What you need to know before starting dropshipping business
Have you thought about starting your own business, but have limited capital and inventory? If so, running a dropshipping business could be a great entry point.
Dropshipping is an online business model that allows entrepreneurs to sell things online without carrying inventory. In this model, third-party suppliers fulfil the inventory and shipment process. The dropshipping entrepreneur does everything else, from setting up the store to handling marketing.
While many people have achieved great success from this business model, starting a dropshipping business is not as easy as it sounds. From ideating creatives to sorting out legalities, there are many boxes to tick before launch.
In this article, we’ll give you an overview of what you need to know before starting your own dropshipping business.
1) You can’t dropship everything under the sun
Just because you can dropship a product, doesn’t mean you should.
Not only are some products notoriously difficult to ship, but they may also be damage-prone. Not to mention some legal issues you may have to face if you’re selling items you shouldn’t be selling in the first place.
So if you’re thinking about dropshipping a particularly delicate or expensive item, think twice—it might be more trouble than it’s worth.
When choosing a product, make sure that it’s high in demand, has low competition, and is priced decently with room for profit margins. Avoid highly seasonal products, low-profit products, and products with a short shelf-life.
A good example: Small and lightweight items like jewellery. These items are easy to store and relatively cheap to ship, so you can turn a profit quickly. They’re also easily personalizable, which can incentivize customers to buy from you instead of the competition.
A bad example: Gaming chairs. While popular among a targeted demographic, it’s not ideal to dropship this item as a beginner. It’s heavy (leading to a higher price for customers) and susceptible to damage during transit.
2) You need to find the right supplier
Not all suppliers are created equal. When scouring places like AliExpress for suppliers, it’s important to vet them. Preferably round up a list of at least 10 potential suppliers. Ask for a sample item from them before proceeding with any large orders.
Remember, the moment your customers receive a low-quality package, they won’t hesitate to leave a bad review—which can be disastrous to any new brand. Choosing the correct supplier ensures you minimise these hiccups from happening.
Aside from the items themselves, here are some factors to take in when choosing a supplier.
- Lead time
- Minimum order quantity (MOQ)
- Quality control process
- Shipping costs
- Openness to negotiation
One tip to help you find the best deal is to find suppliers that run a manufacturing company, not a trading company. Prices are generally lower when it comes straight from the source.
Moreover, don’t be afraid to negotiate with your suppliers. Some may be open to giving you a lower price if it means having more business, so don’t take the stated price as final.
3) Setting up a functional website is necessary
In this day and age, you don’t need to set up a website from scratch. Shopify, Wix, WooCommerce, and BigCommerce are all great no-code platforms for dropshipping entrepreneurs who want to start their first business website.
Your website will be the first impression you make on potential customers, so it’s important to make a good one. The last thing you want is for a potential customer to click off your site because it’s too slow or confusing to navigate. To minimise this, consider the following tips:
- Use easy-to-read text for your landing page copy
- Avoid unattractive and gaudy colour schemes
- Improve loading time by reducing plugins and images
- Improve CRO by decreasing clicks to a product page
- Review and analyse customer behaviour
4) Legitimize your online business
Don’t be alarmed; you aren’t getting on anyone’s bad side by opening a dropshipping company. However, that doesn’t mean you can just set up this side hustle without taking care of the proper paperwork.
Every business needs to be registered with the government, and this is especially true for online businesses that are open to international trade.
There are a few legal factors you need to constantly bear in mind when pursuing a dropshipping business, including:
- Acquiring a business license
- Fulfilling your tax obligations
- Filing paperwork for an LLC
- Copyright infringement agreements
- Other state-specific paperwork
If you’re a business owner who strives to abide by ethical standards, learn more about legitimizing an online business model in this LegalVision NZ article.
5) Choose the right payment gateway
One thing that many first-time entrepreneurs overlook is choosing the right payment gateway.
The payment gateways you choose are a major trust signal for your business. If you want to attract more customers, it’s heavily encouraged to offer multiple payment methods.
For example, if you’re planning to ship overseas like in Europe, the market will trust your business more if you offer SEPA or direct bank transfers in addition to the standard credit card payment options.
In addition, PayPal is the most popular payment gateway in the world, so make sure it’s set up for your online business to get the most sales possible. However, bear in mind that some of these gateways have higher transaction fees than others, so do some research to find the best.
