What is dropshipping? How does dropshipping work?

ByNoel Bangne Updated Date:
Dropshipping low startup costs no stock

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Dropshipping is a method that does not require you to keep products in stock. Instead, you sell the product and forward the order to a third-party supplier who ships the order to the customer. So your only duty is to take in the order, process it and passes on to be delivered. 

Dropshipping allows you to skip the cost of manufacturing, storing and shipping products. It is similar to affiliate marketing, your only duty is to provide customers by running marketing and engage with the customer. 

How dropshipping works?

So how do dropshipping works? It actually pretty easy but acquire hard work. First of all, you have to find the Dropshipper you want to work with. Which would be the merchant or product owner, who will give you access to the products and information that you can use to post on your website, blog, or SoMe platform. Then when the customer orders the product, you then send the requirement to the merchant, who ships the products to your customer.

Basically, the workflow is:

  1. Find and choose the products:
  • Starts by finding a dropshipper source or integrate a dropshipping marketplace to your website. 
  1. Integrate merchant items to your website:
  • Import the products to your webshop and decide the prices. Make sure to have full control over your listings and profit margins, then you are ready. 
  1. Customer orders:
  • Receive and process orders from the customer.
  1. Forward orders to the merchant:
  • Forward the customers’ order and shipment details and pay the dropshipping on behalf of the customers. 
  1. Merchant fulfils the orders:
  • The merchant ships the orders to your customer and the provides you with information about the shipment, which you use to update your customer.

Pros: 

  • Start a webshop with a simple storefront and inventory ready to launch. 
  • No reason to limit the products because of storage space or manufacturing. 
  • Low cost because production and storage cost. 
  • You can launch your business from anywhere, all you need is an internet connection. 
  • You can quickly test products and adjust your inventory. Which means you can change the products when you want because you do not have an inventory you have to sell out. 

Cons: 

  • You do not have control of product quality, though you can change the merchant.
  • Refunds and return exchanges can be difficult, but that depends on the merchant. 
  • Shipping costs depends on the merchants’ location. 

How to start a dropshipping business?

To start a dropshipping business you have to develop a marketable concept, sales channel and a marketing plan to execute your business plan. 
You have to find a concept that you enjoy and are passionate about, also you can find concepts that are based on sales trend. Just make sure to scale and improve your concept through research and test.

Here are five steps to start a dropshipping business:

  1. Pick a niche and products:
  • For connecting to the audience, you have to find a niche and products. This step is crucial because it is a vital point of creating a successful shop. To find your niche, you can start by researching which trends and products are in the market in your niche. 
  1. Choose a merchant:
  • Another vital element is the supplier because you are going to rely on them to deliver and ship good quality products to the customer. One way to do that is to use eCommerce builder such as Shopify, where you can build your shop and then add an app, so you can import products from dropshipping suppliers. You can find many eCommerce sites, who can help you by searching “how to start a dropshipping business”. 
  1. Create and build your website/shop: 
  • Research and evaluate the various available sales channels and make your choice. Some people use sales channels such as Amazon or eBay. For building your website there are two methods such as eCommerce website builder or WordPress depending on your technical level.
  1. Add products to your shop:
  • Next step is to select and add products to your website. You can do by using an integrated supplier or by yourself. Most use Shopify and Oberlo combined to easily set up a website and a supplier. 
  1. Launch and manage your shop:
  • The final step is to attract shoppers to your market, which are usually done by marketing via social media, paid ads or email. Once your marketing efforts are up and running you will receive orders, which you have to manage. Also, make sure to find new trends to update your website and inventory.  

Dropshipping what to sell?

Dropshipping is a growing business method for many eCommerce with various kind of products. To be a part of that you have to find competing products which you can sell on your platform. The best idea is to think about the needs of your audience and the problems you can solve for them. 

We have listed some of the products you can sell on your website:

  1. Organic tea 
  2. Resistance bands
  3. Clothing
  4. Toy
  5. Sportswear


There is a lot of products you can sell, the most important is to study successful dropshipping companies and figure out how which products and how they present their products. Just learn all you can from them, so you have an idea of how to start your own business. 

Conclusion

If you want a business solution with low-cost and low-risk, then the right choice is to use a dropshipping business model. The learning process is not hard, but how which direction you choose for your business does dictate how successful your business will be. 

Read our faq and get some more information about dropshipping.

Dropship is based on impulse buying. Basically, you promote a product on social media and attracts someone to purchase a product. You have to make the product attractive and keep the price low on appealing ads, which are the hook that will induce the viewers to buy your product. If you are a beginner, start by testing several products in a niche, but be sure not to get stuck with a lot of products from the same niche, as it would all be for nothing if the niche does not sell on social media. Some of the top-selling dropshipping products are power tools, tech supplies, lifestyle niche, beauty and health, drones and accessories. Their all have been inconsistent demand during the last five years. Though all these niches are still too vague and you may need to research for more sub-niches. If needed you can find top-selling dropshipping products from many available trendy product finding platforms and Facebook groups such as Spocket, Pexda, Product Research Lab, Repick, Angage etc.

