Dropshipping 2020: Ultimate guide for beginners

Everyone is looking to start a side hustle these days. In fact, according to statistics, as many as 44 million Americans have a side hustle.

And this where dropshipping comes into the game.

If you want to earn a decent passive income by launching your own eCommerce store but are skeptical about complexities like inventory, shipping, and keeping records, then dropshipping is the perfect option.

However, if implemented correctly, drop shipping can help you make a lot of money.

In this ultimate guide to dropshipping,

we cover everything from what it is, to how to get started, to how to run a successful dropshipping business.

Let’s get started.

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WHO IS DROPSHIPPING FOR?

Dropshipping is an ideal way of entering the business world for budding entrepreneurs and novices, people on a low budget, and for those who don’t want to invest their money just yet.

Earlier, setting up a business required a large amount of money. People usually get their parents to loan them the capital or work overtime to earn money. In fact, Jeff Bezos started Amazon by borrowing money from his parents, and we all know how that worked out for him.

The point is, without the initial capital, starting a business was a major obstacle.

But now, with the advent of digitalization and social media, starting an online business is easier than it has ever been at any point in history.

However, the dropshipping model is a slow path to being successful and making huge profits. To put it simply, it’s a patient man’s game.

It’s great for:

Budding EntrepreneursPeople looking at sustained growth professionals interested in having their own retail businessPeople savvy in marketing that can drive significant web traffic

Breaking it down, it’s a perfect business model for the following group of people:

1. ENTRY-LEVEL ENTREPRENEURS.

Dropshipping is a great business model to get introduced to the world of business and learn the tricks of the trade for the first time. Entry-level entrepreneurs are likely to fail a few times while trying to grasp new concepts in business.

However, since there’s nothing much at stake in the dropshipping business, they can afford to fail here.

For example, you could start an ecommerce website selling low-cost t-shirts to test your marketing chops. With such a low barrier to entry, it’s great practice for budding entrepreneurs.

2. SELLERS WITH MULTIPLE PRODUCT NICHES.

If you sell an extensive range of products, dropshipping is an excellent option for you. In such a scenario, keeping stocks and inventories of a wide variety of products becomes very cost-intensive, and may not be sustainable in the long-term.

This holds true, especially if you plan to sell a range of products in the league of Target or Walmart. Going for a dropshipping model, in this case, can save you a lot of money by doing away with the need for maintaining stocks, inventories, and having shops or warehouses.

3. BUDGET ENTREPRENEURS.

It’s straightforward — you want to make money, but don’t have money to invest right now. Obviously, since you’re on a tight budget, renting warehouses or retail locations is expensive.

In this case, dropshipping is the perfect model. With no upfront investment in inventory, middlemen, or warehouses, one can start a dropshipping business with practically zero cost going into it.

4. RETAILERS LOOKING FOR VALIDATION.

Consider this scenario:

You’ve got a product to sell, but you’re unsure if it will work in the marketplace. Making a warehouse and renting out space for it doesn’t seem like the wise thing to do at the moment. First and foremost, you need to test the waters.

With dropshipping, you can get the validation you need at practically no initial cost. If the response to your product turns out to be positive, you win and can now launch the product widely. If it’s negative, at least you won’t end up making huge losses.

Either way, you’ll be gaining ample experience and might get successful along the journey.

5. SIDE HUSTLERS.

If you’re in the pursuit of passive income or want to make money online, then dropshipping is a great option for you. You don’t have to lift a finger or store products. Dropshipping is an excellent way to sell products without storing inventory and earning passive income for years to come.

A beginner might face some challenges at the beginning, like marketing the product, reaching potential suppliers, etc. However, once they get ropes of the business, dropshipping can turn out to be pretty lucrative.

FINDING DROPSHIPPING PRODUCTS TO SELL.

Dropshipping is a pretty easy and straightforward business model. With the right partnerships, products, and a little patience, anyone can start it and reach the zenith of success.

However, the USP of any dropshipping business is ultimately the ‘product’ that you sell, and the value it offers in turn.

Choosing the right niche is going to help you tremendously. It will help you pinpoint your brand’s vote and eventually help you appeal to a specific group of buyers, like tech enthusiasts, body builders, etc.

Here’s an example of a dropshipping store that sells Bluetooth speakers:

Here’s a list of some of the trendiest dropshipping niche ideas for you to try in 2020:

Tech niche ideas: Wi-Fi 6 products, Wireless tech, Wearables and accessories, 360-degree cameras & accessories, and VR devices

Lifestyle niche ideas: Smart home devices, tourism gear, indoor gardening tools, swimwear, and water bottle

fashion niche ideas: Rattan bags, hair clips and barrettes, metallic clothing, women shorts, and lace clothing

Apart from this, you require a proven set of criteria to determine the type of product(s) you want to sell, including:

1. PRICING.

When you are dropshipping products, a massive part of your success and profit margins will depend on the retail and wholesale prices.

A low price can boost sales, but the profit margin won’t be much. On the other hand, a high price will dissuade most customers from buying, but the margin will be higher. Thus, it’s essential to strike a balance between the prices as you go forward.

2. SIZE.

The size and weight may manipulate and affect the prices of the product more than you anticipate.

A larger and heavier product will command:

Higher packaging charges higher shipping chargesHandling charges (sometimes)

It makes sense to at least start with smaller products, and settle for a lower margin. It will at least help you avoid additional expenses that you’ll likely incur with larger and heavier shipments.

3. CROSS-SELLING AND UP-SELLING.

It’s better to choose a niche that makes it easy for you to cross-sell and up-sell your product(s).

Have a look at some of the key benefits of upselling and cross-selling:

Both these techniques not only help you sell more, but they also help you obtain more revenue and push up your margins at no extra cost.

A great example of cross-selling would be selling shoelaces along with shoes or selling mobile phones with tailor-made, specific phone covers.

An example of up-selling would be the campaigns of Dollar Shave Club, which attracts you with the prospect of shaving at $1 and then displaying pricier options on their website.

Their selling point? Excellent value!

Both up-selling and cross-selling can help you earn excellent profits and make your dropshipping business standout.

4. RENEWABILITY.

It makes sense for you to sell products that have a moderate shelf-life. Products with low durability need to be replaced, and with any luck, more customer orders can come your way.

It’s like comparing a toothpaste with a refrigerator. While you may need a new toothpaste bottle every other week (low durability), you probably won’t replace your refrigerator in the next decade or do (high durability).

It’s all about playing at the margins, and it’s for you to decide what type of product you want to sell.

5. GRUDGE PURCHASES.

A grudge purchase is a product that the consumer doesn’t want to buy, but they have to since their options are limited. For example, products like hospital insurance, medical supplies, automobile tires, coolants, and engine oil are all grudge purchases. No one wants to buy them, but they have to, due to dire circumstances.

If you are selling products like tires and coolants, orders may be far and between, and selling points can also become a problem for you.

You should be careful while selling these products. They aren’t purchased in bulk either, and margins tend to be very low.

With grudge purchases, it gets challenging to sustain over a long period, so you may want to avoid such products at the beginning of your dropshipping venture.