There are two main schemes of online trading — the classic model and the dropshipping model. In the first case, the seller himself is in charge of purchasing, storing and shipping the goods. In the second case, the seller only accepts orders, and storage and logistics are handled by the supplier of goods. Sounds simple enough, but in fact dropshipping has many of its own nuances. In this dropshipping guide you will learn what dropshipping is, how it works, what are its nuances and how to start a dropshipping business in 2024.
What is Dropshipping and How Does it Work?
Dropshipping is a model of online commerce in which the seller only sells products and receives orders from customers. The production, storage, and shipping of the sold products are not handled by the seller, but by a third-party supplier.
In dropshipping, most often sellers pay for the purchase of products only after the goods are sold. This means that the seller’s money is not directly invested in the goods, so there is no risk that the goods will take a long time to sell or will not be sold at all. This online trading model is especially beneficial for start-ups who don’t have the ability to invest a lot of capital into their successful dropshipping business.
In dropshipping, there are usually three individuals operating:
- The customer — the end buyer of the goods;
- Dropshipper — the seller of goods and owner of the marketplace who interacts with customers and accepts requests from them to purchase products;
- Supplier — a company or individual entrepreneur who manufactures or delivers the goods ordered by customers.
The classic dropshipping scheme looks like this:
- A dropshipper opens a position on a marketplace or his online store and places goods on it;
- The customer makes a purchase of goods from the dropshipper;
- The dropshipper takes payment from the customer and passes it on to the supplier, withholding a percentage of the purchase;
- The supplier ships the goods to the customer.
Types of dropshipping
For the dropshipping guide to be complete, it is worth highlighting the main types of dropshipping. Some sellers sell different categories of goods and contact a whole list of suppliers, while others sell only one category of goods and cooperate with one or two suppliers. The type of dropshipping you choose depends largely on the seller’s experience and skills, investment and preferences. Here are the five main types of dropshipping:
- Resale of goods. In this type, the seller sells different products from different suppliers. This dropshipping model is suitable for sellers who are knowledgeable in one specific product category and know well the needs of the target audience of certain products;
- Offline business representation. Many manufacturers and suppliers find it difficult to integrate their offline business into the online space. Vendors can take advantage of this and offer manufacturers to become a company or store representative using a dropshipping model. This will give the seller an exclusive range of products and minimize competition. However, this type has its own difficulties and nuances, for example, organizational issues can take a lot of time, there may be no promotional materials, the terms of the contract may be disadvantageous for the seller;
- International dropshipping. This is the sale of goods from one country to another. Most often sell goods produced in China, Korea, and other Asian countries. Slightly less often sell goods from the United States and European countries. Usually international dropshipping is engaged in large legal entities.
Types of marketplaces for dropshipping
There are many different marketplaces to start dropshipping. Their choice depends on the skills and knowledge of the seller, the category of goods, and the availability of potential buyers. Here are some of the most popular types of trading platforms for dropshipping:
- Social media. Social networks are often used by beginner dropshippers, as they don’t require large investments to start selling on them, and potential customers are easy to attract. For example, beginner dropshippers usually use Facebook;
- Aggregator sites. Such sites can include eBay. eBay is considered one of the earliest and one of the most popular dropshipping sites. However, eBay has some serious disadvantages, such as a high commission on sales — 11% of revenue. Also, for the opportunity to work with a wider range of goods, you need to pay a fixed amount every month;
- Own an online store. Opening an online store on its own site is quite difficult and it’s not dropshipping for beginners — you need to hire an experienced programmer or use constructors to create a site, for example, Wix. However, it opens up the possibility of automation and in-depth management of the site;
- Marketplaces. These include the popular Amazon and Walmart. On marketplaces, the seller must set up delivery of goods from the supplier to the marketplace warehouse and only then the marketplace itself will ship to the customer. It is important that you have reliable and trusted suppliers, because if the supplier does not deliver the goods to the marketplace warehouse on time, the seller gets a penalty and a lower rating.
How to Start Dropshipping in 2024?
Choosing a sales GEO
Choosing the country where you will sell your products depends on the choice of the products themselves, the choice of suppliers and the marketplaces where you will start dropshipping. Setting up a dropshipping business won’t work if you don’t choose the right geo.
