If you are considering dropshipping as an online business venture, then you’re going to want to know whether it is actually profitable. With a lot of bold statements and impressive screenshots across Social Media, it can make us begin to question whether this business model is even legit.
So, can you really make money with dropshipping? Yes, it is possible to make good money dropshipping. As long as you effectively implement the business model and process steps (including product research and sourcing, product marketing, customer acquisition and conversion etc). You’ll also need to understand/optimize your financials (including cash flow, profit margins and costs) However, there are a lot of areas where you can fall short which can lead to challenges such as low sales, high costs or low profit margins. Any of these can hamper your results.
Dropshipping is an ideal business opportunity in many ways due to its relatively low start up costs and the ability to get set up quickly. But does that mean you should do it? Is it worth your time and can selling products you never proeuce, stock or own result in significant profit?
Having signed up to eCom Elites some time ago, and implemented the strategies and methods taught within the course, I feel the time is right to present my experience and findings.
I’d like to outline my personal answer to this question, along with pulling in research from other dropshippers and online sources.
How Do You Make Money Through Dropshipping?
Dropshipping is a business model that enables you to sell products directly to customers without ever needing to stock them or hold inventory.
You essentially build a storefront, add products and then market those to the interested audience via a range of marketing strategies. Once an order is placed on your store, you then make the same order at the supplier – providing your customers shipping details. The product then ends up at the customer. And you profit the difference.
That’s the concept anyway.
The concept is relatively simple, but it is in the execution that you can make this venture profitable.
Perhaps the standout contributor to whether or not dropshipping is worth your time is understanding revenue vs profit vs cost.
All three play an important role. They also need to be working for you in the right direction.
Your Takeaway Profit = Revenue – Costs.
First and foremost, you need to be able to drive revenue.
You will do this by sourcing products from suppliers at cost-effective rates, being able to add a healthy profit margin on top, and then selling them to customers.
When it comes to costs, you’ll need to be able to leverage several at once. Some will be required up front, like store platform costs and marketing expenses. But, product costs can be covered when the customer pays.
The difference between revenue and costs will be the takeaway profit. However, if you get your margins, math or financials wrong, the difference can be debt.
The table below outlines the elements of each category:
|• Product Costs||• Product Sales||• Revenue – Costs|
|• Shipping Costs|
|• Platform Costs (e.g. eCommerce Storefront)|
|• Marketing Costs (e.g. Social Media Ads)|
|• Application/Extension/Software Costs|
Therefore, you need to be run your financials before you proceed with adding a product into your store.
You need to be aware of how much profit per sale you can make, and what the cost of advertising can be.
For example, if you were selling a product for $10, that you sourced for $2, you would have $8 worth of costs that you could incur before you start incurring debt.
The lower you keep your costs, and the higher the profit margin per item, the more aggressive you can generally be in your marketing and the more you can spend.
This is why when you first create a dropshipping store, it makes sense to start as lean as you can. Keep your costs to a minimum and only purchase those things you really require.
Factors That Impact Your Results
There are certain factors of dropshipping, or any online business for that matter that are going to impact your results.
Let us take a look at some of the most common ones, in which I have personally experienced, that can impact your sales and resulting revenue/profits.
Some products will sell year-round, others will only sell during particular times of the year.
This is known as seasonality – and many businesses are fully aware of its affects. Particular industries and niches will do especially well at certain times of the year. Whether this be done to weather, supply or customer demand.
Take for example winter clothing. Would you want to buy this in the summer? There is a reason in why many stores will sell winter clothing in the summer at highly discounted rates – they’re not selling very well!
Therefore, when building a store and adding products you need to consider seasonal trends and demand.
Consider what your customers are going to want at particular times of the year, which leads us to our next factor…
Demand for Products
Similarly, there is always going to be more demand for certain types of products than others.
Products that fulfill a need, serve a purpose or overcome a customer pain-point or problem are always going to be an easier sell.
Consider your customers and their needs/requirements and wants. Be sure to analyse what is actually selling in retail stores and what is trending and hot on Social Media.
