23 questions about Dropshipping answered1
Dropshipping brings forth a bunch of queries for anyone wishing to start their business. Here is a list of the most commonly asked questions, and their answers.
Forming a plan
1. How do I start?
There are three simple steps to starting out in dropshipping
- Finding products
- Finding a supplier
- Finding a buyer
Research can be done on the internet regarding where to find products and how to find reliable suppliers and buyers.
2. How much money is required?
Despite being relatively cheap and risk averse, some investments are needed for
- Hosting and add-ons
- Supplier fees
- Obtaining licenses
3. How to market?
Advertisements are a common method of marketing your store. Other alternatives are blogging, social media and email marketing. Choosing an attractive display is beneficial in bringing in customers, and the webpage should be easy to navigate.
4. What products to sell?
The right niche and products will do wonders for your dropshipping store, and give it a unique edge that gathers more attention. To know what to sell, you should look into the top trending products that are not easily available to the target audience otherwise. Best-selling items generally fall under these categories:
5. Is it profitable?
With the right attitude, dropshipping can be very profitable and successful. However this process takes time and determination, and is not a way to quickly get rich. It will only prove useful with persistence.
6. How much can I earn?
As stated before, the money earned with this job really depends on how much dedication you put into it. People who took this seriously are known to have made 6 figure salaries with dropshipping to. To stay on the right track, the following are necessary:
- Being patient
- Investing in ads and marketing
- Keeping customers satisfied with good service
7. What are the benefits?
Compared to other stores, you have the benefit of saved time and effort as the store is easy to set up. Reduced costs are an obvious plus point, and you can access the store on the go, with any digital device. Dropshipping also offers a wider range of products.
8. What are the disadvantages?
Since you are acting as an intermediary, you have little control over the products. If orders end up misplaced, damaged or counterfeit, your store may undergo charges or lose its reputation. Products are also sold at a relatively higher price, than if you were to buy them in bulk and store them in an inventory.
9. High or low profit margins?
Dropshipping profit margins are usually low, for a few reasons. As products are not sold in bulk, suppliers do not offer the same discount as they would on wholesale items. Since products are already expensive, customers would not be interested if prices are too high. For this reason dropshippers have to make a slow and steady progress.
10. Is it still profitable in 2020?
It is true that dropshipping is very common in 2020, making it competitive. But it is still highly profitable if you are keen on making an effort.
11. How much does selling dropshipped products cost?
The cost depends on which sales platform is chosen. On sites like eBay and Amazon, you would have to account for listing fees and product sale price. It can be more convenient to open your store on Shopify, where you can deal with finances more independently.
12. Is it legal?
Dropshipping is a completely legitimate business, which requires you to draw up contracts and pay taxes in much the same way as any business model. Although some ads may appear sketchy, as long as the products are of a certain standard and handled professionally, there is nothing to worry about.
13. Do I need tax ID?
For US citizens, a sales tax ID is required to let the government know that you are doing this business. It means that you don’t have to pay for wholesale products, instead that price can be passed onto customers.
Dealing with suppliers
14. Is customer service provided?
Normally, dropshippers do not provide customer service, as their business page is what customers see. They could have some form of interaction, but that is mostly the job of the suppliers.
15. How to submit order to supplier?
This varies between each supplier, so it is important you talk to them for more details on this. Some want just a confirmation or simple sheet, while a few suppliers prefer a daily sales sheet with all the data.
16. How to pay supplier?
The supplier chooses to receive the money either by every order, or through daily, weekly or monthly invoices. Each transaction is noted by a company credit card which the supplier has details about.
17. Who pays shipping costs?
Your dropshipping supplier will have their own arrangements with their local couriers, but they will pass the costs of shipping and handling on to you. It is your choice how to pass this onto customers or pay some of it.
18. How to account for dropshipping costs for e-commerce sales?
In order to reduce losses, there are many ways to account for dropshipping costs, including:
- Volume based charges
- Flat free shipping
- Free shipping
19. How to track orders?
The supplier decides whether to give out tracking info or not. It is best to discuss this with the supplier for more details about when and how they will provide information, given that they choose to do so.
20. Do orders appear as they were directly from dropshipper?
Yes- package designs, tag items including a logo and your brand name is how customers would want to buy more products from you.
21. What is the average turnaround time?
A good way to ensure customer satisfaction is by sending orders in a timely manner. You should work together with the supplier to reduce time delay and keep you posted on shipping times.
22. How to handle returns from customers?
Return policies vary between suppliers. Some allow returns on selected items, and some do not accept returns at all. You would have a return authorization number for returnable items, whereby the amount is credited back to your account and the product reaches the supplier.
23. Who pays for return shipment?
In the case of damaged or counterfeit items, the suppliers would pay the cost. But if the customer cancels an order during arrival or changes their mind about it, they might have to bear the expenses.