If you want to start an online business and you do not have money to invest in products and do not have any room for inventory, then you should consider dropshipping. Dropshipping is about selling products online without having the products in hand or stocked. The only tools you need to acquire is a computer, an online store and the knowledge to sell. 

You will get paid by finding what you want to sell from a supplier and then list the products on your own website at a price you set and when a customer places an order, then that person pays you the retail price you have set and you make a profit. After the order is placed, then you will place the order with your supplier at a wholesale price and the supplier ships the order directly to your customer. That means you make a profit based on the supplier’s wholesale price. For example, if you found a product on a supplier’s wholesale for $5, you can then list it on your own online store for $25, which means that your profit is $20. So you get paid by setting your own price and attracting customer to buy your products.

The most difficult parts of running a dropshipping business is to find quality products and reliable suppliers. The first step to find reliable suppliers is by analyzing several dropshipping businesses and then start comparing the advantages and disadvantages of using them for your online business. Some of these companies could be Alidropship, Printify, Doba, Megagoods, Oberlo or Wholesale2b. The most essential is to find a company that can support your business 24/7 with great products and services. This will be the partner that will help you grow your business to be successful.

The answer is that you as the owner of the dropshipping business pays for the shipping. But not directly from your own pocket cause as a store owner, you have the opportunity to choose whether you want to separately charge the customer for shipping or instead add the shipping cost as part of the total amount of the products price. There are many different ways to go about, but the most important thing is to find a shipping strategy that works best for you. Usually, the shipping cost effects the customers will to buy the product from you or another store. You can only control the price of your product and not the shipping cost. Therefore the best choice of strategy is to figure out how to form your shipping costs and what is best for your customer. Here Some of the shipping strategies you can use – free shipping, customer pay, flat rate or shipping charge on returned products.

The key to run a successful online webshop is to know the eCommerce market. Specifically which country are best for dropship and your niche. A lot of entrepeneurs focus on the most developed countries, but those countries are not the ones you should focus on, because along with stability on the market comes intesiv competition. Best thing to do is to focus on many countries and identify, analyze and utilize the pontetial in the eCommerce market in the countries you have research. Some of the most popular countries to dropship to are UK, US, Canada, Germany and France. But theres is other countries Denmark, Norway, India, Malysia and south Africa that have higher population of young people, attracts international students and are driven by IT, which make it easier for you to connect with them. Basically it is up to you to find a great market for your products and if the competition get harder in the market, then focus on reaching out to new markets.

You can basically start a dropshipping store at a low cost, with the right combintion of building your store, marketing and purchasing your products. It is difficult to set a specific amount of how much it cost, because you have to consider the cost of having an online store, testing and finding great products, advertising and marketing. All these cost variuos on how much you are willing to pay. Some people can start a dropshipping store with a cost around $300 and others $1000. It all depends on which suppliers, hosters and web builders you choose. Some choose suppliers such as Shopify and then pays a monthly fee and other choose to build their store with WordPress and then integrate a dropshipping API. Either way it is cheaper then having not saleable stock of products at hand.

AliExpress uses a direct-to-consumer model by cutting out the middlemen. Which mean you are buying directly from the manufacturing source and not the typical retail middleman. AliExpress is known to have all products, so whenever you find some products on a few marketsplaces, you can be sure that AliExpress is offering the same product at a lower price. The reason for that it is beneficial for both AliExpress and the seller to get more business and sell more products. Also, most of the sellers offers products that are produced and stored in China, and China has a strong business ecosystem, with low taxes and duties which keeps the cost of production low. The lower cost of production allows the companies and AliExpress to sell the products to lower price.

Yes, you can dropship from AliExpress on Amazon. By using Oberlo as a product source, you can import AliExpress products, descriptions and images into your store. You can then use the products you have imported to your store as items to sell on Amazon.

The first think you need is to find your niche. You have to choose a narrow range of products for your store, which makes it easier for you to make a marketing plan to find your audience and target it. Make sure not to sell products marked with a famous brand even if people are more reluctant to buy them. Due to possible legal problems for you as the items probably are knock-offs and that might harm you reputation. And make sure to rely on Google Trends, when you choose your niche. Pick a product you want to sell, a time period, and Google Trends will show you how many people are searching the item and related topic on Google.

Also, before starting your dropship adventure, make sure to choose a domain based on your niche keyword. Which makes it easier to find for SEO. Once you have your domain, you have to find a hosting provider such as Hostinger.com to build your dropshipping store. Next is to find a gateway for the transactions on your store. The last step is to maintain and update your store and products.

It is hard to find and pick the best dropshipping products. It requires you to consider multiple factors. According to Shopify, the best dropshipping products are office products, gaming accessories, car accessories, cellphone accessories, wardrobe and accessories, health and personal care, kitchen and grocery, home and bedroom, Tools and home improvement. Also, Shopify had made a list of “The Best Dropshipping Products to Sell in 2021 ”, maybe this can help you find the right product for your business. The most important thing is to research and gather information before you make the decision.

