What is Dropshipping? This is probably a top 10 question around the internet. And if you’re dabbling into the realm of entrepreneurship, you have asked yourself for a while if this is a business model you should pursue. Or is dropshipping dead and oversaturated? You’ve probabaly been bombarded with watching advertisements where they introduce it to you as one of the best business models you can succeed at. But are they telling the truth?
Well, whether they are right or wrong, it will be hard to know if you unless you either dive in or do a deep research on the business model.
But for starters, it is a fact that people consider dropshipping a scam due to all the ads, influencers, and people getting advantage of others by offering this business opportunity. Therefore, let’s just say that its reputation hasn’t been able to be quite positive thanks to people who just want to scam others.
However, we don’t want you to remove the idea from your mind and ignore everything about it because, in advance, we will let you know it is legit, but you have to understand how it works to determine if you want to give it a try.
So, we will answer the main question but also give you a “guide” about what you can expect from it and how to get started if you want to bet on this opportunity.
First of All, What Is It?
Dropshipping allows store owners to order fulfillment without having to manage their inventory.
Instead, dropshippers buy the products from a third-party supplier who fulfills customers’ orders by sending them directly without you managing the inventory.
Because it reduces overhead and operating expenses, this business model is appealing to many eCommerce sellers.
Dropshipping can be described as a business model that you can use to create an online store with no inventory. It allows you to sell products directly from the wholesaler to your customers.
All you have to do as a retailer is to maintain an online product catalog and ensure it is updated to prevent any mistakes or orders that won’t be fulfilled.
It is as simple as following those three steps:
- The customer orders the product and, for example, it costs $90.
- You pay $45 to the supplier since you aren’t buying it as a customer (retail price).
- The customer receives the price, and you have a $45 profit (in this case).
Of course, the profit varies depending on the product and how much you are gaining from it. Also, this is just a brief idea, and we will make sure to dive deeper in a bit.
Dropshipping: How does it work?
Dropshipping is a business that relies on three factors: the supplier, the store, and the customer.
- Supplier
In order to place a catalog and sell, you need to locate a supplier that can help you with your order fulfillment and physical inventory.
In 2021, the most common source for suppliers is AliExpress (we are sure you’ve heard about it. However, you can also find many independent suppliers in the USA or depending on the country you’re located in.
Everything depends on how you want to approach this and how fast you want to deliver the items and products.
- The store.
If you don’t have an eCommerce, the customer won’t be able to place an order, and nothing will make sense.
Once having it, you need to upload the product catalog with clean images, details about each item, and a unique description. Different e-commerce platforms work well. However, Shopify is definitely the one to go with.
- The customer.
The customer will place the order on your website, and you can direct it to your supplier so the payment and shipment can be made.
If you want a simple overview of the process, you can follow these points:
- Dropshipping suppliers will source or produce the product.
- You enter into an agreement with the dropshipping provider.
- Dropshipping suppliers store the inventory.
- You host the eCommerce storefront
- A customer places an order.
- You will process the payment.
- The order is sent to the supplier.
- The supplier prepares your order.
- The supplier ships the order to the customer.
Why Is Dropshipping Popular? Its Benefits
Essentially, people decided to start dropshipping because it helps them to reduce risks. However, many other benefits started to accumulate with this business option, one of them being flexibility but also:
- It reduces the cost of starting and running a business: Dropshipping dramatically reduces initial costs to start an online business. Since you don’t need to build inventory upfront, you don’t need to worry about purchasing your inventory.
- You don’t need to manage inventory purchases or storage: This means that you don’t have to keep products that won’t sell, and you don’t have to mark them down and take a loss. Also, you are saving money in dealing with storage.
- You can make your location flexible: Dropshipping can be more flexible than traditional businesses. You don’t need physical inventory, so you can run your business from any place where you have an Internet connection and without worrying about paying rent or logistics.
- Customers can access more products: Since you don’t have to follow inventory or get rid of the one you have before buying more, you can keep up with the latest trends and add new products quickly to your website.
- Inventory management doesn’t have to be difficult: You won’t need to manage inventory if there is none in the first place. You just need to pay attention to what your supplier can ship to your customers.
Not Everything Is Perfect – Cons of Dropshipping
Just like the headline says, not everything is perfect.
Dropshipping is a great business option, but it also has the downsides that are making many people avoid it as well:
- Profit margins are reduced: The longer the supply chain, the lower the profits. Dropshipping might not make sense if you take into account the fees and percentages lost by intermediaries in the process. Since it is also a very competitive market, you won’t be able to bet on high-cost products all the time but rather focus on cheap ones to find customers, and your profits will be quite low based on the products you are selling.
