What Is Dropshipping and How Does It Work? (2024)

Irwin Dominguez from San Diego makes about $10,000 from his dropshipping business, and on a very productive day, he sees a spike in sales that nets him about $30,000. These awesome figures have placed him as one of the most successful drop shippers, with an overall sales of $1 million from drop shipping business.

Now, how do you start a career in such a cool business niche, growing your way to easily earn 6-7 figures monthly? Your detailed guide is just a few paragraphs away, so keep reading.

One of the many benefits of starting a drop shipping business is that you don’t need to own a product to make money. You can earn more than $10,000 monthly through other people’s products using the in-depth strategies that I will be showing you.

Here is the simple formulae, connect buyers to sellers as a dropshipper and make money from the simple process.

But first, let’s find out what a dropshipping business is all about, and how it’s been turning entrepreneurs into 6-figure earners and more.

What Is DropShipping Business?

According to bigcommerce.com, Dropshipping is an order fulfillment method that does not require a business to keep products in stock. Instead, the store sells the product and passes on the sales order to a third-party supplier, who then ships the order to the customer.

Think of Amazon, AliExpress and eBay, these are established dropshipping business with millions of daily sales, with no products own by them.

These big guns capitalize on the increasing number of online shoppers.

According to Oberlo, there are about 2.7 billion online shoppers in 2023, which is why eCommerce businesses like Mini Importation, Affiliate Marketing, and Dropshipping are experiencing a yearly rapid growth.

So, let me show you how to target active online shoppers in your locality to grow your drop shipping business.

Now, with the concept of dropshipping business answered, the next question becomes:

How Exactly Does Dropshipping Work?

In the simple equation of dropshipping business, this is how exactly dropshipping works:

A vendor (Amazon, eBay, etc) fulfill orders for a third party, to get the products shipped to a customer. Here, the vendor’s job is to maintain a sound online presence and run marketing campaigns while sellers registered on their platform handles the products to be shipped.

So, next time you buy a product from Amazon, remember that Amazon’s job is to maintain a profitable online presence and run advertising and marketing costs while paying a seller on their platform to ship your order. And that’s dropshipping right in your face! How does Amazon then earn from dropshipping with their system? They pay their sellers at a discounted rate and make their profit from the discounted rate.

Having understood how these turn out to be a way to connect vendors to sellers and customers, then let’s dive down the detailed guide on how to start a dropshipping business and scale to a 6-7digit income.

How To Start A Dropshipping Business With No Money?

Either you are a beginner who want to start dropshipping or you want to know how dropshipping works, this guide on starting a dropshipping business would give you a detailed strategy on how not to only start a dropshipping business, but scale your business to earn you cool money.

1. Choose a niche

Niching down your dropshipping business will help you laser-focus on one audience category, which would in turn reward your advertising and optimization.

Not only that you get better results when you focus on one particular product at a time (at the early stage of the business), you also have a higher chance of building authority in one business or product category.

In choosing a niche, this is how to pick a profitable niche.

1. Go with what you want

Most drop shippers pick a niche out of their passion for a particular industry or product category. For instance, nursing mothers who are drop shippers might fall in love with the parenting niche, or baby products. This way they have a first-hand experience with what their audience would love.

2. Pick “hot selling” products 

Using Google trend and Google Keyword planner, you can make a list of most searched products in a niche, this would give you insight into the niche to go into.

Google Trend Result For Nike Shoes

2. Build Your Online Presence

Starting and growing a dropshipping business would mean that you have to create an online presence around the internet, where your advertising matter and your audience visit.

In building your online presence, the major places to look at in these 3 stages on your funnel are:

• Awareness: Website, Search engines, Social media.
• Consideration/Nurturing: Email marketing.
• Conversion: Landing pages.

Most drop shipping companies make use of eCommerce platforms designed for the sole purpose of e-commerce, such as Shopify, this is a good place to start especially if you lack advanced coding experience.

In building an online presence, you get to create social media accounts for your business where you use social media marketing to create awareness. Also here, you have to maintain a brand voice across your online presence to create a sense of trustworthy brand.

3. Pick Your Suppliers/Sellers

Picking a supplier is one of the stages you must get through before you can start a successful dropshipping business, but picking the wrong supplier would be a step backward from achieving your business goal.

