Amazon.com is one of the most valuable companies in the world with millions of customers. Did you know that you can grab a piece of the online shopping pie and compete with Amazon? Even better, you do not have to invest in warehouses, inventories or staff to get started.
How is that possible? The answer is simple: start a dropshipping business. Here’s how it works:
Inside A Simple Dropshipping Business
You decide to start an apparel business selling clothes from France. You find a supplier that you like and ask about pricing. You can buy the shirts for $30 each. You decide to sell them online for $75. To land the first patch of sales, you use online sales. Once the orders come in, you tell the manufacturer or distributor to directly ship the orders out to customers.
Did this example sound familiar? There’s a good reason for that. It is an example explained in the classic book “The 4 Hour Workweek.”
How exactly do you get this kind of business started? Follow these three steps to learn the basics of the business.
Step 1) Learn about the fundamentals of the dropshipping business
Before investing time and resources in starting this type of business, do your homework first. In essence, you are going into the online retail business. That means you will produce or obtain products for one price and then sell them at a higher price later. If you decide to avoid hiring employees, you will have to select a set of outsourced providers to help you with shipping, products and so forth.
In my view, there are two major attractions to starting a dropshipping business. First, you can get started with minimal investment – probably less than $500. Second, there is potential to grow the business quickly. How big can you grow? Just take a look at the successful entrepreneurs profiled in “The Million-Dollar, One-Person Business: Make Great Money. Work the Way You Like. Have the Life You Want” by Elaine Pofeldt.
The disadvantages? You have to worry about outsourced providers like shipping companies keeping their word. The companies you work with will directly impact your brand reputation.
Step 2) Choose A Market Niche
You have decided to take the plunge and start a business. Great! Your next step is to choose a small niche to serve. As a beginner, you will save yourself time and frustration by focusing on a proven category where there are already buyers. According to Shopify, here are some of the most popular niches for e-commerce in 2018:
- This multi-billion dollar segment helps people look good. In fact, billionaire entrepreneur Sara Blakely, founder of Spanx, is famous for winning in this market.
- Phone Accessories. With hundreds of millions of iPhones and Android phones on the market, many buyers want to customize their phones. Some people want to protect their phone with a wallet style case. Others want to see different colors. It is a way to get started in the smartphone market without selling phones.
- Portable LED Projectors. According to Oberlo, you can buy these products for about $50 and sell them at retail for approximately $150. That is an attractive margin!
Choosing a product is an excellent starting point. However, if you want to scale up and build a lasting business, there is one more step to consider.
3) Start With Products But Don’t End There
Yes, you will be selling products to your chosen niche. If you want to maximize your profits and charge premium prices, you need to think value. Put in other terms: what is valuable about what you sell? If there is nothing unique about your dropshipping business, you might lose customers to other companies with a lower price.
In Drop Shipping: The Best Way to Setup a Dropshipping Business Quickly, you will learn how to add value in a dropshipping business.
With this approach, you sell supporting products and services to the primaryproduct. Let’s say you sell a trampoline to families with young children. What other products could you offer to them? How about a 1-hour training video showing how to jump safely? Selling access to an online video can quickly add $20-$100 to each order.
Let’s take that trampoline business one step further. If you have ever bought a bookcase or other product from Ikea, you know how difficult it can be to assemble these products. You could sell a “video assembly guide” that shows step by step how to construct the trampoline. After all, your customers have probably never assembled a product like this so they could use the help.
Take The First Step
To keep the momentum coming, complete step one from this article in the next 24 hours.