Last updated - May 10, 2018
Dropshipping is rising in popularity as a great business opportunity in the current eCommerce scenario. More people are able to start a retail business and actually thrive, thanks to awesome options like WooCommerce. In this article, we’ll look into the possibilities of creating successful online businesses in the dropshipping niche using WooCommerce and a useful plugin.
What is Dropshipping?
Dropshipping is an innovative supply chain management method, with apparent benefits for the retailer without an extravagant investment of time and money. Fundamentally, in dropshipping the retailer need not maintain an inventory but will accept orders from customers. These orders will be transferred to the dropshipper (a wholesaler or manufacturer). And the dropshipper, in turn, will ship the orders to the customer on the retailer’s behalf. Consequentially, the retailer is able to pocket a handsome profit due to the wholesale margin.
Advantages of dropshipping business
You can start with bare minimum capital – The initial investment to start a dropshipping business is practically nil. As you don’t have to purchase the products that you are selling, you can get the business up and running in no time.
The complications of storage are bypassed – As you don’t have any inventory, you don’t have to worry about store keeping also. This is quite a relief, compared to the complex storage issues a traditional retailer would face.
Packaging and shipping worries are not yours – The dropshipper is responsible for packaging and shipping of the products. You can pretty much relax once you hand over the order to the dropshipper. However, you have to ensure that you’re tying up with a quality wholesaler or dropshipper as your reputation is at stake.
You don’t have to worry about office and amenities at the start – The presence of the retailer in the dropshipping process is more virtual than physical. Hence you can even operate with a laptop from your home. This might change as you expand the business though, but definitely not at the start.
There is more scope to scale – In traditional business models, growing your business means increasing your workforce too – new employees, bigger office, etc. In dropshipping you can handle growth to quite an extent using the same resources. Additional work in terms of storage, shipping and accounting are all borne by the dropshipper at all times.
Growth is not limited to volume, but in product diversity too – In conventional retail strategy, if you’re specialized in certain kind of products, your growth is pretty much revolving around that. It’s easier to diversify in dropshipping business if you find a new wholesaler with a new set of products.
Challenges in dropshipping business
Ok, you have heard quite a lot of exciting things about dropshipping. Does that mean it’s all roses and no thorns? Of course not. Dropshipping, like any other business, comes with its own set of challenges for the retailer.
Competition is ruthless, margins are low – The simplicity of setting up and operating such a cost-effective business means fierce competition. Dropshipping retailers often compete in the marketplace in one aspect alone – prices! The differentiating factor in a successful dropshipping business often boils down to the price that you offer – the lowest one wins. The quality of your website, the smoothness of the fulfillment process, the seamless customer service, etc will all come second here. As a result, you will be forced to continue operations at extremely low margins.
Stock details are not always accessible – You, as the retailer or merchant, are not always informed about the supplier’s stock details. This may result in back orders, delays in fulfillment, or even refunds. Syncing with the suppliers’ inventory in real time is tough, though there are ways to do; which we will discuss later in this article.
Complications in shipping can be numerous – When you’re actualizing your orders from multiple suppliers, some can get complicated. In a scenario where a single order with three products is fulfilled by three suppliers, there is a chance to have different shipping rates for each. You definitely can’t put your customer responsible for any rate difference in such cases.
You’re answerable to supplier’s mistakes too – Any lapse in the shipping process such as delays or incorrect orders might instantly reflect as customer complaints. As you have no control in the wholesaler’s shipping process, you may end up vulnerable. This can be quite a frustrating challenge for the dropshipping retailer.
How to start a dropshipping business?
The process of starting a dropshipping business is pretty straightforward. If we break it down, it comes to three simple steps.
- Start an online store – This is where WooCommerce comes into the picture. You can set up a beautiful and efficient online store using WordPress and WooCommerce. If you want to know the basic steps to setup an online store using WooCommerce, read our article on the topic.
- Find the right supplier – This is the most crucial step in the process. The supplier you choose can make or break your business. We’ll get into this section more elaborately in this article below.
- Optimize your marketing strategy – Like any other business, marketing is an essential component in dropshipping too. You need to reach to your customers so that they find some useful products in your store. You can learn more about marketing your WooCommerce store here.
How to find dropshipping suppliers?
