What is Dropshipping – Low-Cost, Low-Risk Startup for Newbies

What is dropshipping?

Dropshipping is a good online business model to start with.  There are many dropshippers who have built million-dollar businesses through the years. This is the process simplified:

  1. You have an eCommerce website that displays other drop shipping supplier’s products with a markup already from their price.
  2. When a website visitor orders through your website,  you, in turn, place the order with the supplier, complete with your customer’s details, keeping the difference between what the website visitor paid and what you will pay the supplier.  For example,  on my website, I displayed a product from a dropship supplier that costs $2.00. On my website, I will display it as $6. When a website visitor orders through my website, I will then place the order with the supplier and I keep the $4 difference.  Instant profit. 
  3. The supplier takes care of the shipping of the item. You don’t need to keep inventory, handle products, nor shipping.

Clearly, dropshipping is a low-cost, low-risk eBusiness. You do not need to buy or keep a huge inventory. You only buy the product when the website visitor has already paid you.

This particular business model has a very easy learning curve. This is very important because one of the reasons eBusiness newbies fail is due to information overload that a newbie finds overwhelming and he/she is unable to take action.

What you need to start a drop shipping business:

PC plus a good internet connection

An eCommerce website (hence you need a domain and a web hosting service) that has dropshipping capability. (If you are totally new to website building, don’t worry, most companies offering a dropshipping business  offer website set up for a reasonable fee).

A payment gateway – a way to accept online payments. The simplest way is to open a Paypal account. Paypal accepts both Paypal AND credit cards. Shopify though has a built-in payment gateway so it is indeed an easy set-up with Shopify.

How much will it cost you all in all? It depends on the drop shipping providers you choose, which will be enumerated below.

Some of the popular drop shipping service providers

Alidropship

AliDropship is the best solution for drop shipping  When you sign up for Alidropship, you just need to buy a plugin one-time for $89 (one plugin license per website) plus their recommended web hosting, which starts at $48/year, including an SSL license (an SSL license gives added security to the site, a must for eCommerce stores). Normally an SSL license alone is at least $20 and higher, but with their web hosting, it is free.

 

The Alidropship plugin lets you import products from Aliexpress (which is a big directory of drop ship suppliers) directly into your website, then you can edit the product specifics before making it appear on your store.

Alidropship themes are WordPress-based, so if you know your way around WP, especially WooCommerce, then you can set up your online store easily.   Their 3 Alidropship themes plus 2  WooCommerce themes are all WordPress. If you want to set up your WordPress website yourself, refer to our WordPress post.

Not to worry if you have absolutely no experience with WP.  You can opt to order a custom website, starting at $299. If you want to see the themes, a demo of Alidropship stores, and the success stories, click here to know more about Alidropship.

We will post a separate article for Alidropship soon.

Shopify + Oberlo

Shopify is one of the most popular platforms for drop shipping because the store is relatively easy to set up even for newbies.

Once you have signed up with Shopify for your eCommerce store, you will use an app called Oberlo to easily import products from suppliers directly into your Shopify store and once a customer places an order, you place the order with the supplier, who, in turn, ships directly to your customers.

The Oberlo marketplace is where you can find a wide variety of products from suppliers who provide fully automated order fulfillment services.

You can also opt to apply for an account with Oberlo first and once you sign in to your account, there is an easy set up there for your Shopify store. Oberlo has a free starter plan just to try out and get your feet wet and is perfect with Shopify’s 30-day free trial as well. Click here to start with Oberlo. Take a look at this:

dropshipping with Oberlo

Shopify, however, is not just limited to products from Oberlo.  You can also integrate other dropship products from other suppliers.

Your Shopify store has a built-in payment gateway as well; should there be a refund, it just takes a click of a button and the customer gets a refund in 3 days.

They also provide awesome customer support so running your store is worry-free.  Their plan starts with as low as $13 a month for the Basic Package.  You can have a 30-day free trial, set up your store, and pick a plan later. To know how to start drop shipping via Shopify, click here.

We will also post a separate article to know more about Shopify.

Salehoo

Salehoo is a huge directory of drop shipping and wholesale suppliers around the world. You can find drop shippers in your own country that ship internationally. And because they are suppliers from all over the world, chances are you will find products that are not commonly available with other dropship platforms. They have more than 1000 dropship suppliers and 8000 wholesalers.

