Common questions about dropshipping
Throughout the rest of this book, we’ll cover all of the necessary steps to start a profitable dropshipping business. But before we continue, it’s worth answering a few common questions we receive about what dropshipping is and how it works.
How much do I need to invest to start dropshipping?
Though it’s hard to predict the exact costs for any individual business, there are a few items every dropshipping business will need to spend money on in order to get started. Here’s a quick summary of the essential costs.
Estimated cost: ~$29/month
You’ll need to find an ecommerce platform or website builder in order to create and host your online store. We obviously recommend starting a Shopify store. You’ll be able to effortlessly sync with the Oberlo marketplace to source products, and you’ll get access to our full selection of themes and free branding tools so you can get your business up and running quickly.
Estimated cost: $5-20/year
It’s hard to build trust with customers without your own domain name. While there are a number of top-level domains available (e.g., example.shop, example.co), we recommend looking for a .com that fits your brand, if one is available. You can use Shopify domain name generator to get started.
Estimated cost: Varies
Although dropshipping lets you have minimal involvement with handling your overall product catalog, you should set aside money, as well as a little bit of time, to test out the products you plan to sell. If you don’t, you risk listing a product with too many shortcomings or defects, which will result in unhappy customers and a lot of time spent dealing with returns.
Estimated cost: Scales with your business; we recommend budgeting at least $500 to get started
Every ecommerce business should look for ways to reduce their average cost to acquire a customer through organic channels like content marketing, SEO, and word of mouth. But to get started, advertising is usually an essential channel for most product-based businesses. The most common channels include search engine marketing (SEM), display ads, social media ads, and mobile ads.
How do dropshippers make money?
Dropshipping businesses act as product curators, selecting the right mix of products to market to customers. Remember, marketing is a cost you incur, in both time and money, helping potential customers find, evaluate, and buy the right product. You’ll also have to include the cost of providing customer support whenever there’s a product or shipping issue. Last but certainly not least is the original price that your supplier sells the product for.
With all of these costs to account for, dropshipping businesses mark up individual products in exchange for distribution. This is why suppliers are OK having dropshippers market their products for them — dropshipping stores drive additional sales that the supplier would have otherwise missed out on. In order to make a profit with your dropshipping business, it’s a good idea to find out how much it costs for you to “acquire” a customer, and price your products with that in mind.
Is dropshipping a legitimate business?
Dropshipping is merely a fulfillment model, one used by many global retailers, and is perfectly legal. Like with any business, satisfying customer expectations and building a brand that resonates with the right audience is still key to long-term success.
This question usually comes up due to a misunderstanding of how dropshipping works. Most retail stores you shop in are likely not selling products they personally manufacture. Dropshipping takes this curated approach and turns it into a fulfillment model fit for an online business.
There are, of course, the more fundamental things you need to do in order to run your business legally. Consult a lawyer who specializes in these matters to ensure you’re conducting business legally in your region.
So, is dropshipping worth it in 2020?
As we’ve mentioned, dropshipping isn’t a perfect, stress-free way to build a successful online business—hard work is always required to start a business. The model has some definite advantages, but comes with a number of built-in complexities you’ll need to address.
We’ll be examining these challenges, and how to best address them, in future chapters. The good news is that with some careful planning and consideration, most of these hurdles can be resolved and need not prevent you from building a thriving, profitable dropshipping business.