Start selling real products with zero investment, and no stock…

One of the obstacles to starting a new business on your own is the need for stock. It’s not a problem if you’re proposing to sell a service, but those planning to sell a product will either need a lot of upfront investment, a lot of storage space, or both.

Dropshipping is one solution to this problem and, while it’s perhaps not a completely effortless approach to generate passive income, it can effectively run itself if you make some smart moves in the setup phase.

Dropshipping can take various forms, depending on the approach you or platform you use. We’ll go into some of these in future emails. This will be something of an introduction and summary of the whole subject. If your questions about dropshipping aren’t answered by this email, hit reply (to this or any email from us) and let us know!

TL;DR

• Low Barrier To Entry – potentially little or no cost to start selling
• Passive Income – once you’ve got your business established, it can effectively run itself
• Lower Risk – other than marketing, there’s no up-front spend on products
• Competitive – a lot of well-established competitors in the market, but you can still make a profit if you pick the right niche (hint: focus on high price / high margin products)

What Is Dropshipping?

As we said above, Dropshipping removes the need for stock or storage from the process of opening a new retail businesses. The reason is that you’re not actually selling your own stock – you are just shipping someone else’s stock to your customers. You sell products through an online store and arrange for the items to be delivered directly from the manufacturer or a central warehouse to your client. That’s genuinely all there is to it.

It’s important to note that this is not the “get rich quick” solution that it’s often portrayed as. In fact, given the amount of online marketing directed at those who show even a passing interesting in dropshipping, it’s just as important for us to explain what it isn’t, as what it is. Despite the impressions you might get from Facebook ads and YouTube videos, massive profits are not guaranteed, nor are they necessarily quick or easy to get.

With time and effort, what dropshipping can become is a sustainable and potentially substantial passive income. It requires a certain amount of skill to get to that level, though. Even if you don’t have to manage physical stock, you are effectively running a shop and that requires just as much skill in sales and marketing as it would if your shop were made of bricks and mortar instead of 1s and 0s.

The most significant different between a physical shop and a digital one is the ease of setting it up. Depending on the approach you end up choosing, this could be a simple as promoting products in an existing marketplace like Amazon, eBay, Lazada and Alibaba or as complex as setting up your own eCommerce website. Which you choose will largely depend on what exactly you want to sell and how much effort you want to put into the business.

How To Get Started With Dropshipping

Just as it is with a physical shop, the most important decision you will make in setting up a dropshipping business is finding the right product to sell to the right audience. This is true of virtually all approaches to passive income, in fact. If you find the right balance of high popularity with low competition, you’ll find it significantly easier to make money. Get it wrong – go for something with too niche an audience or too many competitors – and you can still make a profit in the end, but you will have to work much harder to do so.

When it comes to finding that niche, it’s wise to start looking in areas you are already passionate about. The benefit here is that you already have a connection with the audience, already know what kind of products they want and, perhaps most importantly, you’re going to actually enjoy working on your business.

You can check exactly how popular your chosen niche is with tools like Google Trends. You can also check online for what media there is around the subject. Even relatively small niches tend to have one or two websites and magazines devoted to them. If there is a good number of big, professionally run sites, it’s more likely that there is a good-sized audience with enough money to spend on products from your store.

Finally, you should also check out your competition. Are there a lot of other stores selling the same kind of thing you want to? If so, are there ways in which they are failing to meet the needs of their audience? Is there an obvious edge you could get on them in order to secure sales? Are they perhaps overpriced? Lack trustworthiness and authority? Failing at SEO (search engine optimisation) and therefore not showing up on the first page of Google’s results for important search terms? Bear in mind that the market will respond if you prove successful, perhaps copying your approach. Do not assume that the market will remain exactly as it currently is forever.

With your niche selected, it’s time to decide what you will sell. Some dropshippers recommend selling ‘impulse buy’ products – the sorts of things that customers don’t think too much about before they commit to, therefore requiring a shallower sales funnel and less marketing. However, this approach isn’t as effortless as it seems since finding a trend before it’s overwhelmed with competitors is challenging and trends rapidly move on, meaning that monitoring what’s hot and what’s not will become a full-time job.

