What Is Dropshipping? How To Start Dropshipping on Shopify

drop shipping is such a great business model for new and seasoned entrepreneurs because it lets you get started with a small investment generate passive income and work from anywhere today you're going to learn everything you need to know to begin building your first drop shipping business and all you need to get started is a computer an online store and some basic marketing knowledge [Music] now if you've heard about drop shipping you may have come across one of those sketchy video ads selling an incredibly expensive course promising to show you how to get rich overnight and that's exactly why we're making this video there's a lot of information going around on the internet about drop shipping and as the world's most trusted e-commerce platform we think it's incredibly important to set entrepreneurs up for success so today we're gonna arm you with drop shipping knowledge and strategies that you can trust then we're going to take you step by step on how to set up your first drop shipping business on shopify first things first let's define what drop shipping actually is drop shipping is a fulfillment model that allows you to buy directly from suppliers and manufacturers who will then ship the products directly to your customers this lets drop shippers focus on marketing and customer service instead of warehousing and the logistical challenges traditionally associated with running a drop shipping business in digital entrepreneur communities dropshipping has become such a notable model because it has so many benefits for those just starting out for one less capital is required and without the need to spend thousands of dollars up front on inventory drop shipping is a really accessible and less risky way to get into the world of e-commerce it's also a lot easier since you don't have to deal with packing and shipping tracking inventory or paying for a warehouse there's a lot less to worry about than other forms of e-commerce because you don't have to worry about these functions it's also easier to scale traditionally with retail businesses if you were to receive three times the number of orders you would have to do three times the amount of work and that's just not the case with drop shipping since you don't have to buy in bulk right away it's also easier to test the market a lot of drop shippers will actually list and sell an item to test the market before buying it in large amounts and as any seasoned entrepreneur will attest to validating your idea will save you a lot of heartbreak later the biggest risk is building and selling something that no one wants lastly in today's economy the ability to work from anywhere is really really attractive drop shipping does have a few challenges that are important to take note of the first is competition not having your own copyrighted branded products does leave you open to competition secondly supplier errors will happen leaving you to take responsibility for mistakes that you didn't make number three is lower profit margins since dropship products aren't exclusive it can be hard to command sizable profit margins number four is little to no customizability with drop shipping what you see on the supplier's site is often what you get lastly is longer shipping times with drop shipping don't expect two-day shipping while it can widely vary shipping can take anywhere from 19 to 35 days however epacket shipping can significantly reduce this and we'll talk more about that later in this video now that we've discussed the pros and cons of drop shipping let's get into how the model really works let's start by defining the roles throughout the supply chain first we have manufacturers and they're the ones that actually create the product then they sell it in bulk to wholesalers and sometimes to retailers then we have the wholesalers who buy the products in bulk from the manufacturers mark them up slightly and sell them to the retailers lastly we have retailers and they're anyone who sell products directly to the public at a markup notice how a drop shipper isn't listed in the supply chain that's because drop shipping is an invisible service it's not a role drop shipping works like this you as the retailer choose the product set the price put it in your online store and run advertisements to attract customers soon enough a customer sees your product and pays you retail price once that happens you notify your supplier pay them a wholesale price and they ship the product directly to your customer here's an example let's say you're selling resistance bands you find a supplier that sells them for fifteen dollars with shipping included then you put them on your online store for forty dollars with free shipping now when a customer places an order you pay the supplier fifteen and they'll ship the product directly to your customer using the information that you've collected then you get to keep the 25 in profit now you might be wondering why wouldn't your customer turn around and just go buy from your supplier well there are a few reasons the first is that manufacturers and wholesalers typically have what are known as minimum order quantities meaning they only sell in bulk also they will typically only sell to legitimate businesses and not give wholesale prices to the public secondly people aren't just buying your product they're buying your marketing the trustworthiness of your site and typically the lifestyle that your brand represents thirdly most suppliers don't focus on marketing and will typically require more effort to find than the average shopper is willing to expend now that you understand the basics of the drop