- Inventory issues: It’s simple to monitor stock levels when you have inventory and handle it despite all the work it takes. When you don’t, it is more challenging to ensure that you have the right products when you receive orders from customers that are eagerly waiting to leave a positive review or a very bad one if you don’t have the product.
- Shipping isn’t easy: Shipping costs can become very complicated if you work with many suppliers. Suppose that a customer orders three products from different suppliers with different shipping costs. The prices will vary, and your fees will go higher, and the customer will have a bad time paying as well, which usually leads to canceling the order.
- Supplier issues: It is essential to build strong relationships with suppliers that are based on mutual respect and trust. Your suppliers are the heart of your business, so you need to be selective in choosing who you partner with and don’t take them for granted by being late with payments or being difficult to work alongside. Otherwise, you will lose lots of time and money on this business.
How to Start Dropshipping
If you are still here, that means you are very interested in the business model, and all you are waiting for is to see how difficult it can be to start.
We are not particularly into breaking hearts, and despite the previous cons we went over, we know you’re attracted to the benefits of the business model.
Therefore, if you truly want to give it a try, this is what you must do:
- You must commit to the business.
Dropshipping is like any other business. It requires a lot of commitment and a long-term view, not simply deciding to start and expect it to be a one-day thing.
You won’t be able to make six figures or just money in the first place if you don’t invest time on it and feel committed to the process it takes.
You’re more likely to stay motivated and not quit if you have realistic expectations about your investment and potential profit.
Dropshipping is a time-consuming business, so this is the first thing you must remember when trying to commit to it.
Our recommendation is to invest in sweat equity and bootstrap your business. This approach is preferred over investing large sums of money for many reasons:
- This will allow you to understand how the business works inside and outside, which will help you manage others as your company grows.
- You will be able to get to know your market and customers better, which will allow you to make better decisions.
- It’s less likely that you’ll spend large amounts on vanity projects that aren’t crucial to your success.
- You will learn many new skills that will help you become a better entrepreneur.
Most people can’t quit their jobs to start an online business. It may be a bit more challenging, but it’s definitely possible to get started with dropshipping even if you’re still working an 8 hours position or even full-time for someone else.
Just have a set of mind that if you grow in this business, you will be able to quit the job you hate and be your own boss.
- Choose your dropshipping business idea.
Doing market research is the second step to learn how to start a dropshipping company.
You should conduct market research just like you would when opening a store. Look into competitors, trends, locations, and other factors. Then, decide on the most profitable niche.
Although this doesn’t sound too complicated, coming up with product ideas to sell is tricky.
To help inspire your next dropshipping business idea, you can look at a list of trending products based on the top-selling product categories on platforms like Shopify, which isn’t hard since you can see some of the best-sellers. However, it will have to be done manually in some cases.
As a piece of advice, you can attract shoppers’ attention by focusing on niche products and popular products. This will help you gain traction and not compete with established companies.
Niche products are often more popular than mainstream products. This can help you sell to specific customers and increase awareness.
Dropshipping can be done with zero money by starting in fitness, fashion, beauty, electronics, phone accessories, or similar products.
- Dive deeper into competitor research.
Once you have a clear idea of what you will sell in your store’s sales, it is time to examine the work of your competition.
You may find great insights from your competitors, and this can help you create a strong marketing plan for dropshipping that isn’t a copy but rather a direct competition to earn your place in the niche.
Dropshipping is more successful if there is a lot of competition in your market. If this happens, limit your research to four or give dropshipping companies. This will help you stay focused and plan your next steps.
Here are some ways you can conduct competitor research:
- Google search: Search engines are a good place to start. You can use Google to compile a list of top competitors, and you can simply start by searching for key terms, such as the name of the products you’re planning to sell. The top 10 results will reveal who your top competitors are and how they promote their products.
- Spy competitors with Alexa or other tools: Online tools are excellent for tracking your competitors’ online activities. These tools give you information about competitor websites, including their social media profiles and top traffic sources. They also provide details about visitors to the site and how many leads they are generating.
- Explore social media: Look for top-rated brands in your niche by searching Facebook ads. You can also look at the way that the business communicates to its customers, its feed design, and how much engagement it receives. This information will help you identify ways to make your business stand out and improve your social media marketing strategy.
