Dropshipping is the term used for e-commerce stores that don’t stock and pre-purchase inventory, saving massively on overheads and hence financial risk.
How does it work?
A dropshipping supplier is a company that provides, stocks and ships out products directly to your customers on your behalf.
It allows you to advertise for sale a product on your website and charge whatever price you want. When a customer makes an order, you simply order the same product from the dropshipper who sends the product direct to your customer without the customer knowing that they aren’t actually receiving it directly from you. You pay the dropshipper and collect the difference as profit.
It means that you only order a product when you have actually made a sale. You also do not have the hassle and expense of storing inventory.
DropShipping vs Affiliate Marketing vs Retailing Wholesale Products
So how does drop shipping compare to the other common e-commerce business practices? (visit here to read about affiliate marketing)
Set Up Costs:
Affiliate marketing is the cheapest to set up because there is no need to pay for payment processors on your website, or deal with customer service. Selling wholesale products is the most expensive to set up as you’ll need to pre-buy inventory and have a place to store it, amongst other things.
Affiliate marketing will generally deliver the lowest margins. In the other two models you have complete control over the price you charge and can increase and decrease margins according to the market.
Affiliate marketers do not generally collect customer information – in particular emails. This limits their ability to re-market and take advantage of repeat orders as the customer typically deals directly with the company from then on. This is not a problem with the other two models.
Control, Responsibility and cashflow
Affiliate marketers have next to no control over the sales process -including when and if they get paid. There are plenty of horror stories of affiliate marketers not receiving payment from dodgy agencies and the like. When you receive the payment directly from the customer, then you know that you’ve been paid. On the flipside, affiliate marketers don’t have to worry about customer service, which can be a terribly time consuming part of the other business models.
Dropshippers have the best cash flow arrangement because they only pay for goods when they have a sale.
The downside to dropshipping is the lack of control that you have over when a product will be sent and what condition it is etc It can be terribly frustrating dealing with a delivery problem when you had no control over it. This is not an issue for people who sell wholesale products.
Still interested in dropshipping? Read on …
There are literally hundreds of companies that will dropship products for you depending on your niche. When choosing a dropshipping company it’s important to understand how much administrative work is required with each sale. eg if you need to spend 15 minutes on each order completing all the customers details then you need to factor this work into your margins.
One of the most popular companies to use is Aliexpress, who have thousands of (generally) really cheap products enabling you to work off large mark ups. If you choose to use Aliexpress, you’ll be happy to know that there is an excellent app called Oberlo that allows Shopify users to order through Aliexpress with just one click, negating the need to constantly complete customer details with every order.
Other popular and seamless dropshippers that work with Shopify are the tee shirt dropshippers such as Tee-Spring, Teelaunch and All Over Print. All of these apps work by automatically placing orders direct with the dropshippers (not even involving a single click!) so that you can simply concentrate on marketing and all the fulfillment is taken care of by others.
To run a dropshipping store, you’ll need an ecommerce platform to receive payments and process orders.
The world’s largest and most popular platform is Shopify and for good reason. Shopify is a turn key ecommerce platform that basically runs everything that your online shop will need – except of course your products and marketing! It’s a hosted system – meaning that you don’t need to pay for your own hosting nor deal with any of the potential pitfalls that come with that. Their hosting is fast and reliable.
This is the basics of how it works: –
- Choose a Shopify plan that meets your budget and needs. You can begin at the lower paying plan and easily upgrade later.
- Direct your domain (previously purchased from a registrar) to your Shopify store – or have Shopify register one for you.
- Choose your template / design. There are lots of free ones and hundreds of premium ones for sale.
- Add all your products, photos, descriptions, FAQ, terms etc to the site
- Start marketing and making sales.
- Make a fortune, sell your site (easily transferrable) and retire to the Bahamas.
In our opinion, the biggest selling points for Shopify are their awesome 24hr customer service and the huge array of applications and themes available that allow your site almost infinite functionality and design.
Prices for Shopify start at $29 per month
CommerceHQ is a brand new ecommerce platform that has only just come out of BETA. We’ve been testing it for 6 or so months so far, and, well, it just keeps getting better as functionality is continuously added.
Like Shopify, it is a self-hosted turnkey ecommerce platform.
Unlike Shopify, it includes a whole host of Apps and functionality as part of the basic platform, without additional cost.
These apps/functions (you can choose to use them or not) include:
+ 1-click upsells: When a customer makes a purchase, a discount voucher with a timer begins. the customer can purchase more without having to re-enter their details.
+ Abandoned Cart Recovery: When customers leave your site without purchasing, send them email reminders to come back and complete their purchase
+ Zero Processing Fees: Unlike Shopify and other ecommerce platforms, CommerceHQ has NO processing fees. Seriously.
+ Unlimited Staff Accounts: Need to give access to your staff and/or business partners? No problem.
+ Related Products: Upsell to your customers by displaying products that are similar to what they’re looking at
+ Unlimited Products: There is no limit to how many products you can sell on your site.
+ Pixel Management: Tracking pixels are easily added and managed
+ Coupon Codes: Flexible discount codes and coupons to drive sales and reward customers. Unlike Shopify, you can allow customers to accumulate coupons. Great feature.
+ Unlimited File Storage: No limit to the assets you can upload
Prices start at $99 per month for 3 stores. This is more expensive than the cheapest Shopify plan, but any store with just a few sales per month will quickly find themselves saving money – and a lot of it – by the time transaction fees (2% on Shopify) and App fees are taken into account. if you run three separate stores, then each store will be priced at about the same price as basic Shopify but with all the other savings.
Need help or have any questions?
Send us a message and we’ll be happy to help.