shipping model let's talk about how to set up your first drop shipping store if you're looking to make a serious business out of drop shipping it's important that you set it up the right way as most suppliers won't actually work with you unless you're a legally registered business at which point you'll gain access to wholesale prices here are some of the most important steps for making your business legit decide on a business structure legally register your business set up a business checking account and credit card and lastly abiding by the tax regulations in your region listen i'm not a lawyer or an accountant and we don't have time in this video to go into this in depth but i'm going to link an article below that will tell you everything you need to know to get started step number two finding the right products all customers aren't created equally and finding the right products will really help set your drop shipping business up for success it's recommended that you look for a niche market a niche market is a segment of a larger market that has its own preferences identity and needs why are niche markets so powerful for drop shipping because they help you differentiate and ultimately reduce competition here's an example smartphone accessories for traveling content creators here are some general categories to get you started hobbyist products people absolutely love their hobbies and will spend mind-boggling amounts on training or tools that support them business products business clients will sometimes be more price sensitive but they will almost always order in larger quantities than individual consumers products with repeat purchases if you sell a product that needs to be reordered frequently then you can grow rapidly by establishing a loyal customer base in just a moment i'm going to show you how to use online tools to unearth profitable products but before that let's talk about some guidelines that will help you narrow your focus number one is pricing when picking a product we want to look for something that will be able to sell between the forty dollar and two hundred dollar price range and that's because this price range will allow us to maximize profit without having to provide extensive pre-sale support also impulse buyers generally buy things that are between this price range number two is minimum advertised pricing and this is when suppliers require that resellers price their products at or above a certain level if you can find a niche where this is enforced it's going to save you a lot of headaches and price wars with competitors later down the road you never want to be caught in a situation where you're in a race to the bottom number three is marketing potential how many ways can you brainstorm being able to market this particular product if you can't think of many it's gonna be a big barrier to customer acquisition down the line number four is accessories when people commit to making a larger purchase they are less price sensitive to high margin upsells think about it last time you bought a cell phone that was six hundred dollars buying that forty dollar phone case and twenty dollar screen protector seemed like a no-brainer i call this the do you want fries with that effect accessories can be a great way to upsell your customers and increase that average order value and revenue long term number five selling a product that's hard to find locally will increase your chances of success the reason for this is simple when people can't find a product at a store in town they turn to the internet lastly smaller is often better the smaller an item is the easier and cheaper it is to ship to your customers now that we have some principles laid down for finding the perfect product it's time to turn to online tools to be clear there are tons of unique ways to find products but these are some that have worked for us google is a great place to start for brainstorming product ideas as it will give you insight into what people are actually searching google's auto suggest feature will give you even better insight into long tail keywords another amazing tool for market research is answer the public which will give you insight into actual keyword phrases that people are searching for on search engines another great resource for brainstorming product ideas is simply going to online stores and checking out their curated product lists amazon's new and interesting finds ebay's trending on ebay and alibaba's first look at next season's products can be gold mines for product ideas you can also check out social shopping sites like pinterest fancy essence winello and etsy social shopping sites incorporate social aspects like product sharing and user engagement features that give you insight into how a product is popular at a glance another great way to generate product ideas is by creating a mind map mind maps are incredibly effective at getting information in and out of your brain mind maps stimulate great ideas by using a powerful graphic process that unlocks the dynamic potential of your brain while it may be old-fashioned if it's not broken don't fix it now let's talk about keyword tools it's much easier to fill an existing demand than it is to create a new one so once you have a short list of product ideas it's important that you validate them with hard data to do this you'll want to use a keyword tool like sem rush ubersuggest or google's keyword planner to gain insight into how many people are searching for that particular product if you'll be selling primarily in the us it's important that you focus on the local search volume and ignore the global results as that's where most of your customers will be if a search