- Register to receive email updates from competitors: Get updates from competitors straight to your email inbox so you can see and analyze their marketing strategies and improve yours, thanks to this information. Learn more about their promotions and offers to get customers to buy and implement something similar if you notice that they are working.
Search and choose your supplier.
A key step in establishing a successful dropshipping company is choosing a supplier that won’t disappoint.
Dropshipping businesses without suppliers would not have products to ship to their customers, and therefore, they wouldn’t exist in the first place.
Now that you know the items or products you want to sell, you need to find dropshipping suppliers who can provide you with the quality service you require to grow your business.
eCommerce platforms like Shopify offer a plug-and-play style option for finding potential suppliers, but you could also rely on the most common ones like AliExpress or someone in your local area.
Just make sure that the supplier can offer good terms and fees and will not disappoint in shipping products, which will affect your dropshipping business reputation.
- Get your eCommerce or online store ready.
The next thing you need to start a dropshipping business is an eCommerce platform like Shopify. This is where you will send traffic, sell products, and process payments.
Shopify makes it simple to create and launch an eCommerce website, and although it isn’t the only platform you can choose, it is, for a fact, the best one.
Shopify is a comprehensive commerce platform that lets you sell online in multiple locations, accept payments in multiple currencies and manage your products.
It doesn’t require you to be a developer or designer since you can set the shop without much effort with the tools offered that can help you with everything, from logo design and domain name suggestions to the shop builder.
You can also easily change the look of your store using Shopify themes and the store builder.
- Choose a business structure.
You will need to establish a legal business entity if you are serious about your venture. Although we are not attorneys and cannot offer legal advice, we can provide a list of three common business structures.
Sole proprietorship
This business structure is simple to set up, but it does not offer personal liability protection.
Your personal assets could also be at risk if a customer sues your company. There are no filing requirements, and your earnings can be reported on your personal taxes.
Limited liability company (LLC).
By establishing your business as an LLC, you can increase your protection of personal assets.
Although the liability protection isn’t foolproof, it offers more protection than sole proprietorships.
Additional filing requirements may be required, and you will need to pay ongoing and incorporation fees.
Corporation
Major corporations are usually set up as C-corporations since this option provides the greatest liability protection.
Because income does not pass directly to shareholders, they are more costly to incorporate, however.
Which structure should you choose? We are unable to tell you what to do since a legal professional must handle this matter, so we recommend that you consult a lawyer before making any incorporation decisions.
Small entrepreneurs will choose to either form an LLC or a sole proprietorship dropshipping business.
- Market your store.
With the idea clear when it comes to starting the store, let’s talk about marketing your store now.
You may need to invest more in marketing and advertising to make your dropshipping business stand out than in the previous steps due to the competition in this field.
Fortunately, this time-consuming task won’t be a problem since dropshipping is so automated that you can focus on this instead of going for other tasks.
Now, how can you market your store? By using the most common and profitable channels:
- Paid ads: A Facebook advertisement costs around 0.97 cents, and since it is quite flexible, it can be used to promote products and tap into the impulse buying desire of people. You can also use Google Ads to target long-tail keywords that are more likely to attract shoppers looking for specific products. Google ads are more expensive than traditional advertising, but it might be worth your while to try them due to the leads generated with them alone.
- Marketing with influencers: You may be a dropshipper with a small budget, which means you could be limited to market your business. Since we want to help you save money, you can choose influencer marketing to ensure you are going for a cost-effective method since people trust influencers and can help you bring customers more easily after setting an affordable fee with them.
- Content marketing: Add content marketing to your dropshipping plan if you want to create a steady stream of traffic to your store. For it, you can include a blog that should be based on your dropshipping business plan and provide valuable information about the niche. Create content that educates and entertains your target audience. Other platforms like YouTube or social media itself can help with reach as well.
- Communities: Join groups that are passionate about your niche. Start conversations on Reddit, Facebook Groups, or other online forums with potential customers. Just remember not to be too pushy when engaging in the community.
Dropshipping Tips to Be Successful
We don’t want to leave you hanging and struggling in this business model because, like any other option, you will have a hard time dealing with all the things you have to do and the simple fact of having to work around this kind of filled space.
Therefore, we will leave you some tips that will help you boost your success and achieve it in the first place.
- Online shopping? Make it enjoyable: You want the entire process to be as easy as possible, from accessing the store to ordering and delivering the products. This starts with an easy-to-use eCommerce interface for your customers. It is important to create a beautiful site that is simple to use on all devices and easy to understand, so people are bound to not think too much about ordering.
