What is drop shipping and why is it a low-cost way to start a business?

7 min read
Vipin Labroo

If you’ve ever looked up new business ideas, you may have stumbled across drop shipping. What is drop shipping and is it the right business model for you?

According to Market Data Forecast, eCommerce is quickly growing in Asia-Pacific and is expected to grow even more in years to follow.

This means now is the perfect time to start a business in drop shipping, where you can easily reap the benefits of the eCommerce industry.

Below, we’ll discuss what is drop shipping and how to do drop shipping like a pro. We’ll also offer some advice on how to get started and review some of the key benefits.

What is drop shipping?

If you’ve ever wondered what is drop shipping, the answer is quite simple. It is a mechanism that enables one to purchase products from a wholesaler and get them sent directly to the customer.

Man working at a desk sipping tea

Its biggest advantage, from the trading point of view, is that you are not required to maintain a large inventory of goods.

All you need to do is to collaborate with a drop shipping supplier and list their goods for sale on your website.

Anyone who ever harbored the dream of becoming an entrepreneur or starting a business, can easily do so with drop shipping.

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How to do drop shipping in 4 easy steps

After asking what is drop shipping and learning how it works, you may wonder how to get started. You can follow the four steps mentioned below to easily find easily how to do drop shipping.

1.     Choosing a profitable niche

You have to be very sure that the product category you choose is something that you’re sure you will love to promote.

The amount of work required to market any product will be the same, so it would make sense to choose a product that provides you with higher revenue.

The other thing you should bear in mind is the shipping costs. The lower they are, the more your customers will buy. Finding suppliers who charge a low shipping cost is something that one should prioritize, as that will have a direct impact on your ability to sell products.

2.     Study the competition

Studying the competition is crucial to the success of your drop shipping business.

The ground rule is to choose a product that has a lot of players.

This helps show there’s a healthy demand for it.

Entering a product niche that has no competition might mean that there’s no demand for it. The reason for low competition could be:

It’s best to steer clear of products like these.

3.     Partnering with the right supplier

Two men shaking hands in a warehouse surrounded by boxes

This is the single most important step. One must pay careful attention when setting up a successful drop shipping business.

It’s best to find a supplier you are a hundred percent sure is reliable. You should also be able to communicate freely with them -- especially if the supplier is located in another country.

Another best practice is to ask a lot of questions about production capabilities, so that you don’t have a problem later when you scale up. Make sure to also factor in the cost of shipping, since this will have a major impact on your selling ability.

4.     Building a great eCommerce website

It’s quite easy to build a great eCommerce website, especially with the help of many platforms available on the market.

Tools like GoDaddy’s Online Store builder can help you set up your eCommerce store in no time.

What's more, you can also leverage the power of the included marketing tools to help push sales. There’s no need to hire an expensive web development company. Just go with a convenient plug-and-play option from a reliable provider to start with.

Once you’ve established your presence and grown your market to an appropriate size, you can go ahead and customize your website. By utilizing top-notch marketing tools, you can make your website appear even more cutting edge.

Why drop shipping is a great business model

Small box sitting on laptop with “online shopping” written on it

Besides asking what drop shipping is, you should also know why it makes a great business for starting entrepreneurs.

Drop shipping comes with distinct benefits that make it an attractive proposition for anyone looking to start a business with minimal investment. Let's get a lowdown on what these might be.

Low funding requirements

Because you can start a drop shipping business with very little money, it makes an ideal business model for anyone who may be strapped for funds.

All you need to get off the block is your laptop. Even as your business grows, the cost will continue to remain quite low in comparison to any other business model.

No prior business expertise required

You don't have to be a business stalwart to get into drop shipping. It’s quite easy to get started, since you don't need to rent a warehouse to store goods or even a marketing team to help you sell the products in question.

What's more, you don't need to be involved in the shipping of the products.

It’s as hands-off a business as you could have.

You could get started in a matter of hours!

Quite easy to grow

Growing a drop shipping business is quite easy and you can do it at a pace that suits you best. While sales and marketing efforts would need to be augmented as you go along, the operational part of the business remains pretty much the same.

What’s more, the costs remain quite manageable even as your business grows in size. This is largely due to the fact that you can do everything by yourself.

The same holds true even if you might want to hire a small number of people somewhere down the line.

Easily managed and hassle-free

Since drop shipping doesn’t require you to make any major commitments, it’s a business that’s both hassle-free and stress-free.

The only thing you need to secure is a reliable supplier. Once you have that, you can start focusing on how to make your online storefront appealing to your target audience.

After that, it’s smooth sailing!

Key takeaways for drop shipping

Going from what is drop shipping to understanding the ins-and-outs is all a matter of practice and dedication. Once you know the basics, it’s fairly easy to get started. The rest is up to you and how well you’re able to efficiently cater to your target audience.

Keep in mind; drop shipping is a great low-cost way of starting a new business with minimum fuss. With low capital investment required (and no prior business knowledge needed), it’s a great option for starting entrepreneurs.

The important steps for how to do drop shipping include:

  • Choosing a profitable niche
  • Understanding the competition
  • Partnering with the right supplier
  • Building an easy-to-use eCommerce website

The digital age has made it possible for anybody to consider becoming an entrepreneur or starting a business. Drop shipping is one of the easiest and most profitable ways of doing that.

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