A Complete Guide to Dropshipping (stock-free e-commerce) in 2022.
After it was discovered that it was possible to trade on the Internet, entrepreneurs constantly tried new business models to generate income. There were some unsuccessful methods in this process, but drop-shipping (stock-free e-commerce) has found a solid place among e-commerce trends. This e-commerce model, which is not negative for the buyer, is easy for the seller, and creates a new sales area for the supplier, is profitable for all parties in the chain. Read the article to the end ⬎
📋 Quick Sections
- Dropshipping
- What is dropshipping?
- Advantages of drop shipping
- Disadvantages of drop shipping
- How to start dropshipping?
- Is dropshipping useless?
- Is dropshipping legal?
- How to select a dropshipping product?
- Dropshipping products
- How much can you earn with dropshipping?
- What you need to dropshipping
- Things to Consider While Dropshipping
- Dropshipping on Sale
Dropshipping
Being a seller in the no-stock e-commerce model is generally preferred during the first step to e-commerce. The advantages of the model for the seller both make it easier to try this method and enable the seller to gain experience in the field of e-commerce. If you want to do e-commerce without having to deal with processes such as production, storage, cargo management, etc. you can try the no-stock e-commerce model called drop shipping. But first, you should get enough information about what is drop shipping, how to start this business and how much can you make with this business.
What is dropshipping?
It is an e-commerce model that creates a bridge between the buyer and the seller, without the need to stock and store products. You can call it ‘drop-free-ecommerce business’ or “stock-free-e-commerce business”.
There are three main parties in stockless e-commerce: buyer, seller and supplier. But the main character is the seller. Because when the vendor and supplier are the same, the model turns to B2C commerce. A stock-free e-commerce seller sells products that he does not keep stocks and store. He lists the products he wants to sell on the e-commerce site or in virtual marketplaces. Customers, on the other hand, order the product. The incoming order is forwarded to the original seller of the product, that is, to the manufacturer or supplier.
Look at the diagram to understand how drop shipping works:
Advantages of dropshipping
- One of its most important advantages is its low cost.
- There are no costs for production, storage, packaging, staff salaries and the like.
- The initial capital is extremely low and the workload is small.
- Large-scale organizations are not needed to get started.
- It is also possible to be managed by one person from a single computer.
- Since large capitals are not invested, the risk of loss is low.
- It is possible to work with many suppliers from different sectors at the same time.
- Product diversity can be increased along with the number of suppliers.
- Since it is easy to increase the product range, a wider customer base can be reached.
- Since there is no need for storage, it is possible to work from home and manage the entire process digitally.
- Only the products on sale are within the scope of responsibility. The supplier takes care of the inventory costs.
- Since the shipping stage is also the responsibility of the supplier, there is no need for cargo agreements.
Disadvantages of dropshipping
- Profit margin is low as it works with commission logic.
- Commissions charged by payment infrastructure providers and marketplaces also reduce profits.
- Since it is a comfortable venture compared to other models, the number of entrepreneurs is high. Therefore, there is a fierce competitive environment.
- It competes not only with drop shippers, but also with other e-commerce model sellers. In order to stand out from the competition, it is necessary to lower the price and this causes a decrease in profit.
- Inventory management is a little more difficult. It is necessary to update the product list by constantly checking the supplier's stocks.
- For the issues for which the supplier is responsible, the addressee of the customer is the seller. Therefore, the seller has to deal with possible problems.
- The seller is adversely affected by the supplier's mistakes in the packaging and shipping process.
- It is the seller's responsibility to communicate with the customer and therefore has to listen to possible complaints.
- It is difficult to provide technical support, as there is not as much information as the supplier about the products on sale.
How to start dropshipping?
Before doing drop shipping, you should analyze the above advantages and disadvantages well. It is important that you can predict whether this model will be profitable for you in line with your entrepreneur profile and e-commerce strategies. So how is drop shipping done?
Drop shipping can be done on a private e-commerce site or virtual marketplaces. For this, you can start by opening an e-commerce site for yourself or opening a store in virtual marketplaces. If you wish, you can apply both methods at the same time. This gives you more sales channels. Of course, you also need to negotiate with your suppliers. After you open your site or store, you can list the products you can sell online with your agreement with the supplier.
XML integration is often used in the product listing process. If you do not use integration; You have to enter the descriptions, features and images of all products one by one. That's why you should get XML data from your suppliers. After entering the data, your products are listed and you can start selling. The most important job you need to do after this stage is to market the products correctly and effectively.
Is dropshipping useless?
Dropshipping is an e-commerce model that comes to the fore with its losses. In fact, for these details, it can be said that it is a preference rather than a harm. For example, you need to market and sell a product that belongs to another manufacturer as if it were your own. This means that you are vouching for a product that you did not produce yourself. If you are not working with the right supplier, you may run the risk of selling products that degrade the user experience. Therefore, you lose your credit in your customers. But the key point is supplier selection. Instead of choosing more suppliers to sell more products, you can work with fewer but more reliable suppliers. In this case, you do not run the risk of being harmed.
Is dropshipping legal?
There are no legal barriers to drop shipping. In the current legislation, there is no article that prohibits e-commerce entrepreneurs from doing e-commerce without stock. Before you start selling, there are some legal procedures you need to complete during the site or store opening process. It is free to sell products belonging to another supplier, as you will carry your work to a legal dimension with some documents. Your duty is only to comply with the rules of the platform you sell to and the terms of the agreement you made with the supplier.
How to select dropshipping products?
