Drop shipping is amongst the businesses that you can start with no capital. Before jumping into this business you need to be conversant with how the model works
How to Start a Drop Shipping Business with no Capital
A lot of people have resorted to online businesses. A good number of people, however, have some holdbacks when it comes to opening an online store because of the hassles involved like startup costs. What if somebody took over all the costs on hundreds of products and maintain your operations? Running an online store would be way much easier. Sounds good right?
So what is drop shipping?
Drop shipping is selling to your customer directly from the company. You may ask how does drop shipping work? You get a company that will agree to drop ship. You will list their items on eBay, on Amazon or on your own website for selling without buying it first. After the product sells, you assemble the retail price (selling price) and the cost of shipping from your client. The company then sends the package directly to your client.
Most of the time the clients do not know whether the products are being drop shipped because the supplies may customize the label or logo to match your logo. The client then gets the impression that you actually did send the item.
The drop shippers offer the buyers the privilege of enjoying Very reasonable rates, Product Inspection, consolidation, free storage, rebranding, international payment methods and shipping directly to the customer.
Steps involved in starting a drop shipping business
1. Search for a supplier
When drop shipping, you cannot afford to make the mistake of settling for the first supplier you come across. You will have to explore different suppliers. For local suppliers or those within your country, you could check through some of the online sites and locate a suitable supplier. It is advisable to go through the supplier history and look out for their experience. You will need a supplier who understands the importance of quality and delivering on time.
Here are some of the questions that you should ask before drop shipping:
a. What time will it take to receive the items after an order has been placed?
b. What are some of the shipping methods available? For example couriers, flight, sea, e.t.c. You should also ask whether or not they track the items. And if they do, how.
c. What are their product quality control structures? The last thing you want is to receive sub-standard products because you will have to incur extra costs to return them.
d. Do they offer warranties?
e. Will you be allowed to use their product photos? Most big wholesalers have the photos of their products taken by professionals. It would be safe to know whether you can use their photos for the products to seem more appealing.
2. Choose the Products and select the Best-selling.
After choosing the supplier, go through their products (the ones in your niche).
You could locate the best-selling items by
(i) Using the services of search companies like SaleHoo Market Research Lab which does the market research after entering the keywords of the items. Some of the information got from the search is the selling price, cost of shipping, and sell-through rate.
(ii) Going through EBay’s listings through the following steps:
a)Visit eBay.com
b) Next to search bar is the “advanced search” box. Click on that button
c) Select the “completed listings” box
d) Key in the keywords of the products, the category, and click search.
e) The results will display several pages. Go through around 4-5 pages and note the successful listings (highlighted in green). The unsuccessful ones are in red.
f) When you identify an item with more than 60% sales means that it will be much easier selling it. The surest way to be certain that an item sells for more than 60% is to scroll to the bottom and ensure that you are viewing 40- 50 items per page. Counting the number of listings in Green should give you more than 40 of the total sales which count to approximately 60%. That would be a good indication that the product would sell well.
In case the products you searched for do not give any meaningful results, use a different keyword or category to search for the same item. For example, if “electronics” does not match up to any products, you could consider searching “best-selling electronics”.
3. Get a Retail License/ Tax I.D/ Vendor’s License
Although not all sellers on eBay require these documents, some suppliers have it as a requirement to have one before being involved in any sort of transactions with you.
If you are in the U.S or Canada, you will need a sales tax ID. Several states in the US do not need a sales tax ID like
You need to get a sales tax ID if you are inside the US or Canada and running a business (not just selling items from around the home).
Note that some US states including Delaware, Montana, Oregon, New Hampshire and Alaska. If you reside in such areas, you should notify the supplier because you will need to fill out a certain form.
If you are required to have a Tax ID, do not freak out. It is simple and pretty cheap and can be got online or from the county offices. (Check online at “Chicago (your country) + Sales Tax ID”)
To acquire a sales tax ID, you will have to be either a company or a sole proprietor, and also have a Federal Tax ID number.
4. Select a selling platform
Apart from eBay, there are also other online platforms that are growing on a daily basis because of the demand in the drop shipping business. Some of them are even free to use and the signing process is quite simple and fast. Some of them are Amazon.com, Bonanza.com, and even Shopify. Browse through the market and see whether there is a market for the range of products that you chose. (It is advisable to broaden your horizon when it comes to selling on online sites because different sites have different visitors. Try out different avenues. You could even consider coming up with your own eCommerce site which is better because you will manage it yourself, and you will only be required to pay domain hosting fee.
5. Manage your listings
In drop shipping, your items are listed in the same manner you would list had you had the physical stock. (List as if you already have the items). When using eBay however, there are some policies and guidelines that ought to be followed. You must reveal in your listing to prospective buyers where the item is located.
For instance, if your supplier is located in Taobao, you are required to show this information in your listing for the buyers to be aware that the items may take a while before they receive them.
So, what is the difference between drop shipping and wholesale orders? Here is how drop shipping takes place.
After selecting your items from the supplier, you do not purchase them. You only list them eBay, or Amazon, or on your own eCommerce site.
Buyers visit your site, make orders, and pay for them. After the buyer has bought the item, you get the money from him and purchase them from the supplier at a profit.
The supplier then will send the product that you have vended directly to your buyer. After being in the business for a while, you will be able to know what products sell out faster and which do not. Single out the products with a high rate of sell-through and focus on those.
Final words….
Drop shipping is a perfect way to sell online with any initial capital. Just like any other business, it requires dedicated and lots of marketing. Work on getting a nice and easy to navigate website, work on proper customer service, and enjoy your way to the top. Drop shipping is not restricted to any part of the world, it is open to everyone and everywhere as long as you are smart, have a computer, and the internet.