Starting a dropshipping business has been supposed to be a safe beginning to enter e-commerce. Despite the strong wave from this kind of business, it does not always bring to online store owners fertile chances to make money.
Don’t ignore the post since it comes with an A-to-Z introduction to dropship for beginners and an overview of Magento 2 Dropship as well.
A. Introduction to Dropship from A to Z
I. Dropshipping Model and Its Pros & Cons
What does “Dropship” mean?
The term “dropship” (or dropshipping) refers to an order fulfillment method in which an online store does not keep the products it sells in stock but buy those items from the third party. In this model, ordered items are shipped directly from the third party to ultimate customers. In this way, the merchant does not have to handle products with a warehouse.
Unlike the classic business model where you get products from a supplier and store them in your own warehouse, dropshipping completely changes the way you make money. In dropshipping, order fulfillment follows this flow:
- The customer orders and pays you for the product.
- After you get the money from the customer, you pay the supplier so that they can prepare your customer’s order.
- The supplier ships the products directly to the customer.
# Require less capital
Retailers in the traditional model usually have to deal with capital invested in inventory upfront. On the contrary, by looking in the dropshipping model, you must agree that it firstly saves you a huge amount of money from the cost to operate a warehouse and collect products to be available in it.
Not only helps you start a business with a tiny budget, but dropshipping also reduces the risks you might face up with involved in storage.
# Run a less complicated business
Running a dropshipping ecommerce is much easier once you don’t have to directly handle physical products. Specifically, you are never busy with:
- Investing in a warehouse and managing it
- Preparing and shipping your orders
- Managing stock and continually purchasing products
- Handling returns and inbound shipments
# Various options of products to sell
Dropshipping gives you various choices of what you are going to sell because you don’t have to pre-purchase and store them. Therefore, you can freely offer on-trend items to your customers at no additional cost as long as the suppliers stock those items.
# Without dependence on location
You can run a dropshipping ecommerce anywhere with an internet connection since products are directly shipped to customers from your suppliers. In contrast, the traditional model creates a dependence between your warehouse and suppliers’.
# Scale-up easily
In traditional retail ecommerce, the increase in orders means the relevant increase in work. For example, if your store receives a double amount of orders compared with usual, you will need to do twice as much work. However, most of the incremental work will be handled by suppliers in the dropshipping model.
As a result, your business can grow but does not waste much effort.
# A lot of competitors
Once the barrier to enter ecommerce through the dropshipping model is very low, you will not be the only merchant who takes this chance. Don’t be surprised If many other stores also sell similar products, which makes customers overwhelmed by different choices.
# Low margins
To be honest, dropshipping is not a money killer, and some businesses following this model even get very low margins. Many people will take it for granted because they understand that low risk and low overhead means low margin.
Another reason for low margins is the effort to maintain your competitive advantages against your competitors’ or your ecommerce will be completely beaten. The higher prices you set, the fewer consumers will choose your products.
# Inventory problems
You may face up with some inventory problems while running a dropshipping business since warehouses are out of your control. In fact, inventory can change daily, and it can happen at any time. If you stock what you sell, it would be easier to keep track of the number of each product and immediately realize if they are out of stock in real-time.
# Faults of suppliers
When dropshipping suppliers take the most control of the order fulfillment process, they totally decide how customers feel about the shopping experience at your store. Even when there is a fault from your supplier, such as actual product quality, issues that arise while shipping, the customer will still rate your store badly but not the supplier.
II. In What Situation Should You Prefer Dropship?
Everything has its own perks, and the dropshipping model is not the exception. As an online merchant, you should know what proper situations to apply dropshipping are and how to run this model cleverly.
1. Apply dropship for market research
Running a dropshipping online store doesn’t mean you must keep doing this way from the beginning to the end. Using dropship at the beginning as a way to test the market is a clever strategy if you do not want to be risky with new product types. This tip is especially useful to small businesses with tight capital.
After discovering if a product is on-demand and estimating the sales, let’s consider stocking the product. As a result, you can avoid unworthy inventory costs.