As with picking your niche, picking products that you are familiar with is generally going to be a more productive approach. You can talk about it with authority, making your marketing far more convincing.

Of course, what you are able to sell will be limited to what you are able to source. There’s a good list of potential suppliers to choose from, such as Salehoo, Shopify, Ecwid, AliDropship and plenty of others.

The ideal type of product is one that is evergreen – that is, one that is always relevant and required. It’ll mean less work for you in future since you won’t need to start your marketing from scratch each time you start selling something new. There is some benefit to trending and season products since they can result in bigger and quicker income, but it requires significantly more work, making the multiple sources of income less passive.

One of the considerations when picking what to sell may be considering the price and deciding whether you want to sell affordable or expensive products. There are advantages and disadvantages to both, of course. The impulse buys mentioned before tend to be quite cheap – generally between $5 and $25 each – so that people don’t have to think too much about whether or not they can afford it. You’ll perhaps be able to shift a lot of units, but between unit costs and marketing, your profit margin will be very low.

On the other hand, some guides and gurus suggest picking a couple of ‘high ticket purchases’ – products you can sell for thousands of dollars per unit, which generally have a much higher profit margin. It’s a lot harder to convince people to buy such products, so the marketing per sale will be a lot more expensive, creating a significant up-front investment that could potentially never pay off.

As a general rule, it’s best to focus more on the needs of your audience than on the price. If you are selling something that people want at a value-for-money rate, you fill find it significantly easier to make sales.

The final step in the process is simply that – making sales. It’s undoubtedly the most important step because success or failure here decides if your business is going to be a success or failure. The actual completion of sales – both the collection of payments and the shipping of products – will generally be completed by the dropshipping platform that you’re using.

Things to Consider before starting Dropshipping

Despite the popular belief that dropshipping is an easy way to make huge profits, the reality is that your profit margin per unit sold will generally be quite slim unless you go for very expensive products that will attract fewer customers. If you view it purely as a form of passive income, you will not be too disappointed with the profits.

The research phase is undoubtedly the most important part of the process. Once your online store is set up, it can largely run itself. Even the marketing is theoretically optional, if you choose the right platform. However, you won’t make any sales if you’re trying to sell the wrong product. It’s a big investment of time and effort, but it pays off in the end.

While the hands-off approach to selling is an advantage in terms of not needing stock or storage, it comes with its share of disadvantages, too. Quality control is impossible since you might never even see the items you are selling. You will need to trust that the dropshipping platform has chosen a good supplier. The same goes for the actual shipping – you have absolutely no control over when and how items get shipped or how much of any given item is available for sale. Despite having no control over these aspects of the process, it’s still you that gets the negative reviews from customers.

How Much Does It Cost To Get Started With Dropshipping?

Compared to opening your own shop, the cost of starting with dropshipping is virtually nothing. Some platforms – both the dropshipping companies and the sites you want to sell on – require a fee of some description, so it’s not entirely free. Once you’ve got the store established, you may choose to pay for adverts to get the income flowing.

Learn more about becoming a successful Dropshipper

If you are interested in learning more about Dropshipping and how it can create you a passive income, check out these links:

Salehoo – One of the largest and longest running dropshipping resource platforms around (I had my first foray into Dropshipping here back in 2008)

Salehoo provide resources for Dropshipping, Wholesale and e-Commerce websites. 2.5m Products and Over 8,000 Suppliers

Spocket – Huge resource dedicated to high quality US and European products

Inventory Source – provide automated inventory solutions, dropshipping supplier lists and US sourced products.

Shopify – build an online business, no matter what business you are in

Ecwid – a stack of free e-commerce and dropshipping tools. Worth checking out just for that

ThriveCart – for me, the number one checkout platform on the planet. Increased conversions on one of my sites by 96%!

Currently available on a Lifetime Deal as well, which just makes it even more of a steal.