Whether you’re already active in the world of ecommerce or looking to delve into starting an online store, you’ve probably heard the term dropshipping. It has certainly maintained its lead as one of the hottest trending topics in the industry in recent years.
The number of Wix stores connecting dropshipping to their accounts grew by over 123% YoY in the first half of 2022.
In this dropshipping 101, we’ll explain the ins and outs of dropshipping and everything you need to know to start dropshipping like a pro. It includes:
What is dropshipping?
How dropshipping works
The pros and cons of dropshipping
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What is Dropshipping?
Dropshipping is a form of retail fulfillment that allows you to sell products without managing, stocking, or shipping inventory. Instead, you connect with dropshipping suppliers and source products to sell online. Customers pay on your site, then you forward the order information to the supplier and the supplier fulfills the order.
Unlike traditional online retailing, dropshipping eliminates the need for the merchant to fulfill their orders. That means you skip the time and cost of manufacturing products or acquiring inventory, stockpiling inventory, and shipping to customers. One of the main benefits of dropshipping is that it simplifies the fulfillment processes for sellers. It can also reduce initial overheads and expenses, which is important for entrepreneurs setting up an ecommerce startup business, especially those working on a shoestring budget.
On average, Wix stores that add dropshipping products increase AOV (Average Order Value) by 40% and sales revenue by 79% within the first 4 months.
However, to be successful, you need to do your research and choose your dropshipping suppliers and products carefully. Our guide to the 20 best dropshipping products to sell online will help you learn more about how to research and choose products for your dropshipping business.
So as a dropshipper you may be wondering, if your delivery and fulfillment are taken care of, what is your role as an entrepreneur? There is still plenty to do. You need to research the market, choose the right products, build your online store, calculate your profit margins, run targeted marketing campaigns and provide great customer service. An all-in-one platform like Wix eCommerce can help you manage these steps.
How Dropshipping works
Most all-in-one ecommerce platforms, such as Wix, offer easy integration with a range of Dropshipping suppliers and print-on-demand companies, such as Modalyst, Printful, and Printify. After you’ve chosen your vendor and connected their app to your online store, here are the next steps to consider:
Choose products. Browse dropshipping marketplaces to find the right products for your business. Use keyword searches and filters to narrow your options and choose products that appeal to your target audience and align with your brand values.
Import items to your online store, develop a dropshipping pricing strategy and set your prices. You have full control over your offers and profit margins.
Accept orders from customers. Import your chosen dropship items into your online store inventory and make them visible to your shoppers. Now customers can find, checkout and pay for the items they want on your site.
Forward customer orders to the supplier. Submit your customer orders and shipping information to your supplier. Then pay the dropshipping supplier on behalf of your customer.
Send and fulfill orders through the supplier. Your supplier ships every order directly to your customers’ addresses. You will be given a tracking number in the system so that you can keep your customers informed. If the supplier offers white label shipping, you can even use your branding on the packaging.
Sounds simple, right? That’s because it really can. However, there are some important factors to consider that will affect your chances of success with dropshipping. When you choose to dropship, you put your product inventory and to some extent your company’s reputation in the hands of a third-party supplier. That is why it is so important to find a reliable supplier and good quality products. We discussed this in more detail in our blog post on the best dropshipping products to sell online.
The pros and cons of dropshipping
Now that you know a little bit about dropshipping, it’s time to determine if it’s right for your business. Here are some factors to consider:
Reasons to dropship
01. Start Selling With Less Capital
You can simplify the process of starting an online store by opting for dropshipping. When retailers start their business venture, they usually need to pre-purchase and have warehouse inventory. Instead, when you dropship, your suppliers take on these costs, meaning you don’t have to commit large amounts of capital to start selling online. Simply set up your online store, connect to a payment provider, integrate with a dropshipping supplier, and choose your products.
02. Worry-free warehouse management
You don’t have to fill your garage with stock. Your suppliers are responsible for the storage and shipping of your products. Not only will you save money on storage facilities, but you’ll be able to expand your product offering because you’re not limited to physical storage space or geographic boundaries. Since production and storage are taken care of, you can spend your money on marketing and customer service.
03. Control anywhere
Without a physical connection to your products, you can manage your dropshipping business wherever you have Wi-Fi. Make sure you can quickly and easily get in touch with your suppliers and customers if there are questions about an order.
04. Develop your living lab
With dropshipping you can test a wide range of products and quickly adjust your stock to the latest trends. When you buy products from suppliers with no upfront costs, you can be more flexible because there is nothing stopping you from selling that product. If a product doesn’t sell, just remove it from your website and choose something else. You can also use dropshipping platforms to see what’s trending and quickly add it to your product offerings, allowing you to jump on a lucrative trend much faster than traditional retail models.
05. Scale Efficiently
If you’re getting masses of orders in a traditional ecommerce retail model, there’s more work to be done: sourcing, processing, packaging, and shipping the products. Since this entire process is the responsibility of the supplier, you can expand your business with less logistics and fewer staff. However, more sales always means more work at some point in the supply chain, be it website maintenance or customer support.
Reasons not to dropship
01. Lack of Quality Control
When you dropship, you need to be confident that your suppliers are sending your customers good quality products. But without inspecting each delivery yourself, it is difficult to verify. You also have limited control over the shipping times. Both product quality and delivery times can cause customer satisfaction issues for your business. To minimize this risk, make sure to use vetted and trusted suppliers through a dropshipping marketplace like Modalyst or Spocket that is integrated with your eCommerce platform. It’s also a good idea to order test samples so you can see if the products you’ve chosen meet your standards.