Access to these dropship suppliers and wholesalers will cost only $67 a year. (only $5.58 a month!) with a 30-day money-back guarantee. These suppliers have been screened and verified for your peace of mind.

They have more than 1.6 million products that they are actually tracking so that you can easily find niches that are profitable, affordable, trending, and low in competition.

You can sell them whether through sites like Amazon and eBay or have an online store yourself.  Though having an online store is a separate added investment, it definitely has advantages.

You can add Salehoo’s products on your site with Shopify, or WooCommerce, among others. We shall post a separate article on this.

Click here to get started with Salehoo.

There are, of course, other drop shipping providers but these are the most extensive in product and supplier reach.

Which One To Choose?

There is no good or bad choice here. You can make money online with any of these – but one thing is certain – whichever you decide to do, you need to consistently do marketing. That includes social media marketing, SEO, content marketing/blogging, email marketing, and a few more marketing ideas.

You can have a purely online store, but without valuable content, without email marketing, your best bet is to consistently do advertising every day and hopefully you gain traffic and backlinks enough to make you rank in search engines.

Then again, the chances of you getting backlinks and traffic are higher when you have articles that offer great information. Information that makes people want to cite your articles on their own websites or share them around in social media for traffic. As I mentioned before, a backlink is when other websites mention your website. How can one do that when they have no interesting content worth citing in other websites?

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Popular Online Business Models

popular online business models

With more people accessing information online, buying things through the internet, the opportunity is increasingly becoming more lucrative online.  There are several business models and this introduction will enumerate the most popular online business models.

Because this is a course for beginners, we will begin with the low-cost, low-risk online businesses, just to get your feet wet and introduce you to the online income opportunity

The Popular Online Business Models Today

Affiliate Marketing

Affiliate Marketing is when you promote other people’s/company’s products with an affiliate program and earn a percentage from the sales bought through your affiliate link. It could be anywhere from single digit to as high as 50% commission or even more.  Some programs even have a recurring commission, especially for subscription products or services.

The main task is, once you are accepted into the affiliate program, you will be given an affiliate link to serve as a tracking for all goods bought through your marketing efforts, and that is all. The company will be the one to take care of product or services delivery.

Most companies with affiliate programs will expect you to have a website to promote their products and accept you to be an affiliate, but not all require it.

We shall have a separate post to discuss affiliate marketing exclusively.

PROS of Affiliate Marketing

  • Low-risk, low-cost startup
  • No need to take care of placement of orders nor shipping; very hands-free

CONS of Affiliate Marketing

  • Sometimes percent commission is smaller, but this varies greatly
  • Needs a lot of promotion, digital marketing

    Dropshipping

dropshippingDropshipping is also promoting other drop shipping suppliers’ physical products through your website. Once a customer orders through your website,  you will, in turn, place the order with the supplier, and keep the difference from what the website customer paid to you and what you pay to the supplier. The supplier takes care of shipping it to the customer.

PROS of Dropshipping

  • Low-risk, low-cost startup capital
  • No need to take care of  shipping
  • Good profit margin
  • Instantly receive profit

CONS of Dropshipping

  • Longer shipping time – 2-4 weeks or more
  • Requires more effort as you will have to watch the orders and place it every time there is a new order
  • Needs consistent promotion

Know more about drop shipping by clicking here.

Private Labelling

Private Labelling is when you order from wholesale suppliers and sell by retail the products with your own private label placed on the product.  Hence, you can have a big company without needing a manufacturing plant nor research and development department of your own.

PROS of Private Labelling

  • Huge profit, you can buy something for let’s say $2 and sell it for $20
  • No need for a manufacturing or R & D team.

CONS of Private Labelling

  • Huge upfront cost since you buy in bulk
  • You need to take care of the shipping unless you find a fulfillment center to do the packaging and shipping, in other words, fulfillment of orders
  • You need to do marketing as well

There is one of these popular online business models that is increasingly becoming the dream of many, and worthy of mention  – Amazon FBA  (Fulfillment by Amazon).  This is when you sign up with Amazon as a seller, ship your private label products to Amazon, and Amazon takes care of putting your products on display on their website (through a listing that you created of course), and Amazon takes care of packaging and shipping.

Because of the huge customer database of Amazon, one need not worry about website traffic and just conduct pay-per-click and giveaway promotions within the Amazon portal.

More details about these online business models will be discussed in separate posts.