2. Apply dropship for strategic shipping systems
For businesses on the way to expand, shipping complications will be a consequence they may have to deal with. The farther out you get from your warehouse to the fulfillment places, the more shipping fee you have to incur.
In this situation, dropshipping would be a perfect solution to cut down the shipping fee for locations that fall outside your profitable region. In this way, you can solve these problems properly:
- The shipping fee is too much for long distances
- The costs of storage are too high to set up a new shipping center
- The taxes or extra fees may arise when you ship out of your state or your country
Additionally, dropshipping is also useful to test a new locale before you have a specific strategy to expand your warehouse there.
3. Apply dropship flexibly to high-maintenance products
High-maintenance products may be products which are:
- Large: These products occupy so much space, and the profits from selling them can not offset the storage costs.
- Heavy: Both large products and heavy products cost more to ship. Especially the cost may gain so high with long distances.
- Fragile: To ship fragile items, you have to prepare for special care. Let dropshipping suppliers do that for you because they might be more professional and care those products better than you.
- Valuable: Obviously, valuable products like jewelry, antiques need high security while being shipped. If your warehouse can not offer this requirement, dropship would be a better choice.
- Special conditions: Products sensitive with temperature or light need to be preserved with specialized equipment. For example, many canned foods must be kept frozen while shipping to maintain quality.
High-maintenance products usually cost higher storage and shipping fee than others. For that reason, dropshipping a product may benefit you more than storing them in your warehouse sometimes.
4. Protect your store from overstocking
Finally, dropshipping allows merchants to reduce wastes and risks while selling unpredictable products. If you are offering products fluctuating frequently and find it difficult to estimate their sales, let’s consider having a dropshipping supplier as a backup. Let’s stock products at a safe and proper threshold.
This is a clever stocking strategy to protect your business against uncertainties of the market. Even when the products are out of stock, you still can offer them with the help of dropshipping suppliers. Finally, wasted stocking costs will be reduced, and your profits will be optimized.
III. 5 Steps to start a Dropshipping business
For many merchants, starting a dropshipping business is a great first step to enter the ecommerce market. In this part of the post, we are going to walk you through 5 steps to create a dropshipping ecommerce and create your own brand.
1. Select a dropshipping business idea
The very first step is choosing a dropshipping business idea. Let’s brainstorm all the ideas about things you want to sell and write it down. Besides, some market research should be a good start so that you can identify on-trend products and products on great demands.
You must always note that there are a number of merchants who also run a dropshipping ecommerce like you. Thus, a niche that you are most interested in would be a wise choice. Combining careful research and your passion will help make it easier to conquer the market.
Let’s make use of available tools on the internet such as Ubersuggest Keyword Tool, Google Keyword Planner, or Google Trends to discover every trendy thing that internet users are searching for or test the potential of your idea through the search volume. One more tip to find an idea is browsing the best-seller category of ecommerce websites.
2. Analyze your competitors
The best idea for a dropshipping ecommerce is not everything. To ensure that the idea is possible and profitable, merchants cannot ignore competitor analysis. Not only get to know what they sell, but you also need to observe how they sell their products. Thanks to this analysis, you can ensure if your store can compete with others and get profits.
Once again, you can find different tools to support you. To begin, search for one of the products you want to sell on Google and see which names are on top positions of the search engine result pages (SERPs). Ahrefs and SEMrush are popular digital tools that allow you to explore competitors’ web traffic and learn why they rank so high.
On the other side, Similar Webs and Alexa allows you to know niche competitors who are not displayed at high positions on SERPs. These tools will show you social media profiles of those competitors, advertising they are running, and other traffic information as well.
All you know from competitor analysis may reveal what you should do to compete with others and what content gets the most attention of audiences, then have your own content strategy.
3. Choose dropshipping suppliers and test samples
In the next step, you have to choose dropshipping suppliers to whom you find reliable. First, find which suppliers are out there who offer products you need and which options meet your requirements most.
According to your market research, you might want your suppliers to be domestic or oversea. Then, check if their product quality, policies, delivery time, and services are fine. All these things are very critical, which will give your business smooth.
