compensation influence our rankings for certain host companies. This compensation covers account purchasing costs, testing costs and royalties paid to reviewers.
Click to go to the top of the page
Go To Top