You've probably heard about drop shipping but may not know about how this could fit into your business model. In this episode, I discuss how drop shipping works and why it is a great business model for people just trying to get started online.
I talk about affiliate marketing as what I consider to be the best way for new business owners to get started online. But another really good option for people to get started, which is actually quite compatible with affiliate marketing, is drop shipping.
So what is drop shipping?
With drop shipping, products are sent directly from your wholesaler or manufacturer to your customer, no more upfront inventory cost or shipping logistics.
How does drop shipping work?
The basic business model in drop shipping is that you advertise a product usually on a website and this particular product is something you can get from a drop shipping wholesale supplier at a much cheaper price than you would sell it for. You process the customers' orders but instead of you shipping the product yourself, you forward the order to the drop shipper supplier and they ship the order for you. So in drop shipping, you never touched the product, which makes it a great model for beginners.
In a nutshell, drop shipping is when you:
- Advertise the product.
- Purchase the product from the supplier at a lesser price.
- Sell the product at a marked-up price.
- Fulfill it directly to the customer from the drop shipper.
- Pocket the difference when it's all said and done and all your expenses are paid.
There are a lot of pros to drop shipping. You do a little advertising, you make things go and everything just falls into place in terms of getting the order to the customer and you getting the money. But as you get into drop shipping, you may encounter some challenges too.
Here are a couple of challenges you may face:
- Finding a supplier – It may be challenging to find a supplier but it turns out that if you Google around, there are literally hundreds and perhaps thousands of suppliers because drop shipping is a whole big thing, and there are companies that exist just for the purpose of drop shipping.
- Finding a good product selection – There's a lot of criteria that you can consider if you're trying to pick a product that you can drop ship. Here is a couple that you shouldn’t overlook:
- Demand – So the very first thing you need to consider when you select a product is the demand for the product itself. Are people actually searching for it? Target people that are searching in Google or Microsoft search. Use the techniques you’ve learned to estimate search volume. You want something that thousands of people are searching for every month, so you can buy some traffic to get to your store and sell your product.
- Margin – By definition, a margin is the difference between the seller’s cost for acquiring a product and the selling price. For any business to be successful, you need the right margin.
- Supplier in the US – Find a drop shipping supplier that's shipping from the US and get the product to the person in a couple of days.
- Create traffic for your website – Use search engines to your advantage, the whole point of business is to match offers with buyers. You have Google, Microsoft, Shopify as tools to enhance traffic to your website.
In summary, when you get these drop shippers, you've got to pick products, and when you pick products, there's got to be demand for them. There has to be enough margin, and they really need to have shipping times that support that sort of business model so that you can get the products to the customer on time.
The whole drop shipping game is this game of identifying products, putting them for sale on your store, managing the ads, and then making go-no-go decisions on a product by product basis and growing a store. And it’s worth looking into.
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