Consumer Corner: What is dropshipping and how can it make me money?
Consumer Corner: Dropshipping is a business model that allows you to create a website or social media page that advertises a product that you can rebrand as your own if you please.
Dropshipping is one of those new terms you may have come across and wondered, 'What does it mean?' However, the idea of dropshipping has been around for a while, and it is gaining momentum.
There are stories doing the rounds of teenagers who are on the brink of becoming millionaires thanks to their dropshipping business.
Of course, these are the super-success stories, but where there's a will, there’s a way - starting a dropshipping business will take work, but it could prove quite lucrative if successful.
Dropshipping is basically having a business and selling products without having a store. What a dropshipper does is sell the products to a customer, and pass on the order to the manufacturer, who then delivers the goods to the customer under your company name. The dropshipper earns money as they pay a wholesale price for the items, but then can mark up the price when selling them onto customers.
Walter Dunphy on Irishfinancial.ie said: “Dropshipping is a business model that allows you to create a website or social media page that advertises a product that you can rebrand as your own if you please. You do not keep any stock of the product on hand, once a customer orders the product from you, you then buy it from the supplier who then ships it directly to the customer.”
Digital marketing consultant, Cian Murphy, said for anyone hoping to become a dropshipper, the challenges will be finding customers, setting up a local website and handling customer support.
“Starting a dropshipping business can be an excellent venture if you have the right information at hand. Dropshipping is so popular because the dropshipper does not need to hold stock. The drop shipper does not require to part with a vast sum of capital for stocking up the store like conventional retail shops,” he said.
There are many things to consider if you are thinking about getting into the world of dropshipping. Firstly, think long and hard about what products you want to sell and their profitability.
“Like any other business, you need to inspire yourself and learn to manage your time properly,” said Mr Murphy.
Things to consider when starting out is getting a good supplier and this is where extensive research needs to happen.
Word of mouth, of course, is such a valuable research tool, but it is vital to do as much research as possible at this point.
After that, Mr Murphy said next on your list should be obtaining a business permit and selecting a platform for your enterprise.
“Select a market segment which is not fully saturated. It is not easy to find an unsaturated niche, but with the invention of new products now and then, makes it possible to get new market segments,” said Mr Murphy.
Like any other company having a business plan is key, especially laying out how you plan to make a profit.
“You need to venture into a profitable market segment because the objective of any business is to make a profit. Explore several business ideas and narrow them down depending on the profit margins, and pick the one with the highest profit margin or potential,” said Mr Muphy.
Mr Murphy also highlights certain features that a dropshipping product should have and these should be considered when starting out.
“I would advise you to deal with portable products that are easy to transport to customers to avoid incurring additional shipment costs. Deal with products that are not too cheap because the profit margin will be negligible while highly expensive products will reduce your customer traffic. Deal with average-priced products affordable to a wide range of customers.”
He also advises choosing products that are not seasonal, because he points out you will only sell them on seasons and this will kick you out of business when there are no holidays.
“Do not try to introduce a product that is experiencing stiff competition, since you will only fail,” he added.
Mr Dunphy said that rather than looking to far-away international markets, an alternative would be to look for European suppliers or even specifically Irish suppliers that would allow you to list their products on your website.
“Although this is likely to lead to tighter profit margins it will help you still maintain a position where you do not have to keep stock on hand and still get products out to customers on a speedily.”
The final piece to the puzzle then will be making sure you attract customers and this will be where marketing and advertising come into play.
“There are multiple strategies that you can use to lure customers into buying your products. One of the best ways to attract customers is by creating a list of email addresses which you can use to communicate regularly to your customers,” said Mr Murphy.