Find a profitable niche
The most important step in starting your successful dropshipping business is choosing a profitable niche. There is a lot of competition in dropshipping, so you need to choose a niche that generates a good income regardless of the number of sellers in the same product category. To choose a profitable niche, it is worth considering subcategories rather than large product categories. For example, if you plan to work with health products, it is better to focus specifically on weight loss products, rather than selling all the supplements and so on. This will reduce competition and save on investment. However, therein lies another problem — identifying the target audience.
Identifying the target audience
Every dropshipping guide emphasizes finding their target audience as an important step. Since it is better to choose subcategories of products for dropshipping, the target audience for such products will be narrower. But how to determine whether the subcategory has its own target audience at all? To do this, you can use social media, such as Facebook, and Google’s keyword planner. In the first case, you can collect data on users by searching by interests, age, general information about users, their subscriptions and so on. In the second case, just search for a keyword related to your niche and see the number of searches for that word. You can also just look for keywords from your competitors so that you don’t have to search for them yourself. If you don’t find your target audience, setting up a dropshipping business is impossible.
Many dropshippers look for suppliers on social media, marketplaces or directly. There is a strategy of dropshipping for beginners — dropshipping programs. Some suppliers have dropshipping programs, so it is better for novice sellers to communicate to such suppliers to speed up the process of establishing cooperation. After choosing a supplier, you need to sign a contract with him. Most often, the public offer of the supplier can be viewed on its official website. If there is no public offer, then you need to contact the supplier and sign an agency agreement.
Creating a trading platform
You can create a trading platform anywhere — from a page in a social network to your own website. The choice depends on the desire and skills of the dropshipper. In order for goods to be bought, it is important to pay attention to the appearance of the goods on the trading platform, its text descriptions — this information should be exhaustive for buyers, so that there are no questions and there is no understatement. If you don’t make a quality trading platform, setting up a dropshipping business is impossible
Setting up the payment process
On marketplaces, payment is automated and sellers do not need to think how best to receive money. If a dropshipper uses a social network or their own website, they need to connect online acquiring, QR code payments, or payment aggregators to pay for goods online, for example — PayPal.
Setting up an online cash register
In any business involving the sale of goods, the seller must issue checks to customers for purchases. In order to issue checks for payment of goods by card, you must necessarily connect to an online cash register. You do not need to do this on marketplaces, as this process is also automated by the service.
A couple of dropshipping business ideas
Jewelry has always been in demand on marketplaces. Despite the high offer on the market, the demand for jewelry very high and the best dropshipping business is not leaving for other product categories. In 2024 the demand for jewelry will increase even more, so selling jewelry is one of the best dropshipping business ideas.
Like jewelry, cosmetics are in high demand. There are still not many competitors in the market, so selling cosmetics is considered one of the best dropshipping business ideas. Hand, face and body creams, shampoos and gels sell well.
In 2023 user interest in health products increased by 15-20%. Because of this, the demand for health food and supplements has also started to be felt in the marketplace, where products from less well-known manufacturers are sold than in massmarkets. Despite the great competition in this niche because of the high demand of goods bought from most dropshippers. To buy goods and this one of the best dropshipping business ideas brought profit, it is important to sell quality products from trusted suppliers. Vegetarian products, nutritional supplements, vitamins, sports nutritional, and nootropics sell best.
FAQ on How to Start Dropshipping
What is dropshipping?
Dropshipping is a sales model where the seller takes orders from customers and the supplier stores and ships goods to customers.
How does dropshipping work?
Dropshipping allows suppliers and manufacturers to successfully sell their goods without spending time finding customers and investing in advertising.
Where to find suppliers?
Suppliers for dropshipping can be found on marketplaces, social networks or directly through their website, offering cooperation. If you want to find suppliers from Asia, check out the Alibaba website.
How to start working with suppliers?
To start working with suppliers, you need to contact them and offer cooperation. Cooperation can take place under the terms of a public offer or under the terms of an agency contract.
Where can dropshippers sell goods?
Dropshippers can sell goods on social networks, aggregator sites, marketplaces or on their own websites. For example, dropshippers often sell their goods on eBay, Amazon, and Walmart.
Dropshipping has not changed at all over the years. The only change that dropshippers may face in 2024 is even more competition. This is not surprising at all — such a promising sphere cannot remain without the attention of individual entrepreneurs. In order not to face a lot of competition, it is important to engage in dropshipping competently, choosing small niches, cooperating with reliable suppliers, choosing the right trading platforms and reading useful dropshipping guides.