No dropshipping is not dead and is still profitable in 2021. Due to the rise in eCommerce spending. In fact, nowadays consumers can easily find great products and start a dropshipping business with online tools to reduce labour costs and improve the return on investment. There is always a new discussion about the end of dropshipping. But that is not the case because dropshipping business usually does not die, but actually, change the way they work. Some years ago, AliExpress was leading the dropshipping empire, but with time they now directly engage with the wholesalers for their products.

Dropship can be profitable to merchants because it is a low-risk business model that allows a seller to sell products to the customer without stocking the products and thereby you are released from the risk of incurring huge running costs. It allows you to have a minimum startup risk, you have a lower product, storage and logistics costs. Furthermore, you have flexibility due to broad product offerings. All of these benefits together makes it easier to become profitable with dropshipping faster than a traditional business model.

It depends on various factors such as the locations of all parties in the dropshipping process and taxability of the goods where the customer, seller and supplier has an obligation to collect sales tax (nexus). In most cases, the customer pays sales tax to the seller, the seller remits the tax to the government and provides a resale exemption to certificate to the supplier and then the supplier maintains the certificate as proof of sales tax exemption. But it is important to know that multiple factors can lead to different tax scenarios.

Usually, the dropshipping profit depends on the kind of products you sell. According to Alidropship and other companies in eCommerce, it is best to find a product to low-price with a high margin potential. They recommend having a profit margin of 40-70%, by using this formula from Alidropship:

$0<Supplier Price<$2=Your Price: $7.95. Your minimum profit: $5.95

$2<Supplier Price<$5=Your Price: $9.95. Your minimum profit: $4.95

$5<Supplier Price<$30=Your Price: Supplier Price x 2. Your profit: 50%

$30<Supplier Price<$50=Your Price: Supplier Price x 1.75. Profit margin: $22.5 -$37.5

$50<Supplier Price<$100=Your Price: Supplier Price x 1.5. Profit margin: $25 -$50

Supplier Price>$100=Your Price: Supplier Price x 1.35. Profit starts from $35.

Overall the best thing is to do as in any other business. Find profitable products with a low cost and a potential for a high sell

It depends on the seller. With AliExpress you can get free on a lot of items, but it is decided by each seller if they offer a free shipping option on the desired product. This means it not AliExpress themselves who decides the option on free shipping of the products. AliExpress sellers have various different methods to send an order from China to your country and each business has a different delivery time and methods. It is all handled by the seller. Most of the sellers used the methods that suit you best according to the approximate delivery time to your country.

When a customer buys a product on AliExpress, the seller gives AliExpress an estimate of the delivery time, which is an approximate sum according to the shipping method the customer has selected, but the real shipping time for an AliExpress package to arrive at the customer depends on several factors. Most of the time AliExpress shipments takes between 3 to 4 weeks to arrive, but the maximum time is 60 days. This means depending on the country of destination, the customer may have to wait up to 60 days before receiving their product.

There are various free dropshipping platforms such as AliExpress, GoTen.com etc. But it essential to remember the business model is not totally free. You have to consider the cost of a site that will be the channel for your dropshipping business. Another crucial part is the choice of platform, which is the criteria for your success. 

The profit on a product is the margin, which is the difference between the cost of your product and the price you sell it on your store. It means that higher margins create higher profit for your business. With this in mind, you have to pay attention to the price of the products on the market. Overall it is all about selling low-cost products with high-profit margins. Here are the top 10 most profitable products according to Salehoo.com: 

  1. Jewellery – Average Margin: $5-$35
  2. 2. TV Accessories – Average Margin: $20-$50
  3. 3. Beauty Products – Average Margin: $3-$25
  4. 4. DVDs – Average Margin: $3-$10
  5. 5. Kids Toys – Average Margin: $10-$30
  6. 6. Video Games – Average Margin: $5-$20
  7. 7. Women’s Boutique Apparel – Average Margin: $5-$30
  8. 8. Designer & Fashion Sunglasses – Average Margin: $3-$20
  9. 9. Shoes – Average Margin: $10-$45
  10. 10. Halloween Costumes & Masks – Average Margin: $10-$45

To be successful in dropshipping is different from company to company. Some companies have after some few weeks due to the correct platform and niche, but for most dropshipping business it takes at least 12 months to get profits. It is important to be patient because you have to create a platform to engage with your customers and make thorough product and market research.

With all businesses there are a chance to fail. Some dropshipping company have a price model for getting access to their catalogue/service, so a monthly fee for webhosting, and maybe you dont get the right return on some ads on Google/Facebook.

The simple answer is yes even if you do not pay for the products before the customer has made an order. You may risk losing money with dropshipping due to the marketing cost you have for attracting and engaging with your audience. There are always risks in running a business, so it is important to do right by doing your homework by researching your products, niche and market.

The benefit of dropshipping is that you can start a business with no need to front the costs for your products, but there will be some startup cost and other expenses such as marketing costs, supplier fees, your online store, and other business expenses. 

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