Can you still make money with dropshipping? Many people have tried it, and many have failed. Before you get into it, it makes a lot of sense that you look at the numbers and make an informed opinion.
While it is true that many people made money with dropshipping, there are also more who lost a lot. And when people lose money on a business, their immediate reaction is to point blame on others, calling dropshipping companies such as Shopify a scam.
There are also those who took dropshipping courses, opened up a store, and never made a single sale. With a lot of dropshippers competing against you, can you really make money with this business model?
What is Dropshipping?
Dropshipping is a business model where you look for a supplier for a product you want to sell. This supplier has the product readily available, or he can manufacture the goods upon short notice, and he keeps these goods in his warehouse.
You, as the seller, will sell the manufacturer’s products in your online store. If a customer orders, that is the time that you place the order to the manufacturer or supplier, and then the supplier will ship the order to the customer.
It is a great business model because you do not have to rent your own physical sore. You do not have to pay for rent for a warehouse, and you do not have to pay for the goods before they are sold.
You make a profit for selling the item at a higher price. If a supplier is selling the goods for $10 plus $5 shipping, you buy it for $15, and then you sell it for $25. You keep the $10 profit. If you want, you can even raise the price higher.
So, why do people fail? And with this business so easy to do, which means many people are doing it, will you still make money?
In 2017, it was estimated that 23% of all online sales globally were made through dropshipping. If you think all the products in Amazon are directly supplied by the product manufacturer, then you are mistaken. Many people who sell on eBay and Amazon actually do not have the inventory with them. They sell products and order them only after you have made the purchase.
23% of global online sales means about $85.1 billion. That is a lot of money. Also, about 33% of all online stores globally are run by dropshippers.
E-Commerce keeps on growing. Today, you can buy anything online. You can even order your toothbrush and your groceries online. Online sales grows at a steady rate of 17% per year.
What this means is that more and more customers are leaving brick-and-mortar stores, and they are now feeling more confident buying online. This includes gifts, clothing shoes, hobby items, furniture, and so much more.
As more and more customers buy online, more doors of opportunities open for dropshippers. With new people getting employed each year after college graduation, there are more people who will have the buying power to spend money on items they need, or items they want.
How Money is Made in Dropshipping
The simplest explanation to make money in dropshipping is to calculate the difference between your expense and your capital.
The problem is, people do this wrong all the time. They only think about adding a price markup against the cost of the product plus the shipping, but they never even consider the cost of their own time, the cost of marketing, and the cost of maintaining an online store.
If the item you are selling costs $15, and that already includes shipping, you would be happy to add $10 to it and make a $10 profit.
Later on, you will realize that you are not making any money. You also have the challenge in finding leads, generating sales, and managing your online store.
The most dangerous mistake a person can make is to think that dropshipping is free. While it is free to build a website, free to find a product, and free to upload your products on your store, it is not free to process payments. It is not free to advertise, it is not free to find leads, and it is certainly not free to have unhappy customers who demand a refund.
Dropshipping is a serious business. Only those who are serious will succeed in it. And like any serious business, you will only earn money if you spend money.
Not Learning is Dangerous
Many people fail in this business model because they watched a YouTube video for 15 minutes, spent another 15 minutes finding a product, and then spent the next two hours building a website.
After that, they expect sales to come in. As the sales do not come in, they start advertising on Facebook or Instagram. They start paying bloggers and graphic artists.
Still no sales.
While experts make sound easy, convincing a potential customer to part with his money is not easy. You need to be a trustworthy person for a person to pay you for a product. To begin with, you are not a known brand.
Generating sales, finding leads, getting your name out there, putting your website on the first page of Google, and doing your ads right are just a few things that you need to learn. And not just learn, you need to become good at them.
Little learning is dangerous. Just because you watched a video does not mean you are now capable of putting up a business.
The same applies to people who bought a course. Just because you followed the instructions doesn’t mean you will succeed. Think of the course as a college education. Not all who graduate in college will get a job that is relevant to their course. Your success depends on you, not Shopify or the dropshipping expert who taught you lessons about the business model.
The Importance of Doing Things Right
So, can you still make money with dropshipping?
The answer is a very positive YES, provided that you do things right. It takes patience to build a successful store, and here is a little guide that will help you get started.
- Select a niche and perform your research
- Choose a supplier
- Create a store
- Plan a business process
- Market your products
These are only five steps. While they sound easy, they really aren’t. Each phase is a difficult one, and you need to spend some serious time to study it and get it right.
When selecting your niche, you do not have to involve your emotions with it. Just because you love shoes does not mean you will be able to sell shoes so easily. You need to perform research to know what people are buying. Are they buying rubber shoes or stilettos?
If you know what sells, you need to find out where the customers are coming from. Just because the US is the biggest economy does not mean you will be able to sell your products there.
When choosing a supplier, you need to investigate if this supplier is trustworthy. You need to buy the product yourself. One mistake that many people do is that they do not order the product. As such, they do not experience the actual shipping time, and they have no idea if the product is of poor quality. They also do not know if the supplier accepts returns and issues refunds.
A store is the first thing a customer sees. A bad design will make your customers leave. Make a store that is professional to look at, and take your time building one. Make sure that your store is responsive, and that the load time is quick, so customers do not have to wait for an eternity to load your product pages.
Next, you need to have a plan. How will you order the products? What is the timeline that you can commit to your customers in shipping and processing? Think also of your customer service strategy, along with how much you are going to price your products for sale to ensure that you make a profit. A business process is nothing more than a standard set of actions so you can run your business smoothly.
Lastly, market your products correctly. Just because you created an ad and launched it on Facebook does not mean it will work. You need to study things like Facebook Pixels, retargeting, branding, SEO, and so much more. If done right, your advertisements will find their way to the right people, and you can expect to generate sales.
Dropshipping is a business model that works. Soon, it may even overtake other companies. It is a business model that makes products affordable because there is no need to pay unnecessary expenses like warehousing. There is also no need to pay a lot of employees because many systems are now automated.
If you do things right, you can make money in dropshipping. And not just money, you can earn a lot of money that will help you achieve financial freedom.
Franklin Hatchett has worked online in various industries over the years generating more than 8 figures online. Now he teaches entrepreneurs how to start there own thriving online business! Franklins goal is to now educate others on how they can benefit from Ecommerce!