One of the ways to pick a supplier after identifying the niche you want to delve into is to check sellers ranking scores in some of the successful dropshipping stores on AliExpress, Amazon, Doba, SaleHoo, Shopify, eBay, Spocket, etc.

Here, you pick a product in the same category you would want to delve into, then compare the ranking scores and the percentage of satisfied customers.

Also, check if the seller is actively responding to reviews with the poorest ranks. Here, you’re looking out for a sense of sound customer service skills, these are what makes a good seller.

This has to be manually done as there are no tools to find out the best suppliers registered on these drop shipping companies. After picking a good number of suppliers you’re likely going to work with, further detail your search and find out whose timing, spoken language, availability, etc, matches your goal.

One thing you don’t want to get caught up in is to start your dropshipping business with a supplier who isn’t readily available to ship items after a successful order has been placed.

4. Start Your Marketing/Advertising

There are no successful dropshipping stores that didn’t have to advertise like wildfire. As a matter of fact, this is one of the many business models that dropshippers bring to the table in every discussion – the marketing and advertising angle of the business.

Before you start any campaign, you have to conduct audience profiling and design your customer avatar to know your audience. This will make it easy where you’re expected to detail your prospect’s persona while running any campaign.

In designing your customer avatar, some of the question you’ll have to fill up in your sheet are these:

• Where is your customer located?
• What age range do your customers belong to?
• Where do your customers get their breaking news from?
• Are your customers employed?
• What is their salary range?
• What are they interested in?

This information will assist you, especially when setting up campaigns on different social media advertising platforms, or on Google ads. Secondly, you’ll have to design a sales funnel to help you in planning out which channels to use in your marketing and advertising strategy.

Click here to read more on sales funnel and how to create an effective sales funnel for your dropshipping business.

These strategies can be used to solidify your marketing and advertising strategy in any campaign you’re running for your dropshipping business.

You can also check these useful guidelines on how to run high-converting campaigns across different social media and Google networks: Facebook Advertising guide and Instagram ads

With these advertising platforms, you can generate quality leads for your dropshipping business.

5. Grow Your Email List

Email marketing is said to be the center of lead generation for any business. And that’s because, in lead generation you can successfully drive 10,000 quality leads to your landing page but not all the leads can all buy at the same time.

There might be on-the-spot objections and reasons why a prospect won’t pull out their debit cards to buy from you at that moment.

These could be:

• High price.
• Unwillingness to spend.
• Failed or unsuccessful transaction.
• The need to make inquiries.

These could make any prospect not take action after getting to your payment page. Nonetheless, you don’t let your leads drop off your landing page, rather you give out an offer they can’t say no to.

Your offer could be in exchange for their email address and other data important to your lead generation strategy. This irresistible offer is called a lead magnet.

Click here to learn how to grow your email list

Growing your email list will give you the option to nurture your leads with offers, discounts, and also use a sense of urgency in your marketing campaign.

6. Capitalize On SEO

SEO is a lead generation strategy you must never rule out. According to Jumpshot, 35% of Google product searches turn into transactions within 5 days, and this simply means that people who actively search for products on Google search engine have a high rate of turning into purchasing customers.

Take, for instance, you’re in a dropshipping business and one of the products you dropship is Nike shoes for women. Then, let’s take a look at the search volume for the keyword “Nike shoes for women” with a location-based search for UAE.

Below is the image of the results giving you insight on how well people use search engines to make searches about their desired products or intended purchase.

SEMRush result for “Nike shoes for women”

Also, these customers are at their decision-making stage, so, your blog posts and web pages if well optimized at this stage can rake in a high number of customers from search engines alone.

To learn how SEO can help your dropshipping business, click here, you will also learn how to optimize your web pages for focus keywords with high search volume.

Benefits of Dropshipping

Dropshipping offers several advantages that make it an attractive business model for many entrepreneurs:

1. Lower Startup Costs

Unlike traditional businesses that require significant capital to buy inventory, dropshipping eliminates the need to invest in stock upfront, reducing financial risks.

2. Quick Product Offering

With dropshipping, you can start advertising and selling products almost immediately after deciding to list them on your website, allowing for faster market entry.

3. Wider Product Range

Dropshipping enables businesses to offer a broader range of products without worrying about storage space or inventory management, as suppliers handle the shipping and storage.