Next, contact the suppliers who best fit your requirements and suggest a relationship. You should have at least two or three suppliers and then test their products by ordering yourself some samples to make sure they are reliable in the long run. Besides, you can ask for services such as custom labeling to improve packaging and boost your own brand.
Alidropship, Alibaba, Spocket are some of the best places where you can find products to dropship in 2020.
4. Build your online store
No website means no ecommerce. Once you have chosen exactly dropshipping suppliers, it’s time to invest in a website where you can offer various items. An online store generally requires an ecommerce platform like Magento or a website builder to host your online store, a domain name, and a suitable theme. In addition to those components, you might need additional modules to support dropshipping.
A domain name really matters because it affects the way internet users understand what your website is about and how they remember it. Therefore, a short, understandable and related domain name should be prioritized. Domain names like “.com” is highly recommended to use, no matter what. Also, do not name your domain after your name or a very specific product. Usually, you will have to pay from $5 to $20 per year for a domain.
5. Promote and optimize
Now, your online store is almost completed. However, the effort to promote and optimize it is necessary so that your store can get first orders and your brand can grow up. There are so many advertising ideas fitting different budgets you can think about, such as Facebook ads, display ads, influencer marketing, etc. You can consider spending an advertising budget of at least $500 on getting started, for example.
That’s about paid services. Lots of merchants ignore the importance of inbound factors. Unfortunately, they really matter. It’s crucial to care about SEO performance and how your content work since this is the most economical way to boost the rank of every website.
Also, don’t forget to make use of free marketing channels that allow you to approach potential customers like social media, email marketing. Along with the development of your business, you should use these channels in a more strategic way.
IV. FAQs for beginners
Question 1: What are the common ideas for dropshipping products?
=> These trending dropshipping niches in 2020 might give you good ideas:
- Power tools: wireless charger, electric flea comb for puppies, etc
- Phone accessories: car phone holder, neck phone holder, etc
- Lifestyle niche: mirror alarm clock, moon lamp, mini air conditioner, posture correction belt, etc
- Drones and accessories: legs for drones, helicopter drone, etc
Question 2: Is it possible to start dropshipping without money?
=> No. You surely need some money to start a dropshipping. It’s the cost to build a website (online store). You can use a hosting service (which usually wastes you from $50 to $100 per year) or self host-your store (which will cost you a bit more upfront but save you money later). Besides, you also have to pay $5 to $20 per year for a domain name.
Question 3: What are some examples of dropshipping stores?
=> Inspire Uplift is a great example of a general dropshipping store with a beautifully designed homepage. This website offers various options for kitchen and household, beauty and wellness products.
HYGO is another dropshipping store that offers a wide range of items in different catalogs such as Babies, Beauty, Health & Wellness, Pets, Phone Accessories, etc. Let’s navigate more on their website.
Question 4: How to know if a store is dropshipping?
=> When you see these signals at an online store, that store is most likely a dropshipping business:
- Their shipping time usually lasts up to 2 weeks or more.
- If you have spent quite a lot of time searching for products to dropship, you might easily realize if a store is dropshipping if they sell products commonly used for this order fulfillment method.
- You find on that store something regarding customs charges and they say that you need to pay for that.
- Most of the images on that store have a white background and they don’t make any effort to create better ones. You even can find the same pictures on Google.
- You can realize the same thing with descriptions of their products. Many drop shippers just copy those texts from their suppliers and do not make any changes.
- The design is really simple and not professional.
If you find many of those things at an online store, it should be a drop shipper for like 95% certainty.
B. Magento 2 Dropship & Top X+ Magento 2 Dropship Extension Options
I. Dropshipping in Magento 2
According to what we discussed above, dropshipping is no doubt a very hot method of order fulfillment in ecommerce for different reasons. And online stores that work on Magento are also applying this method to complete orders in spite of the absence of some items.
So, does Magento support dropship?
Although Magento has become one of the most popular and best ecommerce platforms throughout the world, it still lacks features for dropship. It’s not a big deal since merchants can easily have Magento 2 dropship in stores with the support from the third-party extensions.
