How many times have you thought about starting an eCommerce store?
Doesn’t it feel a bit daunting? It should. Starting an e-commerce store isn’t a walk in the park, it’s hard work. It requires a good understanding of things like fulfilment, logistics and marketing, to name a few, but focusing on these elements before you even get started won’t get you anywhere.
Sometimes you just need to get started. Any action is better than no action at all.
You might have heard of drop shipping. Well if you haven’t – Drop shipping is a retail method in which you don’t keep products in stock.
Instead, you partner with a wholesale supplier that stocks its own inventory – you transfer customer orders and shipment details to them, and they ship the goods directly to the customer.
Instead of investing thousands of dollars into product inventory that may or may not sell, you can invest your resources into paid ads, SEO, and content marketing.
The idea of dropshipping is that a wholesale drop shipper (the supplier) offers you the option of selling products without buying them first.
They also act as service providers who prevent you from having to:
- Store items
- Package and ship items
- Risk money on items when you aren’t sure about how they will sell
But they don’t do all that for free! When you buy from a wholesaler offering drop shipping services, they add a fee to cover the costs involved with offering this service.
This is usually S$2-$25 per item, which means you must be careful when you think about the products you want to dropship, as there are some items which are much more suitable for drop shipping than others. We suggest going for:
- Deep niches such as rear brake lights for late model Honda Civics
- Low-volume sell-through rates and high-profit margins – meaning you won’t sell 150 per week but you will make a decent profit on them when they do sell
- Low competition. This is important when you are dropshipping as you have to take those drop shipping fees into consideration, which makes keeping up in a competitive market really tough on sellers who are dropshipping.
Here’s a 5 Step Guide to get you started with your own dropshipping business
- Find a supplier
- Select products and find the best selling ones
- Get a tax ID
- Choose a selling platform
- Manage your listings
Step 1: Find a supplier!
You need to explore a few different possible suppliers.
Join drop shipping paid directories or visit trade fairs in your city.
For local suppliers, try flicking through your Yellow Pages in the Wholesale or Suppliers sections.
Look for ones who have plenty of experience in dropshipping and who understand the importance of sending out your items in a timely manner.
Before negotiating a deal with them, ask:
How long it will take for an order to be shipped once you have placed the order with them?
What shipping methods do they offer? E.g. overnight courier, or for international suppliers, which company they use and what their tracking systems are like.
What are their quality control systems?
You don’t want to be dealing with sub-standard products, it will mean lots of hassles with returns, which wastes valuable time you could spend on making money.
Do they offer warranties?
Can you use their product photos?
Large wholesalers often have professional product photos taken which will make your listings all the more professional looking
Step 2: Select products and find the best selling ones
This step could also be Step 1 those who know exactly what they want to sell. Start by trawling through your supplier’s product range and pick out a few items which interest you and do some market research.
Here’s one way:-
Taking a close look through eBay’s completed listings.
If you haven’t used this method before, follow these simple steps:
Go to eBay.com (or your local eBay site)
Click ‘advanced search’ (located right next to eBay’s search bar)
Check the ‘completed listings’ box
Enter your keywords and category and hit the search button
Now scroll through around 5 pages of listings and count the number of successful listings (listed in green), compared to the unsuccessful ones (listed in red).
When you find an item which sells 60% (or more) of the time you can be pretty certain that you will be successful in selling it.
The easiest way to find out whether a product sells 60% (or more) is to scroll right down to the bottom of the page and make sure you’re viewing 50 items per page.
Then go through and count the number of green listings. When you get to the bottom and have counted at least 30 (60%) green listings out of the 50 listed… that’s a good sign!
You might be onto something so keep looking through a few more pages to make sure.
If none of your products match up, go back and find something else to research or try searching the same product under different key words and categories.
Step 3: Get a tax ID
Not all sellers need a tax ID (also known as retail or resellers license, tax ID, resale number resale certificate or vendor’s license) but some wholesale suppliers require you to have one before they will do business with you.
You need to get a sales tax ID if you are inside the US or Canada and an ABN# if you are in Australia running a business (not just selling items from around the home).
Applying for a tax ID is easy and inexpensive; you can do it by visiting your local county clerk’s office or online – just Google “[your state] + sales tax ID”.
To get a sales tax ID, you may need to be a business entity; a company or a sole proprietor (which applies to a lot of at-home online businesses), and to have a Federal Tax ID number.
Step 4: Choose a selling platform
The obvious selling platform is eBay but there are plenty of other online auction sites out there which are growing rapidly and getting a lot of traffic (and some are even fee-free or much cheaper to use than eBay!)
Check out sites like Bonanza.com or Amazon.com and see if there is a market there for your product range.
It’s a good idea to diversify when it comes to selling on online auction sites as each site has its own unique visitors (not everyone checks eBay first!) and with most sites being free to join, there is no reason not to give others a try.
For sellers who are really looking to diversify, consider setting up your own eCommerce site such as a Business Growth Club which is the fastest and easiest way to open your own store.
You can get a free 30 day trial of a Business Growth Club right now and try it for yourself.
Step 5: Manage your listings
When drop shipping, you will list your items in the same way you would if you had the stock on hand, but when selling on eBay (and some other sites, you must check individual policies), you must disclose in your listing to all potential buyers the location of your item.
For example, if your supplier is based in Hong Kong, you must display this in your listing so that buyers are aware that there may be longer than expected shipping times.
Drop shipping orders work a little differently than regular wholesale orders. Here’s what a typical drop ship order will look like:
After you have chosen your items from your supplier, you will list them on eBay or on your eCommerce site (like a Business Growth Club shop).
Once the item is sold, you will collect the money from the buyer and pay your supplier (keeping the profit you make, of course!) by ordering the item you have just sold from their website
The supplier will then send out the item you have sold directly to your buyer.
You will soon work out which products have a great sell-through rate and which don’t and can begin adjusting which products you list accordingly.
This is just the beginning of your dropshipping business.
Now comes the fun and exciting part – marketing and letting the world know about your products!
In other blogs, I will cover some of the marketing strategies I have successfully used to build my own drop-shipping eCommerce stores. Stay tuned:)
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