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With E-commerce expanding into our daily lives, many are seen turning to dropshipping as a reliable means of income. Currently standing at 4206 billion US dollars, the e-commerce industry’s sales revenue is expected to rise to 6542 billion in 2023. It is no wonder that people are increasingly interested in getting a slice of the pie.
Although starting a dropshipping venture may seem daunting initially, such a leap may prove worthwhile given the right amount of time and effort invested. If you’re keen on starting your own dropshipping business or perhaps, looking for more insights on dropshipping- this article is made just for you. Here is a guide to the fundamentals of dropshipping.
Market research
Not a single business can survive without substantial market research. Before making that initial step, it is imperative that you know your business dynamics inside and out.
These factors include:
- How your industry works
- Your pricing strategies
- Your promotional efforts
- Your product and placement strategies
- How to overcome potential roadblocks
How does dropshipping work?
In the simplest of terms, dropshipping can be summarised in three steps. When a customer places an order from your platform, he or she pays you at the retail price you wish to sell at. Next, this order is then forwarded directly to your supplier and you pay the wholesale price for it. Lastly, the supplier then ships the product directly to your customer.
You might be wondering why consumers even choose dropshipping in the first place. Well for starters, the internet is a very big place. Many consumers are generally unaware of where to find their items at the lowest possible price. That’s where your dropshipping platform bridges the gap as not many consumers have direct access to suppliers out there.
According to an article by shopify, it is realistically possible to generate $1000-$2000 of monthly income within 12 months, assuming a mere 10-15 hours commitment per week. In fact, another article by Unrivaled Review revealed that successful dropshippers are known to make around $50000-$100000 per month in revenue- showing a lucrative path for many to follow suit.
Pricing
Implementing the right pricing strategies can make or break a firm’s competitiveness in the early stages. One can set his/her prices at any level, but whether consumers are receptive or not usually revolves as the main issue at the end of the day.
With consumers becoming increasingly value driven, this makes them more price sensitive in their purchases. One should therefore do his/her due diligence to seek out how their competitors are pricing their products as a benchmark for their own settings.
That said, one should also couple their research with varying pricing strategies. If you’re a new entrant with little reputation, you may perhaps consider a penetration pricing strategy- where sub market prices are used to entice consumers over to your domain. Once you develop a substantial customer base, this will perhaps entitle you with greater pricing power as time goes by.
Alternatively, psychological pricing can be used as well. Consumers are increasingly known to pay greater attention to detail. Things like $99.98 and $100 may make a difference in closing a sale in today’s competitive context. Taking these details into account may perhaps put you on a slight edge over your competitors.
There are certainly many other pricing strategies you can possibly incorporate into your business operations as well. Click here to view them.
Promotion
Promotional efforts are equally important in contributing to the success of one’s dropshipping business. This is where advertising comes into play. Being able to market your product in a way that differentiates your business from the competition is pivotal in maintaining your relevance in the market.
Good marketing, promotional and advertising efforts may win the minds of impressionable consumers. Consumers are not just buying the product itself today. They are usually influenced by visual, audio aids or any associated “story” behind it.
If one is able to market their dropshipping strategies out well to the masses, what may perhaps follow is greater business traction. This not only improves your branding image, but also provides you with a competitive advantage in the long haul.
Product and placement
Choosing the right products to sell in the dropshipping market is a major factor for consideration too. Market saturation is a constant fear for the e-commerce industry due to its low barriers to entry. There are more often than not numerous competitors out there selling similar or if not, identical products.
It is thus important that you choose the right target market to enter. Try avoiding the sale of overly generalized products where market competition is high. Instead, it may possibly prove more beneficial to research and enter into niche markets. Although niche products may cater to a smaller consumer base, you do need to face the risk of tough competition- which is especially important for a new dropshipping entrant.
Lastly, select the right place to start your dropshipping venture. Contrary to popular belief, you do not actually need a lot of capital injection to start. While you can possibly create an e-commerce site for as low as under $1000 today, there are several readily available platforms that may render as cheaper alternatives such as Oberlo, Shopify etcetera. In fact, Shopify offers individuals a free trial for the first 14 days.
Although such platforms still come at a cost, any form of cost savings may provide additional cash flow for other crucial operational areas of need- so make every cent count!
How to overcome potential roadblocks
A successful dropshipping business requires a substantial amount of time and dedication. It is almost certain that you’ll encounter difficulties along the way. It is therefore important to set realistic goals to keep yourself motivated along the way.
Dropshipping is generally associated with fast scaling potential due to its ease of entry and low capital requirements. As such, be patient and be on the constant look-out for changing business landscapes. Once you gather enough data through trial and error, refine your strategies accordingly.
Lastly, there are also many drop shipping courses readily available. Although they might cost a little, the invaluable tips you can get may potentially place your business in a more strategic and sustainable position in time to come.
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