How Shopify Dropshipping Works?

Dropshipping is an ecommerce owner’s dream. There’s no manufacturer required, no storage warehouses, no over-producing and under-selling, and no responsibility to ship products out to customers. You choose a product, find a supplier, create a website with a storefront, and start selling.

Whether you’re using Shopify or taking an autonomous dive in, starting your own Shopify dropshipping business is actually that easy. You save lots of time and prevent the massive headache that often comes from dealing directly with inventory and shipment. 

And––this is the one everyone wants to hear––there is little financial investment required, unlike most other business models, which makes it low risk. You can get up and running in a few weeks selling hundreds products through numerous suppliers (that sounds ambitious but it is possible!)

But that doesn’t mean there aren’t a few key things you need to know and do throughout that process.

How do you choose a product? How do you know a supplier is reputable? How do you price and market your product, make customers happy, and keep the cash flowing?

We’re going to answer all these questions and more––let’s get started.

WHY SHOPIFY DROPSHIPPING

When you’re starting a business, one of the most important first steps is research. There are many business models to choose from in ecommerce - why choose dropshipping?

Dropshipping is a retail fulfilment model in which the vendor (you) sends purchase and shipping information to a third party, such as a wholesaler, manufacturer, or other retailer who then handles fulfilling the order: packaging and shipping the product. 

As the vendor, your role is to curate and market products; you don’t actually have any contact with the products themselves. However, to be well-invested in the process, it’s important to have samples of physical products.

Operating a dropshipping company is simple because your focus is the front-end of the business: design and marketing. We mentioned how little monetary investment is required, and that also applies to overhead costs––there aren’t really any. With no inventory to purchase, you don’t accumulate any storage or fulfilment costs. This means you can start a dropshipping business with virtually no money in the bank.

The ability to expand is an attractive reason to go the dropshipping route too. While you may begin with one or two products, you can add a variety of items to your store’s collection. Unless you want to focus on one item specifically, you’ll probably find that expanding product variety is a natural next step as you become more familiar and confident with the operation. This is especially true if you’re staying current with product research.

And for all the wannabe digital nomads out there - a dropshipping business can be managed from anywhere in the world so you have freedom of location. 


How do you choose a product?

Start by finding a niche. We’re big believers that you have to like what you’re selling for your operation to be successful and profitable. Given that, you must choose a product that is popular and will result in revenue. Otherwise, what’s the point? You may love cat-inspired footwear, but if no one else does, your business won’t even have a chance to fail. 

When you have a starting point, Google Trends can expose various possibilities and help narrow the focus. Browsing through other shops also gives you a view to what people are selling, how they’re marketing it, and if you’re going in with a critical eye, how you could improve the product or a customer’s experience with a particular offering. 

TikTok provides an effective measure of how popular a particular item is. TikTok has more than 1 billion users in 150 markets. It gives a view to the world’s shopping mall and buyer activity. But as its marketing score increases, so too do its sophistication, strategy, and rules. (Hint: if you’re going to get on the ecom bandwagon, make sure you have a presence on TikTok––soon.)

As you’re going about your daily life, wear two lenses: one for the consumer and one for the merchant. Regard everything you come into contact with as a possible product offering and analyse it from both perspectives. This not only starts a databank of viable ideas, it also trains your eye toward a more business-oriented view of buying and selling. 

One final tip: brainstorm products that people buy repeatedly. Then you can focus your efforts on establishing brand loyalty through email and remarketing campaigns to keep first-time buyers coming back for more.

How do you know a supplier is reputable?

If you’re cringing right now, it’s because this is a cringe-worthy subject. Finding a good supplier isn’t the easiest task in the world. It takes research, intuition, asking around, trust, and ultimately, experience.

There are a couple of ways to find a good supplier. One is contacting the manufacturer and getting a list of its wholesale distributors. Contact each one separately to get details on the dropshipping process. 

Another effective way to suss out a supplier is to talk to other ecommerce owners that use a dropshipping business model. If you don’t have many people in your network, join online groups and hunt through relative forums. Collect a shortlist and contact each one individually for information.

There are always a few ways to suss out whether a supplier is legitimate.

You want to make sure you’re entering into business with a legitimate wholesaler and not a retailer posing as a wholesaler. A Shopify expert writes, “a true wholesaler buys directly from the manufacturer and will usually be able to offer you significantly better pricing” (source).

Bad news wholesales (aka fake) tend to want ongoing fees, and they sell to the general public advertising “wholesale” prices. 

Legitimate costs include per-order fees to cover the expense of packaging and shipping individual rather than bulk orders. Most real suppliers will have a minimum purchase order amount too, which may cause some issues depending on your budget and your average order size. 


How do you price and market your product, make customers happy, and keep the cash flowing?

Obviously, this is a big question with a lot of layers. To answer it as simply and clearly as possible––research is number one when it comes to determining the right price point. You may also need to experiment with different prices to find the sweet spot. Check out the competition for a starting point, and while you’re there, go through their reviews like you’re performing a lice head check. 

Your customer is what drives your business so their satisfaction is key. The way to get that is by giving them what they want, when they want it, with as little fuss as possible. Your response to negative customer reviews is critical too.

Marketing your product offering takes some education and skill. Some people have a knack for it; others find it a grind. If you get stuck here, Shopify experts can help. We’re also ecommerce website specialists so we can help with design, set up, launch, and promotion. Call us now to book your free strategy consultation.


Posted on

August 7, 2020

in

Operations

category

Written by

Colleen Thornton

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