02. Customer Service Challenges
Customer service can be more difficult. Unless you have in-depth experience with the products you sell, questions may arise that you cannot answer. To resolve this, make sure you have a way to communicate directly with your suppliers. You also need to manage returns and exchanges. Depending on your supplier, you may also need to handle the refund process yourself.
03. Low Margins
The dropshipping market is very competitive. Its low barriers to entry, including low overheads and quick installation, make it an attractive option for entrepreneurs. With many dropshippers buying products from the same selection of independent and major marketplaces, you’ll likely find other companies selling nearly identical products to yours, and some at a lower cost. While this is a popular strategy for attracting customers and gaining a foothold in the market, lowering your prices in an effort to match the competition will only lower your profits.
Before starting your business, do your research to see what your competitors are selling and charging, and do your calculations to determine which products can sell at a higher profit margin. You may discover an alternative niche with greater earning potential.
04. Shipping Considerations
If you choose to ship internationally and purchase internationally, the shipping costs will depend on the location of your customer and supplier. If customers live far from where your products are stored, shipping will be more expensive. In addition, if you connect to multiple dropshipping platforms and a shopper purchases items supplied by different suppliers, for example a Printify t-shirt and Modalyst leggings, you will be charged a separate fee. Ultimately, you have to decide whether your company can absorb these costs or whether you should pass them on to your customers.
05. Limited customization
Dropshipping offers limited options for customization. Choosing products from a third-party supplier means you have no control over how the product looks, or how it is branded and presented to your customer when it ships. Without customization it becomes difficult to distinguish your product offering in a saturated market. To counter this potential problem, look for dropshipping suppliers that offer white labeling so they can fulfill your orders and ship your products with custom branding and packaging. Or use print-on-demand providers like Printful or Printify to create unique designs that can’t be found anywhere else.
How to make dropshipping work for you
Ultimately, there are many ways you can use dropshipping to build or improve your ecommerce business. You can:
Only sell dropshipping items. In the first half of 2021, the number of Wix stores selling purely via dropshipping online grew by 84%. Best-selling seller BWSS Fit uses a direct-to-consumer (D2C) model to sell high-quality fitness equipment to shoppers who want to stay fit and create a gym-style workout from the comfort of their home.
While other websites offer similar products, BWSS has worked hard to differentiate itself in an incredibly competitive market. Their easy-to-navigate website has strong graphics, helpful fitness content, and honest customer reviews. In addition, their transparency regarding their D2C business model, international suppliers and shipping estimates appeal to buyers willing to trade faster shipping times for a better price.
Use dropshipping to improve your store’s existing inventory. Think of a coffee roaster boosting their online sales by selling dropshipped espresso cups. Or a clothing store that sells custom t-shirts made by a print-on-demand company. This path is ideal for sellers who realize their business could benefit from adding additional items to their inventory, but don’t have the time or budget to buy them directly.
Sweet Mana is a skincare and lifestyle company with a wide range of products. The company’s ethos is very much about relaxation, mindfulness and healing the mind. While their main draw is their handmade botanical skincare, they use dropshipping to bolster their offerings into other avenues such as travel photography prints.
Increase your eCommerce business’ existing revenues by selling print-on-demand merchandise. Even if your eCommerce website isn’t primarily an online store — maybe you specialize in providing a service — you should still consider diversifying your offerings.
Little Tail Farms in Dunlap, Tennessee, is an animal farm, or so-called brick-and-mortar business, that uses dropshipping as an additional revenue stream. Website visitors who may wish to book a farm holiday or farm tour should not miss the Gifts menu, which takes them to the farm’s online store where they can purchase a range of branded items, from hoodies to phone cases, as a memento of their stay
Is drop shipping legal?
Dropshipping is completely legal. To be clear, you are selling products with the consent of the suppliers. Make sure you conduct fair marketing campaigns and comply with online VAT laws.
How do dropshippers make a profit?
As a dropshipper, you need to balance your costs and revenue. First, consider the wholesale prices of the products you buy and your marketing efforts. Then price your products wisely to ensure that you earn more than you spend on your dropshipping business.
The key to a smart dropshipping profit margin? Remember to stay competitive. Of course you want to cover your costs and generate income. Be sure to research the competition’s prices to get a reasonable range, then pick a profit margin that will win over customers.
How much does drop shipping cost?
There are 3 main costs to consider when starting a dropshipping business online:
Your eCommerce platform plan: $17-$35 per month with Wix.
Your website domain: $5-$20 depending on your domain name. With Wix, your domain is free for the first year when you upgrade to a Business and eCommerce Premium plan.
Your marketing: This depends on your strategy. Every Wix Business and eCommerce Premium plan comes with built-in professional marketing tools. Additional costs, such as targeted Facebook ads, can run about $79 per month.
Is dropshipping worth it in 2022?
That’s up to you. Do your research in selecting the best dropshipping products to sell, put forward your best business ideas and marketing efforts, and learn about the pros and cons of the dropshipping business model.
Dropshippers take minimal risk. It requires only a small investment, there is no requirement to order a minimum and it allows you to test new markets. In the best case scenario, you will start a successful online business.
So what are you waiting for? Personalize your online store, connect with a dropshipper and start selling today.