4. Risk-Free Product Testing

Testing new products becomes less risky as dropshipping allows you to introduce new items without investing heavily upfront, providing a low-risk way to gauge customer interest.

5. Learning Opportunities

Engaging in dropshipping can provide valuable skills in areas like digital marketing, customer relations management, and webstore analytics, enhancing your expertise even if you transition to other business models in the future.

Disadvantges of dropshipping

While dropshipping offers various advantages, it also comes with some drawbacks that entrepreneurs should consider before diving into this business model:

1. Limited Control Over Quality

As a dropshipper, you rely on suppliers to fulfil orders and maintain product quality. This lack of direct control over product quality can lead to issues like inconsistent product standards or delayed shipments, potentially affecting customer satisfaction.

2. Reliance on Suppliers

Dropshipping businesses heavily depend on suppliers for inventory, order processing, and shipping. Any disruptions or issues with suppliers can impact your business operations and customer experience.

3. Supply Chain Issues

Due to the involvement of multiple parties in the supply chain (supplier, dropshipper, customer), there is a higher likelihood of supply chain disruptions, delays, or miscommunications that can affect order fulfilment and customer satisfaction.

4. Competition and Low Margins

The dropshipping market is highly competitive, making it challenging to stand out among other retailers offering similar products. Additionally, the margins on dropshipped products can be low due to fulfilment service charges by manufacturers, limiting pricing flexibility and profitability.

Frequently Asked Questions On Dropshipping Business

How to find suppliers for dropshipping in Nigeria?

To find suppliers for dropshipping in Nigeria, you can follow these steps:

Online Marketplaces: Look for suppliers on popular online marketplaces like Jumia, Konga, and DealDey, which are known to have dropshipping options.

Supplier Directories: Utilize supplier directories like NigeriaBizList, Alibaba, or TradeIndia to find potential dropshipping partners in Nigeria.

Social Media and Forums: Join relevant social media groups and forums related to dropshipping where suppliers often promote their services.

Networking: Attend industry-related events or trade shows to network with potential suppliers and establish partnerships.

Contact Manufacturers: Reach out directly to manufacturers of products you’re interested in and inquire if they offer dropshipping services.

Local Businesses: Contact local businesses or wholesalers in Nigeria and check if they are willing to collaborate for dropshipping.

Always remember to verify the credibility and reliability of potential suppliers before partnering with them.

How profitable is dropshipping?

Dropshipping can be profitable, but success depends on various factors such as product selection, marketing strategies, and operational efficiency.

Does dropshipping business work in Nigeria?

Yes, dropshipping can work in Nigeria, but it requires careful planning, finding reliable suppliers, and understanding the local market dynamics.

What products should I start my dropshipping business with?

When starting dropshipping, consider selling niche products with high demand and low competition. Also, conduct market research to identify popular and trending items.

Here is a list of product ideas to consider when starting dropshipping:

• Phone accessories (phone cases, chargers)
• Fashion jewelry
• Home decor items
• Fitness and sports equipment
• Beauty and skincare products
• Travel accessories
• Pet supplies
• Kitchen gadgets
• Baby products
• Electronics gadgets (smartwatches, earbuds)

Can dropshipping business make you rich?

Dropshipping has the potential to be profitable, but it is unlikely to make you rich overnight.

Success in dropshipping depends on various factors, including product selection, marketing strategies, customer service, and operational efficiency.

It can be a viable business model, but building significant wealth typically requires time, effort, and consistent growth.

Highest Paid Dropshippers

• Tze Hing Chan: $19,000 in profit over two months
• Pierre Emmanuel
• Sarah and Audrey: $1 million in sales through influencer marketing
• Alex Philip
• Andreas Koenig and Alexander Pecka: the $10 million per year mark
• Harry coleman
• Cole Turner: $2 million in just over one year

Conclusion

eCommerce businesses are one of the major industries that are fast-growing, with a very high number of shoppers buying digitally. And dropshipping is a part of the eCommerce business.

It could be lucrative when the right strategies are practiced.

One of the main strategies you should deploy as a dropshipper is optimizing your marketing strategies using the results you get. With this practiced along consistency, you can be sure to have a successful dropshipping business.

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