Electronic trading is enjoying greater popularity day by day, the online-selling of goods becoming clearer and simpler.
However, what can we advise those who dream of online-sales, having nothing but this wish: no goods, no money for buying them, and no online-shop either?
This is the glory hour for dropshipping – a very helpful model, available for everyone and requiring minimal knowledge of Internet sales.
This explanation evokes another question: “How to make money dropshipping?” Let’s get to the point.
What is dropshipping?
The word is synonymic to “direct delivery” or “direct supply” – a type of entrepreneurship consisting in selling goods by means of an intermediary (a dropshipper).
According to the scheme, the intermediary buys goods from the producer only after being paid for them by the client. The intermediary’s profit evolves from the difference between the wholesale price he pays the producer and the retail price the buyer pays him.
Advantages of dropshipping:
- Fewer demands for the capital.
Due to the direct delivery from your supplier, you won’t have to invest thousands of dollars into the replenishment of your stock of goods.
Instead, you make a query for certain wares after receiving an order from your buyer.
- A large choice of goods.
Without any necessity of preliminary procurement of all various assortments of goods, you can offer your clients a much wider range of products and items.
- Lower risks.
Without multi-thousand investments, the risk of creating your own online-shop tends to zero.
Even if you fail, you won’t have to sell out your warehouses for a song.
- No restrictions of location.
As you have no need for creating your own warehouse, you can lead your business from any part of the world, having only a laptop with Internet access.
- Engaged in dropshipping, you can forget about such things as documentation, personnel, equipment, and rent.
- The supplying company can send you goods on behalf of the dropshipper, thereby the latter can create a recognized trademark and advertize it.
Disadvantages of dropshipping:
- The dropshipper is also responsible for low quality goods.
- The untimely delivery depends on the supplier, but imposes obligations on the intermediary as well.
Interesting: 6 variants of how to travel the world and make money
Making money dropshipping: a classical approach
A classical approach implies receiving prepayment from the buyer before the transaction is closed.
Stages of cooperation:
- The dropshipper finds a buyer.
- The buyer pays for the product.
- The dropshipper receives the payment and places an order.
- The supplier receives payment for the product.
- The supplier executes the order.
- The client receives his product.
- You receive your payment directly.
- Goods are prepaid.
- The client pays for goods before they are shipped.
The choice in favour of the classical type of transaction depends on the specifics of the client. For example, this model is perfect for dealing with juridical persons: they are usually better protected in comparison with regular customers and are ready to prepay for the product.
Also, this model is especially attractive for dropshippers: you instantly receive money, pay the supplier for his goods, and put nothing at risk.
The classical approach excludes risks for dropshippers, but aren’t always comfortable for clients.
Read also: How to Make Money Selling Avon?
Making money dropshipping: a modernized approach
Customers aren’t always ready to carry out advanced payment. Very often they simply don’t trust online-shops requiring payment for their goods before shipment, fearing swindlers.
To provide your clients with an opportunity to pay upon receipt, be sure to firstly remunerate the order, whereupon the supplier will send it to the customer, he will pay for it upon receipt, and you will return the whole sum.
Stages of cooperation:
- The dropshipper finds a buyer.
- The dropshipper places an order.
- The dropshipper pays for the order with floating funds.
- The shipper executes the order.
- The client receives and pays for the goods
- The dropshipper receives his money.
- The payment can be carried out by the courier company.
- The dropshipper pays for all goods before shipment.
- The client pays for goods upon receipt.
The modernized approach wins favour of your clients, but implies certain risk for you as you have to buy out goods by means of your floating assets.
What do you need to make money dropshipping?
- To make money dropshipping, the intermediary needs, first of all, to choose the producer and the goods he is going to sell.
- We would advise you to subscribe to a paid-for catalogue of products as no search engine will provide you with a link to a good dropshipping company.
The thing is that the suppliers offering direct delivery usually sell their production themselves on relevant sites (for example, eBay).
Consequently, their prices will inevitably be lower than yours.
In a large catalogue of companies you’ll be able to select producers that offer goods at process 10–20 % lower than usual.
- Be sure to monitor feedbacks on suppliers.
Pay attention to the availability of goods and the punctuality of deliveries.
Pay supreme attention to the quality of goods as in reality they frequently do not correspond to their online images or even happen to be out-of-spec.
Where to sell goods to make money dropshipping?
- In an online-shop.
Undoubtedly, your own online-shop is the best option for selling goods on the Internet.
You can upload goods to it directly from your suppliers’ services.
Preferably divide your products by groups and schemes.
For instance, at first, you buy some goods and then resell them, while purchasing other types of goods is possible only after your customer’s prepayment.
It might be a good option in case you don’t have your online-shop yet.
At auctions, you can gain the authority of a vendor, thus winning more trust from your buyers.
- Social networks.
It won’t hurt to create a group or a page on social networks (for example on instagram) to sell your goods to friends… and their friends.
How much money can I make dropshipping?
Profits from dropshipping evolve from the difference between retail and wholesale prices. As for dropshipping, the producer’s price is usually 15–20 % lower than the retail one. Its money equivalent size depends exclusively on you.
Of course, the profits will be closely related to the goods you sell.
If you market expensive electronics, your profit won’t be high – maximum 5–10 %. But if your products are affordable accessories, you can gain as much as a 100 % profit.
Also, the margin will significantly depend on how elaborately you offer your goods to your customers – it will enable you to set higher prices comparing to your competitors.
The success in the sector of dropshipping goes hand-in-hand with marketing and ability to use all possible promo-tools.
Today, dropshipping is considered a very promising and rapidly developing type of business.
Provided you treat your customers politely and tactfully, ensure large assortment and reasonable prices for your goods, making money dropshipping won’t constitute any problem for you.
You’ll achieve great results and become a successful businessman.