Ultimate Guide to Dropshipping

Shoppify published a 100 page guide on starting and running a dropshipping e-commerce businesses. They provide a nice infographic which is summarized below.

What is Dropshipping? A fulfillment method where a store doesn’t keep the product it sells in stock
Dropshipping Infographic

Pros of Drop Shipping

  • Easy to Scale
  • Low Overhead
  • Flexible Location
  • Easy to get started
  • Less capital required
  • Wide selection of productions

Cons of Dropshipping

  • Low margins
  • Supplier errors
  • Inventory issues
  • Shipping complexities

Characteristics of Fake dropshipping suppliers

  • Membership Fees: Real wholesalers do not charge membership fees
  • Sold to the Public: If you don’t have to apply to become a wholesaler, or your wholesaler will sell to you as a “public” buyer, you are not working with the right supplier

Characteristics of Legitimate Dropshipping Suppliers

  • Pre-order Fees: Most dropshippers will charge a pre-order fee ranging from $2 – $5 per order for packaging and shipping
  • Minimum Order Size: Dropshippers need you to commit to a minimum order size in order to filter out window shoppers

Attributes of Great Dropshipping Suppliers

  • Expert staff and industry focus
  • Dedicated support representatives
  • Investment in technology (product feeds, ordering, fulfillment, tracking, etc.)
  • Can take orders via email
  • Centrally located
  • Organized and efficient

Picking Products to Dropship

  • Picking the perfect product is the biggest factor in success or failure in your dropshipping business
  • Marketing Potential: Know your marketing strategy before you launch
  • Accessories: Products with many associated accessories can increase your cart-size and margin
  • Turnover: Updating products in a dropshipping model is a lot of work, try and find products that do not get updated with new models constantly
  • Hard to Find Locally: Products that cannot be easily found at local merchants will increase your chances for success
  • Size and Weight: Smaller items are easier and more cost efficient to ship to your customers

Finding the Best Target Market

  • Hobbyists: Targeting a base of customers who are passionate around their hobby will help increase loyalty and help you build a refined niche audience
  • Businesses: Businesses will be price sensitive, but represent large quantity purchasers with an opportunity to build repeat business through relationship and loyalty development
  • Repeat Buyers: Try to aim for products that derive recurring revenues and repeat purchases.

Getting Started

  • The most important thing is to start
  • Don’t spend a lot of money getting started
  • DO spend a lot of time and energy

10 Ten Things to Live By in your Dropshipping Company

  1. Accept that things can get messy
  2. Adopt a KISS mentality
  3. Own up to a botched order
  4. Consider multiple suppliers
  5. Manage out-of-stock situations
  6. Route orders intelligently
  7. Stay vigilant with fraudsters
  8. Nail down a fair return policy
  9. Worry more about shipping as you grow
  10. Be constantly invested in support