Looking to start an online business but don’t know which route to go? Drop shipping might be your best bet. Not only does it have some of the best margins, but it’s relatively straightforward to get into, providing a low-risk, gradual reward model. Yes, this is an excellent model to start a business out with, which is why we’ve provided a few reasons on why. Check them out below:
The Numbers
Over the past few years, drop shipping has become one of the most prominent eCommerce models out there. According to AmeriCommerce, 22 to 33 percent of internet retailers have adopted a drop shipping model as their primary method of fulfillment, which when you factor in those who are direct sellers, actually accumulates to a sizable portion of the eCommerce market. Why is this the case? It’s simple, the benefits.
What is a drop shipping benefit? Well, there are plenty of them. As a drop shipping model doesn’t require you to hold any inventory, there’s less risk for you to be responsible for (more on this later). Furthermore, drop shipping allows a more forgiving period of trial and error, enabling you to find both the right inventory and marketing strategy to make your business successful. Yes, drop shipping can be an excellent path for bringing down your costs, as well as enabling you to spend money in other places, which might be the competitive edge you need.
Lower Costs Enable You To Market More
As a significant advantage to drop shipping is having lower costs for inventory, which also means you can experiment a little bit more with your marketing techniques. From guerilla campaigns to email blasts, nothing’s off limits for your drop shipping business to implement, but some items are going to be more efficient than others. However, that’s it’s important to start thinking of your marketing in terms of ROI.
With ROI, the name of the game is how much you invest financially versus the return you could potentially see, including the amount of time spent on it (after all, your labor cost money). Granted, it’s not always going to be a pound-for-pound quantitative analysis, but it’s a good practice to hone in on how to improve your revenues into the future. The other half of this is going to be storytelling, which is where execution comes into play.
For your executions, try to analyze things from a perspective of what will get the best return for the amount of time put in. For example, while hiring a photographer for lookbook style photos can cost more than listing out new items, according to DreamGrow visual content is 40 times more likely to get shared on social media, which shows why quality is imperative. Furthermore, while you might not be a design wizard for email yet, getting in the habit of being consistent with it can bring in approximately $38 per every dollar that’s spent (as noted by ConstantContact). Getting yourself familiar with these is smart, as their going to be the tools that help you gain steam amongst your audience, growing as a better storyteller as well.
No Inventory Risks
Finally, perhaps a cornerstone as to why so many people get into drop shipping is the lack of inventory risks. Not only do you not have to pay for the goods up front, but additional space to store them. As noted by Entrepreneur, 82 percent of businesses fail due to poor cash flow, which is why drop shipping can be such an appealing option. But it’s not always the easiest to establish. Although the benefits of reducing inventory risks can outweigh the costs of inventory, it’s also a system that you need to get ironclad tight to thrive.
When you break down the different items you’re going to need for a drop shipping business, the most significant consideration is how the supplier is reaching your customer base. For example, if most of my customers are in America but my main distributor for an item is overseas and cost a fair amount of money and time to ship, then they might not be the best option. Furthermore, it’s also important to verify that the goods you’re drop shipping are indeed authentic, as getting caught up in fraud could mean you face the end of a chargeback, which can get expensive. As reduced inventory risks can be a great reason to get into drop shipping, it’s also a process that’s the foundation that could make or break your business, which is why you should take the time in making sure it’s done right.
Why are you most excited to start a drop shipping business? Comment with your answers below!