How to Start up a Dropshipping Business (in your PJs)
Has someone been banging on about how they’re going to start dropshipping? Did you look up from your fish and chips when they said something about making money from home? You’re not alone! We love that kind of thing, too. At FindMeAStartup, we are constantly thinking of ways to earn passive income, researching them to death, then trying to decide if we can be bothered. Dropshipping is by far the closest yet that one of us has come to actually getting on with it.
Before we go any further, here’s some good and bad news about dropshipping.
The good news is that yes, it’s 100% a genuine way of earning legitimate money from the comfort of your couch. It’s even something students can do without signing up for stupid online crap that you can’t unsubscribe from until the Grim Reaper comes knocking. Without becoming a brick in someone else’s digital money-making, affiliate marketing pyramid.
The bad news is that it does require effort and some smarts. Let’s have a look.
I don’t understand dropshipping
If you’ve ever considered ‘making money on your laptop’, you’ve probably already thought about dropshipping, whether you’ve heard the term before or not. It’s likely that you’ve had a vision of yourself sitting around in your pyjamas, doing an occasional check on your laptop, and basically earning passive income. While the reality is not this straightforward, the idea itself is very simple and the UK e-commerce industry is worth over $150 billion, meaning there are actually a lot of different ways to go about dropshipping. You can buy stuff from Amazon/Ali Express and flog it on eBay for more (or variants thereof) but this article is about actually setting up your own retail store.
How does it work?
Dropshipping is a supply chain model that involves you setting up an online retail store, but getting someone else to deal with the inventory handling, packaging, and dispatch. It involves very little in the way of initial investment because you won’t need to stock massive amounts of whatever it is you’re selling in your back room.
In short, you set up a retail shop online and make some connections with a manufacturer (or online supplier), then get them to send the stuff to the digital shopper. You pay wholesale, charge retail, and keep the profits. Yes—it’s all about arbitrage.
How do I start?
First, think about what you’re going to sell. Which isn’t always what you’d like to buy. Try to think of a niche that isn’t too obscure (e.g. collars for black cats so they look like priests), and then Ask Jeeves whether your idea is feasible.
Just kidding—we’re pretty sure nobody’s asked Jeeves anything for a good while. Here is some actual advice:
- Think about your hobbies and interests. If you sell things you know about, you’ll be in a fantastic position to give advice and tips to potential customers. People more likely buy travel gear from an experienced backpacker than a paramedic, for example.
- Google your competition. You’ll be able to get an idea of whether you stand a chance or not. Maybe—just maybe—you aren’t the first to consider selling headphones online. If you don’t care, then you better have a strategy to beat your rivals.
- List ALL your potential costs. Depending on where you plan to source your products (think Amazon, eBay, AliExpress), you’ll need to consider fees like import taxes, postage and handling, packaging, and seller fees. All of this is on top of the wholesale price per unit of cat collar/fridge magnet/whatever. Note it all down!
- Work out your potential profit margins. How much can you really sell your product for? Do you have a rough idea of the wholesale costs per unit? After you have factored in different percentage markups, how much must you flog to make real money?
Where do I look for suppliers/manufacturers?
There are at least two main options if you are setting up your own retail site.
- Go straight to a wholesaler:
A very good place to start would be an online directory of wholesalers like https://www.thewholesaler.co.uk/. Sourcing your products from a local wholesaler cuts down on postage costs and means you can offer MUCH faster shipping. It also allows you to grill them (politely) to assess whether they are legit and provide all the services you require. Another benefit of sourcing from a wholesaler is that you can conduct your feasibility assessment before you faff around setting up an online store, which we will cover shortly. On the downside, due diligence requires effort, and a shoddy supplier can do stuff like run out of stock, decide not to sell it anymore, and basically let you down. Then your customers will get upset.
Note: Ask your potential supplier many, many questions—the most important of which will be: “Do you have a dedicated dropshipping service?” If they don’t, you’ll have to put in a lot more legwork getting the actual products to the actual customers, won’t you.
- Use a digital dropshipping solution:
Your other option requires you to start your online retail store first. Apart from this, it involves much less effort on your part, as you don’t have to find suppliers and manually post their products on your store. You just click ‘Import’, receive payment from your customer, then pay the wholesale price for whatever product it is.
Probably the most commonly used digital solutions is the Oberlo application, which you can look into at https://www.oberlo.com/. Oberlo works in conjunction with Shopify, which is one of the platforms that allows you to build an actual (online) store.
I don’t know how to build an online store
You know what? It’s cool, because it’s the 21st century. Here are some great potential platforms you can use:
WooCommerce & WordPress
“I’ve heard of WordPress!” Yep, and their parent company bought WooCommerce, so you can use a lot of WordPress templates with WooCommerce = less effort. You will need to pay for your own hosting, but it’s an option worth considering if you’re worried about your data being owned by anyone else. Prices will vary based on what WordPress themes you choose (billed annually) and what WooCommerce extensions you would like to enable, but WooCommerce itself comes as a free plugin that lets you start retailing right away.
Shopify itself makes it pretty simple to build your outlet, receive orders, and organise all your products. Hosting and domain names are included, too, but the big fat plus of Shopify is that you can use it with Oberlo. And it’s really simple for beginners. A basic Shopify plan will cost you $29/month as well as a small per-transaction fee. You can also choose Shopify Lite for $9/month (& transaction fees) if you want to start small, but you can only shift those cat collars through a button on social media—that means no actual online site.
Wix offers ‘drag-and-drop’ functionality that lets you easily design and preview your store. You can put lovely videos up to better sell your product, but it’s not a dedicated platform for online stores. That means it doesn’t offer as many different features as some other platforms, like Oberlo+Shopify or WooCommerce+WordPress compatibility. Subscriptions start at $20/month.
How do I get customers?
You can market your store in many different ways. Because digital marketing is a whole, massively intense ballgame of its own, we can only provide a few suggestions for now. If one of your friends has decided to start up a digital marketing agency, you can ask them to help. Otherwise, there are two broad categories when it comes to marketing approaches:
- Pay for digital advertising. Throwing money at it to make it grow faster through Facebook Ads, Google Ads, SSL, search engine registration, and paid backlinks on relevant, high-quality sites. The last few are related to SEO, but require your money.
- Get some organic traffic. This doesn’t involve buying ads or backlinks to your store, so it will take longer. Instead, you’ll need to use other free, off-site techniques to get people aware and interested. Things you can do include:
- Getting FFF (friends, family, and fools) to blog about your store, linking back to it;
- Going onto forums (that your target market care about) and talking about how your store is the logical solution to everybody’s problems—this happens a LOT on Quora, for example;
- Doing your own SEO, using keywords and content to rank higher;
- Advertising offline in logical places (e.g. local noticeboards, point-of-sale at stores that will allow you to do so); and
- Giving up and choosing paid digital advertising.
Food for thought
There’s a lot to setting up your own online store but we’ve done our best to cover at least some of the basics. It’s important to know that in no way, shape, or imaginable form is something like a supplier search covered by “Ask a lot of questions”, but it’s very likely Jeeves will be able to tell you more.
For us, the idea is tempting but still on the “Someday” pile. We’ll get there I guess. Maybe.