- Be careful with your products: Dropshipping is a great way to sell many products. However, you don’t have to sell every single one. To determine the products you should sell in your store, do market research and analyze trends. Consider what is most marketable, can be shipped easily, and is difficult to find locally.
- Quality is the key: if you want this to work, you need to keep an eye on your supplier even if you trust it enough to handle everything without much control. The service cannot decay in quality, or the first party affected will be you. If there are multiple incidents of damaged products, lost packages, or late deliveries, you should cut ties with the supplier to avoid losing your customers’ trust.
- Establish a trusting business: Reputation is everything, and we know you can agree with us. Therefore, do your best to build it and maintain it with your customers and partners, and suppliers.
The Local Lead Generation Process for Your Business
All right! So, everything is about building properties and generating leads. But how does the process actually take place? Are there other steps I need to know?
The steps I mention below are what students from our local lead generation program follow to generate leads for businesses like yourself. So I’ll help you see what we do. And how if you join our program, you can simply generate leads for your own business (unless you want to start a side hustle and build a laptop lifestyle business).
Essentially, our lead generation can be divided into four steps:
The first is prospecting. You need to take the time to do market research on a niche (industry) and determine how many phone-driven businesses are there.
Keep in mind that this is local research as you need to know how many companies need leads. For example, you may search for “plumbing services Youngstown OH.”
You will find dozens or even hundreds of businesses trying to get themselves in front of the customers by ranking on Map Listings, organic results, and even Ad.
The second step, building. When you find a niche (plumbing, tree services, a software company, real estate…), you will need to start building your digital properties. You don’t need to be an expert in HTML or coding. It can be easy with the right tools.
The third step is now taking time to rank your lead gen website. With the site done, you need to work on SEO strategies and start dominating those Google search results. If you’re new to SEO, it stands for Search Engine Optimization.
To keep it simple, it consists of the entire process of growing a company’s visibility on search engines like Google and generating organic traffic. And remember this, local lead generation is part of the strategies.
Moving on to step four, once you rank the site, you will start getting your ROI and profits. You only need to rent it out to a local business interested in the leads the site generates. You can offer a couple of free leads to their move on with the actual pay per lead.
To review steps 1-4 above, I described it to a normal student who is building a lead gen business to help local service providers generate more calls. But replace the student with you as the business owner. And replace sending the leads to a business to simply siphoning the leads to your personal business.
By the way, fun fact, about 20% of our students in our local lead gen program are actually business owners who went through the program. And they use the skillsets we teach to generate leads for their own business.
An Example of Lead Generation: Home Advisor
You must be thinking, “if lead generation sounds so good so far, how come I haven’t seen any company?” That’s the thing; there are many out there. You just don’t know they are dedicated to it.
HomeAdvisor is one of the best examples you can find on the Internet as it is a top lead generation company that has spent millions building its brand but also earned even more zeros for this same reason.
They started small as everyone else but invested in building their brand awareness to make people who are looking for home services go to their website and find what they need. They are over 75% of people’s first choice when they need those services.
If you don’t get HomeAdvisor that much or need a refresh, users need to submit their information to request a service and get a professional or expert who can provide it.
HomeAdvisor’s job is to share your information, which makes you a lead, with local companies so they can contact you and offer the service you’re requesting. For sharing this lead information, HomeAdvisor gets paid by the companies. This happens for every single lead they send to multiple businesses.
Business owners who don’t have marketing skills or don’t even know how to have any online presence will always rely on those pages to list their services. They will save time and effort, but companies like HomeAdvisor can make them spend lots of money as leads aren’t exclusive (one lead is sent to multiple companies after all).
Using Facebook Ads aka Paid Ad Platforms: Do They Generate Leads?
They DO generate leads. If not, no one would use them.
However, you need to remember two facts:
- Paid ads or platforms can be expensive.
- They don’t generate “natural” leads.
Whenever someone sees or clicks in one of those ads, over 80% of them did it by accident or are trying to close/report it.
Why? Because they aren’t looking for those services. At least not at the moment.
What those ads do instead is interrupt their time on the platforms. Users aren’t there to find companies or businesses unless they are searching for a specific company’s user, and for that, there’s a search bar. This is why it is hard to convert them to actual customers who will show interest in the companies’ services. Also, you’re limited by a budget.
When using lead generation, everything is organic. You aren’t forcing others to pay attention to your business but rather being there when they need you. This is why Google’s organic traffic will always beat paid ads, and the reason companies continue investing in it, which is a lot cheaper as well.