term has many variations that are actively searched for that's a really good sign that this market is fairly deep with a lot of variety and interest also keep an eye on the all-in title and how many results return for a particular term as this will give you a really good idea of how much competition you will face in this niche if you're using sem rush this process will be so much easier as their tool market explorer gives you insight into competitors keywords audience interests and demographics all at a glance once you've used all the tools i just mentioned head over to google trends to gain more insights take a look at the search volume over time ideally the niche you're entering should be growing then take a look at top and rising terms this will give you a snapshot about which related search terms are growing the fastest and which related search terms are currently the most popular after that take a look at geographical concentration which will let you know where people are located when they're searching for a particular term this is really powerful as it will give you insight into where your customer base for a particular niche are most heavily concentrated lastly take a look at seasonality and this part is crucially important if demand for product radically shifts at different points in the year you're going to want to know about it if you're starting a single product store make sure to really take your time to evaluate your product choice fully as it's really going to make the difference between your store sinking or swimming once you've chosen your product you'll want to take some time to conduct a competitive analysis too much competition and you'll have a tough time acquiring traffic and competing against established players too little competition and that can indicate a tiny market size which will really limit your potential for growth to conduct a competitive analysis run a google search and take note of the top ranking sites make sure to take a look at how they present themselves with their messaging imagery and design since backlinks are a large ranking factor for search engines running your competitors websites through link explorer is going to give you a really good idea of how hard it's going to be to outrank them 0 to 50 linking root domains will likely be the low end for most worthwhile markets 50 to 250 linking root domains will likely be the sweet spot for individual drop shipping entrepreneurs as it offers the best work to reward ratio and likely shows a decently sized niche market if there are over 250 linking route domains unless you're an seo ninja it's going to take some serious time and commitment to build that amount of unique links this isn't necessarily a deal killer but be prepared to go up against some serious players now let's talk about finding a supplier two of the most common approaches are to find a supplier manually by using supplier databases and the second is to use a shopify app that instantly connects you to thousands of suppliers for the latter we recommend a burlow a marketplace developed by shopify that connects you to products to sell this makes finding a supplier so much easier you can browse aliexpress and import products to your store with the click of a button here are some other handy features that this route offers access to millions of products fulfilling orders automatically easily monitoring inventory levels calculating inventory margins automatically shipping and tracking orders and measuring delivery performance here's a pro tip when looking for a supplier on a burlo look for ones that have e-packet shipping e-packet is a shipping option offered by third-party logistics providers that allows merchants to provide fast and affordable shipping for light packages while using an app like oberlo is undoubtedly simpler for new drop shippers there are some compelling reasons as to why you might want to find a supplier manually the first is lower shipping times by finding a supplier manually you can look for one that's in a geographic location that you are targeting and the second is control by finding your own supplier you'll have more control over packaging branding and quality it's important to note that finding your own supplier can take quite a while sometimes weeks and you'll also need to qualify the supplier yourself if you're going to go this route it's critical that you're able to differentiate between legitimate wholesale suppliers and retail stores posing as them a real supplier will buy directly from a manufacturer and will be able to offer you significantly better prices here are some red flags ongoing fees if a supplier asks you for an ongoing fee just for the privilege of doing business with them they're likely not legitimate and the second is they sell to the public if a supplier sells to the public they're probably not legitimate as a real wholesaler requires a wholesale account that you need to be approved for if they're selling to the public they're definitely selling at inflated prices there are a few ways to find suppliers manually the first is google but know if you do this you're going to have to search extensively wholesalers are traditionally terrible at marketing and promotion so you'll probably have to go into the double digits of the google search results pages you might need to try various search queries and make sure to use a lot of keyword modifiers like bulk distributor reseller and warehouse also when you find a supplier don't judge them by their website wholesalers are absolutely notorious for having poorly designed 90s style websites another popular way to find wholesalers is through supplier directories now these are