This is the most important step in a dropshipping venture. Choosing a great supplier more or less seals the deal for you. Now we’ll discuss some of the basic strategies to finding your dropshipping supplier.
Reach out to the manufacturer directly – If you have a fairly good idea about what products you want to sell, you can contact the manufacturers directly. This is quite a sensible way to go ahead as the manufacturer may lead you to the wholesalers. You can then contact these wholesalers and set up a dropshipping account with them. Wholesalers mostly will have products from multiple manufacturers and soon you’ll have a connection with the market leaders.
Google search might just do the trick – Wait before you discard this as generic advice. There are a few things that you need to optimize here though. A superficial search won’t be enough; you may have to dig deep to find a good wholesaler. This is because wholesale businesses are not really into aggressive marketing, let alone SEO! But a thorough search using diverse keywords might yield good results. Also remember, a good wholesaler might not have the best-designed website, but they are still worth the money.
Get hold of a supplier directory – This is yet another useful strategy that you can employ to find suppliers for your dropshipping endeavor. You may have to pay a fee to get a membership to a popular supplier directory. Relying on a supplier directory is by no means a definite way to find a dropshipping supplier, but might help in the early stages of your business. Some of the good supplier directories include Doba, SaleHoo, Wholesale Central, Worldwide Brands, etc.
Concentrate on the best
Since this is a lucrative business with minimal investment, there are chances of fake wholesalers duping you. It is important to identify certain facets of good suppliers and the not so good ones. Here we go…
Tips to spot a good dropshipping supplier
Good suppliers essentially show a set of features that separate them from the rest. Some of them are listed below:
Efficiency is the key – The way they do business definitely speaks the most about a good supplier. The unfortunate thing is that you’ll know more about a particular supplier’s efficiency only once you start doing business with them.
Knowledgeable representatives – This is a factor that you can look into even before you start doing business with a supplier. The market knowledge and industry focus of the staff tells a lot about the business. If you feel confident in this aspect, you can proceed further.
Location – This is another straightforward feature that you can look in a supplier. A centrally located dropshipper might prove to be greatly effective in shipping to diverse regions in a big country such as the United States.
Technological competency – This is an important aspect when you are running an eCommerce business. Things, like accepting email orders instead of calling every time to place an order, will add a pleasing tone to your dealings. Features like live updates on inventory, online order history, etc can prove to be extremely worthy of you.
Things to avoid while choosing a dropshipping supplier
You can use the following factors to keep away from the bad ones too:
Recurring fee payments to the supplier – A legitimate supplier won’t charge any fee for dropshipping. However, charging a shipping fee per order is common in the US.
Your supplier sells to the general public – Normally wholesalers sell only to retailers. But if the supplier you are considering is selling to general customers, you can give that one a miss. There is every chance this one is a retailer posing as a wholesaler.
Not getting a clear idea about the supplier’s inventory – You need to be always aware of the supplier’s stock status. Otherwise, you may land in trouble with your customers. It is better to avoid a supplier who refuses to provide you with regular stock updates.
Other things to consider while choosing dropshipping supplier
There are certain legitimate fees – Though a good supplier won’t charge you for doing business with them, there might be some fees that you may have to pay. This often includes a shipping fee, for each order that you send them. This is accepted in the industry as shipping small orders are costlier than bulk orders that wholesalers are more used to. An initial minimum order limit is also a common practice in many countries. This is the result of a strategic approach by dropshippers to maintain long-term collaborations. If you invest in a high amount order upfront, you’re indirectly proving your commitment and seriousness towards the venture.
Collaborate with multiple suppliers – If you have only one supplier for a specific set of products, chances are you’ll become too dependent on that one. This way, you may miss out on a lot of business opportunities. A good way out of this is to have multiple suppliers for the same product. One risk factor here though is that long-term business with the same retailer might give you better deals.
WooCommerce dropshipping plugin helps you streamline the process
WooCommerce Dropshipping Plugin helps you communicate with your supplier in real time about the orders that you receive. This is a great booster for the smooth operation of your dropshipping process. This plugin creates a group of ordered products based on the supplier and then sends a notification email to each supplier. To enable blind dropshipping (where the wholesaler gives the retailer’s address on the shipment), this plugin creates packing slips and attaches it to the notification email. With this plugin, you can also import the supplier’s inventory (provided in CSV format).