One of the biggest advantages of the drop shipping business model is its staggering return on investment (ROI) potential. Unlike conventional business models (i.e., manufacturing, wholesaling), which required people to sink many thousands of dollars into creating and maintaining inventory, drop shipping needs only a minimal investment in the right web-based infrastructure.
That being said, like any business model, drop shipping can certainly get expensive if it isn’t approached and managed properly. High fees on ecommerce sites, for example, can take a dangerously large chunk out of your profits.
To really do drop shipping right, you’ll need to create a concrete plan for how to set up (and run) your new business with very little cash. The guide below should help you get started:
How To Set Up A Drop Shopping Business On A Shoestring Budget
1) Find a niche.
Your niche should either tap into something you’re vocally passionate about online or solve a problem people you know are having (such as not being able to find affordable electronics peripherals, for instance). Why? This will create an “instant audience” for your products and therefore significantly cut down your marketing costs. It will also help you generate a profit more quickly, giving you more money to invest in your fledgling business.
2) Research products carefully before choosing one to sell.
If you’re starting a drop shipping business with little cash, it’s of the paramount importance that you sell a reliable, high-quality product. Having to handle returns and refunds is not just a hassle for you and your customers, after all—it can also get seriously expensive if you’re paying the return shipping costs. Additionally, the better your product is, the easier it will be to create loyal customers. To that end, you should research the product you’re interested in thoroughly before you offer it for sale.
There are practical considerations that must factor in to your product choice, too: Don’t forget to take a look at how much a product weighs before you commit to selling it. Selling heavier products limits conversions (high shipping costs discourage buyers), so it’s better to choose a light product wherever possible. Finally, for best results, you should pick a product that is simple to use (or one that comes with completely comprehensible instructions). If your customers can’t figure out how to use your product, they’re likely to return it.
3) Choose your supplier carefully.
Don’t “default” to whichever supplier offers products at the lowest prices. A supplier that is unreliable—one that either delivers products late, not at all, or delivers defective products—can do lasting damage to your reputation and brand image (in addition to creating direct costs). Ideally, you want a supplier who is willing to communicate with you in “real time” and who offers “same day” order processing. You should also verify that they have a range of different shipping options so that customers who want expedited shipping, or shipping via their preferred carrier (DHL, UPS, etc.), can get it. Last but certainly not least, your supplier should be prompt when it comes to notifying you about stock level or price changes.
4) Choose your online retailer very carefully.
Once you have a quality product and a reliable supplier, you’ll need a place to sell said product—And this is another area where many rookie drop shippers run into problems. Creating a truly functional and attractive ecommerce website often requires a substantial upfront investment and the vast majority of online ecommerce platforms (Ebay, Shopify, and so on) charge high fees. Shopify, for example, will charge you at least $29 per month just for its “standard” business package. If you need to upgrade to its Professional or Unlimited plan, that will set you back $79 or $179 per month, respectively. (Ouch!)
The solution here is to avoid the “big names” in ecommerce and place your trust in smaller platforms like us. Not only do these lesser-known platforms charge dramatically less, you won’t face the kind of intense competition you would on a large marketplace like Shopify.
There you have it: With a bit of planning, preparation, and savvy strategy, it’s possible to set up and run a successful drop shipping business with little cash. If you follow the steps above, you should start to see profits rolling in almost immediately, making strict budget concerns a thing of the past. Good luck!
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