online databases with pre-vetted suppliers and they usually charge a one-time fee for access some of the most notable supplier directories are worldwide brands doba salehoo and wholesale central as mentioned earlier it's really important that by this point you have your legal documents in order as a lot of legitimate wholesalers will require proof that you're a legal business before allowing you to apply for a wholesale account and revealing their prices here are several things that some suppliers might require per order fees to cover the cost of shipping and packaging and minimum order sizes which is the lowest number you'll have to purchase on your first order when qualifying suppliers here are some questions you should definitely ask do you offer drop shipping do you offer customization can you put my company's logo on the packaging do you offer private labeling are there any fees how should i send you orders as i receive them how will you invoice me for orders do you accept credit card payments and what is your refund and return policy for damaged or missing orders how long does it take for orders to be processed and shipped and lastly are you the manufacturer of your products when qualifying a supplier make sure to look for these things expert staff top-notch suppliers will have knowledgeable sales representatives who really know the industry and their product lines dedicated support representatives quality suppliers will assign you a representative that's responsible for taking care of any issues you might encounter they're invested in technology well there are plenty of good suppliers with outdated websites features such as an online catalog searchable order history real-time inventory and customizable data feeds are a pure luxury for an online merchant and they can really help you streamline your operations they can take orders via email well this might seem like a minor issue having to call in every order or manually place orders on their website can make processing orders a lot more time intensive they're centrally located a centrally located supplier can save you a lot of money on shipping fees long term and allow you to promise consistently faster delivery times they're organized and efficient some suppliers have amazing staff and great systems that result in efficient and mostly error-free fulfillment but there are others that will literally botch every fourth order the trouble is it's difficult to know which is which until you start working with them if you're not using the oberlo app which fulfills orders automatically every supplier is going to have a different communication method which they prefer for fulfilling orders whether they prefer excel email instant messaging or have their own unique login system don't worry the supplier will help you get all set up luckily shopify also has an option to help automate this process by adding a custom fulfillment service in the back end regardless of whether you're using a burlow or finding your own supplier it's definitely recommended that you test the product before selling it although you'll probably have to pay for samples but this is a small cost to make sure that your customers will be satisfied regarding payment the vast majority of suppliers will accept payment in one of three ways credit card paypal or net terms which means you have a certain number of days to pay the supplier for the goods you purchased if you go with net terms you may be required to give them some documents as they are effectively lending you money sometimes your supplier is going to mess up it happens and when it does it's important that you take responsibility for their mistake and remedy the issue by providing customer support the internet has always been a fairly transparent place but the rise of social media has made your business reputation even more important if you don't treat your customers well they'll often let the entire world know including potential customers the biggest customer service risk for drop shipping merchants is having tunnel vision on per-order profits and losses when fulfillment issues go awry it's critical to accept that drop shipping can get a little messy you'll be paying to clean up these messes and you shouldn't try and pass these costs onto your customer if you aren't occasionally losing money on individual orders to make your customers happy well you're probably not providing very good customer service however just because you take responsibility for their mistake doesn't mean you have to pay for it in these situations try reaching out to the supplier and seeing if they can help you make it right now let's talk about marketing products the number one frustration that new e-commerce merchants face is lack of traffic to their stores too many merchants spend months making the perfect website and creating the perfect brand only to launch it to a world that doesn't know they exist as it turns out the build it and they will come mentality does not apply to the world of online businesses marketing and driving traffic is absolutely essential to the success of your business and you need to take some initiative to make this happen this is particularly important during the first 6 to 12 months of your existence when no one knows who you are following your site launch you need to dedicate 75 of your time to marketing traffic generation and seo for at least six months it's really easy to get caught up in perfecting your site design or perfecting that logo but marketing is ultimately what's going to move the needle now let's get into some marketing basics first we'll start with crafting a value proposition crafting a compelling offering is a key