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A Beginner's Guide to Dropshipping – How to Make Money Online and Build Your Own Online Business
- Read in 12 minutes
- Audio & text available
- Contains 7 key ideas
Dropshipping (2018) is a handy, straightforward guide to setting up your own e-commerce empire with minimal investment and overhead. This brief manual gives a detailed overview on operating an online retail business and the benefits of doing so.
Key idea 1 of 7
Dropshipping is an easy way to make money with online retail.
Let’s say you’re buying something online. Maybe it’s a funny T-shirt, a small appliance, or a fancy new cat toy – it could be anything, really. With a few clicks, you make a payment, get a confirmation email, and begin eagerly awaiting your package.
Now, chances are you’re not buying those items directly from the manufacturer. Instead, you’re paying an intermediary to handle your order. This whole process is called dropshipping, and it lets online retailers make money without stocking any items of their own.
If that sounds like a nice little business, you’re in luck! With a bit of initiative and know-how, you too can set up a profitable dropshipping business of your own.
The key message here is: Dropshipping is an easy way to make money with online retail.
So, how exactly does dropshipping work? Well, it’s about connecting people to products without a brick-and-mortar storefront. You see, in traditional retail, a merchant buys items in bulk and then sells that inventory to customers bit-by-bit. In dropshipping, the merchant doesn’t buy the inventory until after collecting orders. They buy the requested items on the customers’ behalf at a lower price – and collect the difference as profit.
Here’s a concrete example. You set up an online shop selling cat toys for $20. A customer places an order for one toy and pays you $20. Then, you send that customer’s order to a manufacturer or wholesaler who sells each toy for $15. You pay $15, they ship the order to the customer, and you pocket the $5 difference. The customer gets their toy, you get your profit, and everyone is happy – especially the cat.
Setting up a dropshipping business is great because it doesn’t take a lot of overhead to get started. You don’t have to buy huge inventories beforehand, store unsold products in your home, or even physically handle the shipping process. In fact, most of your work is processing orders, marketing your online shop, and managing any customer service problems as needed.
Of course, like with any business, there are downsides as well. In the world of online retail, the options are endless and competition is fierce. And since most dropshipping stores have to keep prices low to attract customers, you may start with very low profit margins. Plus, you’ll have to handle any customer complaints, from delivery snafus to the products themselves. That’s why it’s essential to partner with the right wholesaler, which we’ll cover in the next blink.