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What is Dropshipping?

Updated on March 22, 2017

I’m going to start this guide by telling you straight up that I am no expert on dropshipping. However a while back I was hired to write a series of articles on the subject, for which I was never paid for. I’ve since gotten over that blunder, but now I have a collection of knowledge about the subject and not much to do with it. Therefore I am going to pass this knowledge on through an article of my own, my hope being that those who know nothing about dropshipping can get a simplified view of it through someone who isn’t peddling the service. Oh and to any lawyers who might be circling, this is not a copy and paste version of the articles I wrote for that company which shall remain nameless. They own the rights to those articles and I am in no way going to reuse them. The content of this article is unique; so no need to whip out the legal mumbo-jumbo.

What is Dropshipping?

The quickest and easiest way to understand dropshipping is to think of a door-to-door salesman. Any sort of annoyance and/or hatred aside, a door-to-door salesman shows up at your house with a catalogue, from which you can purchase a number of products. This person doesn’t have all of these products in their pockets or even their car (aside from maybe a fancy vacuum cleaner). Instead, they have access to the company that makes the products in the catalogue. And when you buy something from the salesman, they place the order with the manufacturer, who sends the product to you. The salesman then gets a cut of the profit without having to make or buy anything of their own.

So think of dropshipping as a virtual salesman, although it is probably a lot nicer because you don’t have to walk around the suburbs, getting doors slammed in your face. Instead you just post products online on sites like Amazon and eBay as if you owned these products. But rather than purchasing these items and then holding them in your house waiting for someone to buy them, you are selling items that a specific manufacturer can make (or has in stock). If a product sells then you get whatever profit margin you specified. In other words, the manufacturer gives you the wholesale price of a specific product, then you determine what price to list it as online. It’s true that you could price a twisty straw at one million dollars, but it doesn’t mean it’s going to sell.

And this leads me to the challenges of dropshipping. Even though you could start listing products for manufacturers without too much of a money investment (more on that later) it does require a large time commitment. If you really want to sell things, then you’ll need to find out what is selling. Ebay has a great section of their site that allows you to see finished auctions so you can see what is popular. Not only do you need to keep up to date on hot products, but you need to keep your prices competitive. If you set your price high, you might get a big profit margin, but sell very few items. On the other side if you price your items low, you might sell a lot, but it would be a smaller amount of money coming your way. So, while droppshipping isn’t a scam (sometimes it sounds like one) it is one of those ventures that requires a great deal of work to be profitable, and if you aren’t savvy with the process, you might not be cut out for it.

How can I get started?

So if you decide to take the plunge and become a dropshipper, then you’ll need a few things. You’ll need access to a website like Amazon or eBay that allows you to sign up as a seller and post products. Remember when you sign up for sites like these, there is often a different sign up procedure for sellers versus buyers, so pay attention.

You’re also going to need to get in contact with manufacturers that actively participate in dropshipping. Not every manufacturer does it, and some manufacturers say they do it, but are lazy about getting a product out, which will make you look bad. In this instance you would probably want the help of companies like Worldwide Brands, Salehoo, or Doba which you can sign up for and they give you a list of participating manufacturers and the types of products they offer. This will probably be your biggest expense when trying to get into this industry. You might be able to do it without signing up for this service, but it would be more difficult.

Once you have your selling site and come to an agreement with your manufacturer you can start listing things. But like I said above, you’ll want to do research on what products are selling and for how much in order to be a competitive force. But I would also recommend further research into how to market yourself and get ahead. Remember I’m just providing you with a general overview of dropshipping. This guide is intended to inform you enough that you can tell if it is a thing you want to try. If it is, then feel free to go for it. If not, then I hope I’ve helped you avoid something unpleasant.


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