place to start because it's this messaging that's going to fuel your marketing campaigns a value proposition answers why someone would buy your product for example this is the value proposition of slack be more productive at work with less effort here are some value prop elements that might inspire you price quality features benefits a feeling a solution to a problem exclusivity slash a patent customer service or convenience once you've crafted a compelling value proposition then it's time to create a customer profile that will help you focus your marketing efforts and that's because there's a lot of ways to get people to your website but we're only interested in attracting people who will buy what we're selling so first you need to ask yourself these questions what niche market are you targeting for example if you were selling cruelty free cosmetics your niche market would be conscious consumers then you need to ask what are your customers interested in for example let's say you're selling hiking boots we can reasonably assume your customers are interested in nature also how do your customers behave what books do they read what sites do they use where do they hang out if you're selling cell phone tripods chances are your customers hang out on tick tock lastly be mindful of demographics age gender location and marital status for example if you were selling sports themed beverage coolers the demographics might look something like middle-aged married men located in american suburbs once you've completed this it's time to actually begin marketing here are some of the most common marketing channels that dropshippers find success with paid advertising influencer marketing affiliate marketing content marketing and communities there's so much to cover with each one of these marketing channels we couldn't possibly do it justice in this one video so make sure to hit that subscribe button because we're going to be doing dedicated videos for each marketing channel for now the most important thing to remember is to adopt the mentality of a scientist and methodically test value propositions and marketing channels until you unearth the ones that work for you it's important to remember that every product and every brand is different and there really isn't a one-size-fits-all approach now let's talk about conversion optimization and increasing your average order value since you're sending people to your site you're going to want to make sure that your product pages are optimized because you want people to actually buy a product page can really make or break a buying decision here are some quick best practices first let's talk about price setting a price slightly higher than your competitors can be a great strategy as it can increase the perceived value of your product we wouldn't recommend being the cheapest thing on the market as it will ultimately be a losing game and just slowly eat away at your margins building trust will be a vital component of increasing your conversions reviews and testimonials customer generated photos and money back guarantees are all powerful ways of building trust and reversing risk for your customers urgency can be a powerful technique for increasing conversions using flash sales and letting customers know there's a limited quantity of an item can help them adopt a scarcity mentality and put them on a time crunch and this can really help them make a purchase decision a lot faster using relevant product recommendations to cross sell and upsell your customers can really help to increase the average amount they spend at your store per purchase another great tactic is order minimums offering free shipping on orders over a hundred dollars is a great way to incentivize your customers to add on extra items lastly we have loyalty programs offering your customers a discount or coupon for their next purchase is a great way to get them to keep coming back at shopify we think one of the most important things to remember is that just like any other business with shipping it's vital that you have a long-term perspective building a drop shipping business is just like building anything else of value it takes a significant level of commitment and investment over time to truly build something that is successful for some reason there's this myth that persists that people can build a six-figure passive income with just a few months of part-time work and that's just not the way it works thanks so much for watching and hopefully this video has given you everything you need to start your drop shipping journey and while beginning a store can feel daunting really the hardest part is just sitting down and getting started and once you have your drop shipping store comment below because i'd love to take a look give you some feedback and set you up for success also don't forget to like and subscribe so you don't miss out on more tips and tactics on how to grow your online business remember we're a channel for small business owners with big plans i've been your host tyler and i'll see you next time on learn with shopify

Channel: Learn With Shopify

Views: 367,842

Keywords: learn with shopify, ecommerce tutorials, shopify store, ecommerce business, how to make money on shopify, shopify dropshipping, dropshipping for beginners, shopify 2020, epacket shipping, how to start dropshipping, what is dropshipping, How To Start Dropshipping on Shopify, Dropshipping on Shopify in 2020, How To Start Dropshipping on Shopify in 2020, shopify dropshipping course, dropshipping for beginners no money, dropshipping explained, how to start dropshipping 2020

Id: GlKo6FlbkQw

Length: 27min 24sec (1644 seconds)

Published: Fri Sep 04 2020