Now the question is “how to choose the best Magento dropship extension for stores?”
To upgrade your online stores with dropship features, there’s no way but installing a Magento 2 dropship extension meeting these requirements:
- Provide you with the ability to fully manage multiples warehouses (core feature)
- Support shipping calculator for dropship
- Should be friendly to use and compatible with all custom templates
Besides those basic requirements, each dropship extension for Magento 2 has its own outstanding benefits. Move to the next part immediately to explore the top 6+ free and paid options.
II. Top 6+ Magento 2 Dropship extension options
This dropship extension by Webkul is one of the richest in features. A typical benefit of the extension is integrating Google Maps for auto-completing addresses. By installing Dropship Extension for Magento 2 by Webkul, you can:
- Import products on AliExpress into your selected store (include description)
- Import products on AliExpress into multiple stores
- Verify shop URL while registering your Magento store URL
- Insert Product Price Synchronization from AliExpress by cron
- Automatically process AliExpress orders
- Choose shipping methods for each warehouse
- Import shipping rate information via a CSV file
- Import multiple warehouses using CSV, XML, or XLS file
- Calculate shipping fees based on warehouses location
- Provide admins with warehouse dashboard to analyze sales
- And more features
Dropship Module for Magento 2 by Magestore is a built-in module in the bundles of Magestore POS Solution for Magento retailers. The module ensures a great customer experience and makes seamless sales for even dropshipping business.
- Introduce the simplest dropship process ever with 3 steps
- Allow suppliers to create shipment/cancel request through frontend
- Send notifications to admins via emails to keep track of the dropshipping process
- Provide the admin and suppliers with a detailed order listing pages
Dropship Extension for Magento 2 by Amasty is a tool used to set up a multi-channel business without any warehouse costs. Thanks to it, you can expand your business regardless of your location and save so much money.
- Easily create your own base of suppliers and provide them flexibly limited access
- Assign products to specific warehouses
- Allocate ordered items between suppliers
- Limit suppliers’ access to order management
- Calculate shipping fees based on warehouses location
- Include advanced MSI features
- Support best-selling Aliexpress catalog
AliExpress is a giant marketplace with vast options of products to sell. Most of the vendors in AliExpress are overseas manufacturers with very competitive prices. For that reason, the module by Ced Commerce allows you to connect with the Aliexpress Dropshipping program to advertise their products on your website.
- Easily import product information in bulk from Aliexpress, including description, images, reviews
- Allow fetching product variation data like color, size, fabric, etc.
- Synchronize product price, image, description, and availability of products
- Import products based on keywords and product URL
If you find it boring to manage dropship orders manually, Magento 2 Dropship by Xtento is one of the recommended solutions (available for both Magento 2 and Magento 1). Here are some key features of Magento 2 Dropship by Xtento:
- Connect your Magento store to any supplier that allows to import/export via FTP(S), SFTP, HTTP, APIs (SOAP/REST), or E-Mail using Xtento’s import/export extensions
- Support exchanging data formats, including text-based formats like CSV, XML, TXT, etc.
- Fast and simple to integrate into your Magento store
Another quality dropship extension for Magento 2 comes from Boostmyshop, which brings store owners with a clever warehouse management system. The extension supports:
- Allow admins to supplier stock and price
- Auto-select the cheapest supplier to optimize profits
- Provide admins with a dropship workflow to control the progress
- Compatible with Magento 2.2.x & 2.3
Along with those paid extensions, here are some options for a Magento 2 dropship extension free:
- Magento 2 Dropship Extension free by Mageinn
- Magento 2 Dropship Extension free by WebShopApps
All things about dropship discussed in the post have revealed how amazing this business model is. However, making profits by a dropshipping business has never been easy and requires wise decisions from drop shippers.
BSS Commerce hopes that we have provided you helpful information to approach this trendy order fulfillment method. We also discuss other useful topics around ecommerce through our blog. If interested, let’s subscribe to our blog with your email to be noticed for our latest posts.