Is Your Next Small Business or Side Hustle Ecommerce Drop Shipping?

Tips for drop shipping success

There are a lot of people making money selling products today without ever having to touch the products themselves. Drop shipping and Fulfillment by Amazon (FBA) are two popular ways to do this.

Drop shipping is the focus today, although we’ll touch on FBA.

If you need to know the basic drop ship model, the totally “hands-off” version of drop shipping follows a course like this:

  1. Find a supplier for a product you believe you can sell via the Internet.
  2. If the supplier will drop ship for you, great, if not, buy the stock and ship it to a fulfillment house.
  3. Set up an ecommerce website and create the pipeline that will channel orders to your drop shipper and maintain inventory information.
  4. Promote your website and the product you’re selling.

Ecommerce packages available

I’ve oversimplified a little here, but you get the idea. On the bright side, there are turnkey ecommerce software packages or plugins available that have drop shipper connectivity built into them, so you don’t have to compile that code from scratch.

If you can achieve any level of success at this model, it becomes a money machine. However, success doesn’t come easily. There are two basic paths to take if you’re going to be profitable drop shipping. Either one will work and if you can do both, you’re gold:

  • Find a unique product to sell.
  • Be the best in your product niche at SEO and Adwords.

The downside of the drop-shipping model is that the barrier to entry is low, so the competition is high. You’ll be going up against some veterans who have mastered the strategies of driving traffic to their websites.

Drop shipping profits

While a traditional retailer likes to get keystone pricing with its 50 percent markup, the drop-shipping model typically yields a 7-10 percent margin. That’s very slim and even though this is a model that (supposedly) requires little work on your part, it can be time consuming nonetheless. There really is no such thing as cheap drop shipping; the costs add up.

Competition in easily sourced products is fierce, to put it mildly. If you scan different sellers of the same products on Amazon, for example, you’ll see how the lowest prices are usually only pennies apart. That gives you an indication of how close they are to not having any margin at all.

This means that to be successful you have to be able to drive a lot of traffic to your product page and if you can do it at little or no cost, you’ll be in a much stronger position. Are you an expert at SEO? Have you had success achieving very high organic rankings on Google search engine results pages? And if so, have you had that success in a highly competitive niche?

Finally, more headaches that come with the drop-shipping model are customer service, inventory control, and operational control. You’re at the mercy of your fulfillment company. You can’t respond to any issues faster than they want to respond. This can create major customer service problems and those will eventually be reflected in ratings, which have the potential to sink your future sales.

(By the way, these issues lessen significantly if you set yourself up with an FBA account. Then you have the professionalism and power of Amazon customer service on your team.)

Still want to try drop shipping?

I don’t want to completely discourage you from trying to establish an online business that supplements your income. However, before you jump into it, work hard to find a product that has potential for volume but little serious competition. Also, it would be very smart to become a local expert in Adwords and keyword SEO before you launch any business based on drop shipping a product manufactured by a third party.

Also, be warned that you can find a lot of information on the subject on the Internet; there are drop shipping books and other materials designed to get the novice going with a drop shipping program. However, note that these materials – or any drop shipping course – is providing every “student” with the same information, so they can’t really be relied on to deliver any kind of competitive advantage or “inside information on drop shipping.” Frankly, many of these are really nothing more than drop shipping scams themselves.

Have you had experience with the drop-shipping model? Share your knowledge! That’s the kind of information that will prove useful.