What Is Local SEO?
Don’t worry… I didn’t get it at first either. Following the short explanation, local SEO focuses on scaling businesses’ visibility on search engines. However, this is only for those who serve their communities face-to-face.
What does this mean?
Experts and professionals like painters, plumbers, and dentists (but not only them) offer their services to their local customers. Why? Because they can’t deliver them unless they are located in the same area of their customers.
To make sure those businesses get more leads, you need to rank them locally by claiming the business listing on Google to place them on Map Listings. Local SEO also involves online reviews, citation management, and how you manage your entire online presence in the local area.
If you are going to bet on lead gen, you need to adapt yourself to today’s world: The Internet.
Keep in mind that although traditional channels and methods like billboards, warm calls, and pamphlets still work, they aren’t part of your tools. Whenever someone needs a service, they go to Google and search for it.
“Dentist in Miami” or “plumbing services in Orlando,” etc. And you can keep coming up with services or professionals people need and look for. Thus, you need to make sure you’re using Google to get the companies in front of their clients.
Users will always click on the first search results (those near the top), and many of them will be either Ad links (people paid to place their websites there), Map Listing, and then you get websites. Almost all of them are your goal and where you should always aim to place yourself.
Can My Business Utilize a Local Lead Generation Strategy?
If you want customers, you better know you need it. Following the previous explanation, lead gen is all about placing businesses in front of their customers, choosing them over their competitors.
Put it simply – it’s all about closing deals and having clients for those companies to make money. The main difference with the usual methods companies use for this is how lead generation approaches different channels to get them in the right place of the market to get customers.
Those channels are all focused on the Internet as most people are searching for products but also services across the net. The issue is that the Internet is way too broad, and businesses don’t know how to place themselves. They usually try, but they get one common result: losing money and time.
How Powerful Are Organic Leads from Google?
For companies looking for customers, it’s everything. For you? Pretty much the same. When you build a business with digital properties, you get to make thousands of dollars a month.
This isn’t a “get started today and get rich tomorrow” thing, but it is HIGHLY scalable, and ROI + positive results are guaranteed. Learning a fairly decent and very needed set of skills to create your digital properties and start ranking them on Google is required.
I have invested in several online businesses over the years, and if there’s something uncertain, whether you will get your ROI or not, even more than the actual profit.
However, this business moved my earnings from five figures a year to a month in ONLY passive income while sitting comfortably at home.
On my laptop. Anywhere. Anytime.
You can look at one of the first sites I built back in 2016, and it continues making me over $1.000+ every month. The best part is that I don’t need to touch it or the rest I’ve built over the years, just like this digital property.
What Makes Lead Generation SO Alluring?
Here it goes: you can work from home.
The main issue with regular business opportunities is how much you need to invest in staff, equipment, or rent to have a place to sell your products or offer your services.
We all know the hassles of traditional businesses that involve regular expenses, which are extremely high. Can you afford it? I don’t think so, and even if you can, is it worth it? Now, it isn’t only about the money. You also need to put in a lot of work, and it isn’t only during the first couple of months or years. Usually, it is as long as you continue running it.
You can save yourself those headaches and bone-breaking tasks and expenses with lead gen since it is more about generating leads with digital channels—mainly websites.
Websites can be VERY cheap to build, and with many tools online, you get to do it in a couple of hours instead of days. Any virtual or digital business is scalable and won’t need constant maintenance.
So, let’s summarize this:
- You save money in regular expenses with traditional and most online businesses as what you need is yourself and digital properties (websites).
- You can bet on passive income.
- There’s no need to hire more people to get started.
- You can generate leads in multiple industries, which allows you to work on any niche you want.
How Can I Get Started in the Local Lead Generation Program?
Anyone can start and learn. That’s the beauty of this business model. I knew nothing about SEO, Map Listing, and everything I’ve mentioned so far. It is all about learning the skills, gaining experience, and deciding to take the step.
Remember that this business model will never get old as business owners are always looking for leads. They need to do business and scale their companies. Why not do the same while helping others and still making money?
You can start with this local lead generation course highly recommended for anyone wanting to grow in the business. It is a close training that will take you through each step and make sure you are able to get your ROI, profits and take control of your life.
You will be added to an incredible lead generation family ready to help you 24/7 when asking questions on the group. Anyone is welcome who’s willing to put in the work. Click here to watch the lead gen webinar.