Dropshipping product selection can be considered the most important business in this business model. By simple logic, you should actually sell as if you were earning from the release. Therefore, products that can sell themselves and are needed over and over are very suitable for dropshipping. If the product selection is made correctly, the marketing process becomes easier. Your sales will increase along with your marketing performance.
Whichever model you work in, product selection is among the first things you need to know to sell online. Another point to be considered when selling online is that it is not easy or economical to access the product on sale from physical stores. Convenience and reasonable price play an important role in consumers' preference for online shopping. For this reason, you should include advantageous products for your potential customers in your online dropshipping store.
You should also pay attention to the target markets of the products you will choose to list. The size of the audience in the market is very important at this point. Very narrow or very wide markets are not suitable for this e-commerce model. In a balanced market, it is best to turn to product groups with a fixed audience.
Examples of products eligible for dropshipping
- Electronic product accessories and hardware units such as covers, headphones, speakers, mice, keyboards
- Consumable personal care products such as shampoo, toothpaste, cream, mask
- Necessary products, accessories and toys for pets, especially food and sand
- Hobby products such as books, stationery, toys, musical instruments, puzzles, board games
- Paper, ink, cleaning products and similar consumables needed by workplaces
How much can you earn with dropshipping?
The range of earnings in dropshipping is very wide. If you prefer this method with goals such as starting new e-commerce and doing business with a low budget, you should keep your expectations low at the beginning. As you gain experience, you can increase your sales and earnings over time. As a result, the money you can earn is somewhat up to you. Your entrepreneurial and marketing performance directly affects sales and therefore your earnings. After choosing the right supplier and product, you can earn enough money to make dropshipping a profession with effective marketing.
What you need to dropshipping?
The most important thing to dropshipping is to be legal and meet tax obligations. If you do not meet the legal requirements, it is not possible to open a store or establish an e-commerce site in virtual marketplaces. Therefore, first of all, you should set up a sole proprietorship whose establishment phase is extremely simple. If you are considering a larger venture, of course, you can also set up a joint stock company or limited liability company. The next steps are briefly as follows:
- Performing competitive environment analysis
- Creating the e-commerce site, you will sell
- Supplier selection
- Customer acquisition
Things to consider while dropshipping
You need to pay attention to every step you take while dropshipping. All dynamics, from the competitive environment to the supplier, from the product to the customer, affect your sales and income. Therefore, it is always useful to be careful. Analyzing each step thoroughly, without rushing at the beginning, ensures that you have a solid foundation for the future of your business. Then you can grow even more with sales and marketing strategies.
1. Perform a Competitive Analysis
When you enter the market, you become a direct competitor with dropshipping companies. Of course, since the customers will deal with you as a seller rather than an intermediary, most of the sellers in other formats may come across as your competitors. For this reason, it is very important to analyze the competitive environment and competitor at the beginning stage. When determining the identity of your business, you can consider the environment and competitor analysis data. In this way, it will be easier for you to stand out in the market. Likewise, analyzing the competitive environment and competitor helps you in the product and supplier selection process.
2. Create Your E-commerce Site Where You Will Make Sales
Your customers know you, not your supplier. Therefore, the task of creating a reliable identity falls to you. The most effective way is to create the right e-commerce site. You need to have a well-equipped e-commerce site where you can make your sales. You need a strong infrastructure to increase the user experience and keep the satisfaction at the highest level.
Your e-commerce site should have a simple interface and easy to use. It's not enough to just list the products by category. By adding various filters, you should make it easier for the user to reach the products. You should present a remarkable and useful site on technical issues as well as visuals. A secure payment infrastructure is also an important detail. It is also beneficial to increase alternative payment method options.
It is very easy to build an e-commerce website these days. Platforms like Shopify, and Wix.com allows you to set up an e-commerce store just by drag and drop. No coding knowledge needed!
3. Choose the right supplier
As a dropshipping entrepreneur, you represent your supplier. Customers address you, but the real owner of the products is the supplier. Therefore, the supplier becomes the determinant of many details about you. For example, your customers who are not satisfied with the products sent with bad packaging hold you responsible for this situation. The most common problem in online shopping, the late arrival of cargo, also affects you negatively.
Choosing the right supplier is also important for the communication and operation process apart from these details. You should choose a supplier who can stay in constant and healthy communication with you. It should share all the stock and similar details about the products with you up-to-date. In this way, you can have competence about the products you offer for sale and keep the stocks on your site up to date.
You should also examine the products of the supplier you have chosen. When a sale occurs, you only manage the digital process. Therefore, you do not physically see the product that goes to your customer. Therefore, before making an agreement with the supplier, make sure to ask for samples or go and see the products on site. After making sure of the quality of the products, make an agreement with the supplier.
Plan to Acquire Customers
After all the stages before starting the sale are completed, a never-ending customer acquisition process begins. You need to constantly acquire new customers as it is relatively difficult to get loyal customers in dropshipping. For this, you need to create effective marketing strategies. You should choose your marketing strategy in line with your customer acquisition plans.
Your most important weapons in the customer acquisition process are digital ads and social media. Use digital advertising channels as heavily as possible. Never neglect social media. For example, you can reach more customers by using Instagram's store feature. Make sure your site is SEO compatible and make sure to open a blog page. This makes it easier for your customers to reach you and interact with you.
Dropshipping on sale
In addition to opening your own e-commerce site, you can also use national and international virtual marketplaces as an alternative. But at this point, you should consider the possibility that your limited profit margin may decrease slightly with the marketplace commissions. For this reason, dropshippers often use both sales channels at the same time. In addition, sales channels can be increased by opening a store in more than one virtual market place.