While Dropshipping can be a good way to make money online, it can also be a very competitive business. Sometimes it seems like everyone is selling the same hot products, and for these ultra competitive markets, the profit margins can be very skinny indeed. With a little research and work up front, however, you will find that making a profit online with drop shipping can be easier than you think. Keep the following things in mind when establishing your business.
Find and develop relationships with quality wholesale and dropship providers. There are many smaller dropshipping companies out there. While some are legitimate and have a good reputation, others can be scams set up to take advantage of the unwary. One way to reduce or remove potential problems with dropshippers is to use a dropshipping directory. These directories aggregate many drop shippers under one roof, usually provide a feedback rating mechanism and other tools for finding hot products and niches, and often have long-standing relationships with many of the wholesaling companies.
There are several dropshipping and wholesale networks. Some of the more popular include Worldwide Brands, Doba, Salehoo, Liquidation.com, and Dropshipping Wholesalers. By far the market leader, and the one with the most comprehensive suite of tools and training resources, is Worldwide Brands. It is also one of the more expensive, but can jumpstart your business if you are serious about starting a dropshipping business. Salehoo and Doba are very good and slightly more cost effective solutions for the beginning dropshipper. Some of these programs require one-time fees, while others include access as part of a monthly subscription service.
When deciding on which products to sell, think Accessories. While everyone seems to be selling the hot products like the iPod and Iphone, profit margins tend to be much higher in the accessories for these items than for the item itself. If you have an eBay, Ubid, or Bonanzle store, focus on selling all the items people would normally buy in addition to the main item. Even if the item only sells for 10 or $20, these items are consistent sellers, and if you do enough volume in them, they can become very profitable indeed. If you do offer one of these hot items, consider it to be the magnet through which your accessories sales will occur.
Do market trending analysis for your products. Use services such as Google Trends, Alexa, and the like to see what people are interested in. Take advantage of seasonal trends as well. Offer products that you know will be popular during the holidays early on to take advantage of cyclical shopping trends. Also, take advantage of the market tools available from a good wholesale network such as Worldwide Brands.
Another consideration is where to host your business. Many small businesses run their operations through one of the online auction sites, such as eBay, Amazon.com, and Yahoo. Others create and host their own website elsewhere, using services such as 1ShoppingCart.com and establishing merchant accounts to take payments online. There are pros and cons to both solutions. These can include:
1) How your customers find you. If you run your business through one of the online auction sites, these often have a ready source of traffic from people who habitually use these websites to find products. This can save the owner from having to do – in some cases extensive – advertising and marketing in order to generate customer leads. If you own your own website, however, then it is up to you to send traffic to your store in order to produce sales.
2) Fee structure and profit margins. Online auction sites tend to have a higher fee structure than an independent website. These companies offer a valued service to the small business owner and charge accordingly. In addition, the business owner has fewer options when it comes to store design and payment methods. These are part of the trade-offs one agrees to when using these sites in the hopes of tapping into a large existing user base for traffic. With your own site, you have total control over how you sell to your customer, which payment services you offer, your sales terms and conditions, how you handle returns, dissatisfied customers and credit card fraud, and many other factors.
So choose wisely when starting your online business. The work you do upfront is a large factor in determining the kind of success you will have down the road.