How to Make Money in Ecommerce Drop Shipping
by Duran Inci
Drop Shipping is ideal for many individuals and / or small businesses. It requires very little investment to start and can grow to a large business quickly if done correctly. So, how do you make money in Ecommerce Drop Shipping? Where do you start and what are the important factors that affect the outcome?
Ecommerce is very competitive online. There’s a thin line between making and losing money. Therefore, any business plan should be well thought through and then executed properly. There are very small details in drop shipping that can make or break the profits. The following key elements that should be taken into account for successful ecommerce Drop Shipping
- Suppliers: There are a lot of suppliers who claim to provide a wide selection of products online at great prices. While I do not want to mention names, I will ask you to stay away from any drop shipper that charges a monthly fee. The right products and the right suppliers matter a lot. Therefore, you need to make sure that you have solid, long lasting relationships with your suppliers. You can find companies that drop ship easily with a simple Google search in any industry. (ex: medical products drop shipping)
- Products: Products and pricing play a huge role in the success of any drop shipping operation. You must make sure that you have competitive pricing and niche products. (Don’t be the highest price, but do not be the lowest either) I would never drop ship electronics since it’s very competitive online and margins are low. Try to find niche products that target a lifestyle or an ideology. (Skating, healthy living.etc.) This will bring more targeted and higher converting traffic to your site.
- Original Ideas: Try to think of original ideas or services to offer. For example, offering extended warranties or memberships to an online blog filled with useful information on a specific product line or lifestyle is a great idea that will convert.
- Profit Margin: This is one of the most important factors. You MUST have a gross profit of at least 30% to make money in online drop shipping. Do not forget this rule and look for suppliers or products that can promise this margin. This will make your life much easier.
- Website and Ecommerce Cart: The most important factor. Your website and ecommerce script matters a lot since you are working with other company’s products and inventory. Inventory matching in online drop shipping operations is a huge challenge.
o What does this mean?
Let’s say that your supplier has only 12 items of the XYZ product today. And you happened to add that product to your website since the price is great. Five days from now, your supplier might have only 3 of those products since they’re selling to other buyers as well; however your inventory still shows 12. This is the problem. Products come in stock and go out of stock so the more accurate your stock information is, the more money you will make. Your ecommerce system should support live integration with your supplier if possible. If this is not possible, you should make sure to equalize your inventory with your supplier once a day. This inventory issue creates big problems and major loss of advertising money with Adwords and PPC. It should be addressed promptly.
You also have to make sure that your ecommerce cart supports shipping options from multiple warehouses since you will have more than one drop shipping supplier. This will insure that you have accurate shipping information on your website.
The ultimate goal is to make money, and that’s not easy in online drop shipping. If you would like to learn more about how to successfully drop ship online, please contact us.