Some products will come and go, and be immensely popular before burning out. These are sometimes called FADS. Remember the fidget spinner?
Its always a good idea to know when to jump on a trending product and when to jump ship. Its also important to fill your store with products that will always be in demand, so that you are never subjected to a sudden fall in sales.
Product Types and Availability
The same goes for the types of products that you sell. Some products are exciting and offer the opportunity to go viral.
Others are dull, or can easily be picked up at a local store. The need to buy online, or pay a premium for an easily acquired product doesn’t make much sense to customers.
Alternatively, a product that has not been seen before, or that helps you to harness the sharing power of Social Media can really help you to profit with dropshipping.
Shipping Times & Costs
Customers expect fast delivery these days due to the likes of Amazon and their prime service. One of the challenges with dropshipping is the long shipping times.
You can overcome this by paying for express shipping but this is usually costly.
Therefore, you need to consider how to strike the balance between shipping time and costs. You’ll need to know how to find suppliers with the best shipping times/options and the services that ensure your customers receive their orders in good time.
Suppliers can be located across the globe. If you are sourcing from marketplaces like China, shipping will of course take longer. However, if you opt for local suppliers you can usually get products shipped out very quickly (but the product costs are generally higher).
Its all a balance that research can help you to understand and overcome.
Returns are one of those frustrating yet inevitable aspects of selling. All stores encounter this and have to go through it. the key is not eliminating returns altogether, but keeping them low and ensuring they do not affedct your bottom line.
For this reason it is always a good idea to see/test the products you sell ahead of time. Ensure they are fit for purpose and that your customers will be satisfied with them.
Also, ensure that you are not selling products that do not have too high a sourcing value that you cannot cover.
This is usually an issue ‘high-ticket’ dropshippers run into, as a return is a challenge to cover financially and the supplier may not be willing to take it back.
For lower-cost products, these can be discarded or even recalled to your home address where you can make a decision. Big, bulky or expensive products usually cannot be handled in this way.
How To Succeed With Dropshipping
As mentioned previously, simply throwing up a store with any old product and blasting it out to any old audience will not work.
Doing this is likely to prove very unsuccessful and you will soon find yourself incurring costs that exceed your revenues.
When you think about it, this is the same as opening a shop in an location you know nothing about, and stocking it with products in which you do not know there is a demand for.
Strategic planning and research and is therefore at the core of a successful dropshipping store.
It will help you to understand and leverage some of the factors referenced above. It will also help you to keep your costs down and ensure you invest wisely from the outset.
Knowing ahead of time that your products are going to sell is a different mentality altogether. And while we can never know for certain, we can educate ourselves to the point where we are more certain.
If you are serious about dropshipping, then one of the best ways to educate yourself is to get on a comprehensive training course. This will give you all the information you need, in one chronological, step by step way.
It will enable you to replicate the process steps you need to take, learn how to set up everything from a technical standpoint, and most importantly, teach you exactly how to research for products, niches and customers.
For me, eCom Elites is the best course on the market right now. My review explains why, but ultimately you learn the business model from A-Z.
You learn how to thoroughly research for a niche and in-demand products, build an optimize an eCommerce store, run highly targeted Social Media Ads and manage and scale your store as you begin to make sales.
If you click here, you can visit eCom Elites where you will see why signing up will help you to profit from dropshipping first time around.
Making money with dropshipping is definitely possible; its a matter of optimizing processes, understanding your financials and adding real value to the market and your customers.
On the surface, dropshipping may look easy. In fact, it is relatively straight forward to build a store, find products to sell and market them via Social Media Ads.
In reality, there is a lot more to it than that. You need to consider quite a lot of different factors and elements, all of which can play a big role in your success.
There are a lot of dropshippers that fail; just like there are in other business models and ventures. Its hard to build a business – that is true for any industry an entrepreneur attempts to pursue.
With all that being said, you can increase your chances of success.
Getting on a thorough dropshipping course is perhaps the best way. Equip yourself with the knowledge you need to succeed from the outset.
So, if you want to get started with dropshipping, do yourself a favor and checkout eCom Elites.