Dropshipping is such a great
business model for new and
seasoned entrepreneurs, because
it lets you get started with a
small investment, generate passive
income and work from anywhere.
Today you're going to learn
everything you need to
know to begin building your
first dropshipping business.
And all you need to get started
is a computer, an online store
and some basic marketing.
Now, if you've heard of about
dropshipping, you may have come
across one of those sketchy
video ads selling an incredibly
expensive course promising to show
you how to get rich overnight.
And that's exactly why
we're making this video.
There's a lot of information
going around on the internet
about dropshipping, and as
the world's most trusted
e-commerce platform, we think
it's incredibly important to set
entrepreneurs up for success.
So today we're going to arm you
with drop shipping knowledge and
strategies that you can trust.
Then we're going to take you step
by step on how to set up your first
dropshipping business on Shopify.
First things first, let's define
what dropshipping actually is.
Dropshipping is a fulfillment model
that allows you to buy directly
from suppliers and manufacturers
who will then ship the products
directly to your customers.
This let's dropshippers, focus
on marketing and customer
service instead of warehousing
and the logistical challenges
traditionally associated with
running a drop shipping business.
In digital entrepreneur
communities dropshipping has
become  such a notable model
because it has so many benefits
for those just starting out.
For one, less capital is required.
And without the need to spend
thousands of dollars upfront on
inventory, dropshipping is a really
accessible and less risky way to
get into the world of e-commerce.
It's also a lot easier, since you
don't have to deal with packing
and shipping, tracking inventory
or paying for a warehouse,
there's a lot less to worry about
than other forms of e-commerce.
Because you don't have to
worry about these functions,
it's also easier to scale.
Traditionally with retail
businesses, if you were to
receive three times the number
of orders, you would have to do
three times the amount of work.
And that's just not the
case with dropshipping.
Since you don't have to
buy in bulk right away.
It's also easier
to test the market.
A lot of dropshippers will
actually list and sell an
item to test the market before
buying it in large amounts.
And as any seasoned entrepreneur
will attest to, validating your
idea will save you a lot of
heartbreak later, the biggest
risk is building and selling
something that no one wants.
Lastly, in today's economy, the
ability to work from anywhere
is really, really attractive.
Drop shipping does have
a few challenges that are
important to take note of.
The first is competition.
Not having your own copyrighted
branded products does leave
you open to competition.
Secondly, supplier errors
will happen, leaving you
to take responsibility for
mistakes that you didn't make.
Number three is
lower profit margins.
Since dropshipping products aren't
exclusive, it can be hard to
command sizable profit margins.
Number four is little
to no customizability.
With dropshipping what you
see on the suppliers site
is often what you get.
Lastly is longer shipping times.
With drop shipping don't
expect two day shipping.
While it can widely vary,
shipping can take anywhere
from 19 to 35 days.
However, Epacket shipping can
significantly reduce this,
and we'll talk more about
that later in this video.
Now that we've discussed
the pros and cons of drop
shipping, let's get into
how the model really works.
Let's start by defining the roles
throughout the supply chain.
First, we have manufacturers
and they're the ones that
actually create the product.
Then they sell it in
bulk to wholesalers and
sometimes to retailers.
Then we have the wholesalers,
who buy the products in
bulk from the manufacturers,
mark them up slightly and
sell them to the retailers.
Lastly, we have retailers.
And there are anyone who
sell products directly to
the public at a markup.
Notice how a dropshipper isn't
listed in the supply chain.
That's because dropshipping
is an invisible service.
It's not a roll.
Dropshipping works like this.
You as the retailer, choose
the product, set the price,
put it in your online store
and run advertisements
to attract customers.
Soon enough, a customer sees your
product and pays you retail price.
Once that happens, you notify your
supplier, pay them a wholesale
price and they ship the product
directly to your customer.
Here's an example.
Let's say you're selling
resistance bands.
You find a supplier that sells them
for $15 with shipping included.
Then you put them on your online
store for $40 with free shipping.
Now, when a customer places, an
order, you pay the supplier $15
and they'll ship the product
directly to your customer,
using the information that
you've collected, then you
get to keep the $25 in profit.
Now you might be wondering why
won't your customer turn around
and just go buy from your supplier.
Well, there are a few reasons.
The first is that manufacturers,
wholesalers typically what is
known as minimum order quantities,
meaning they only sell in bulk.
Also, they will typically
only sell to legitimate
businesses and not give
wholesale prices to the public.
Secondly, people aren't
just buying your product.
They're buying your marketing,
the trustworthiness of your
site, and typically the lifestyle
that your brand represents.
Thirdly, most suppliers don't
focus on marketing and will
typically require more effort
to find than the average
shopper is willing to expend.
Now that you understand the
basics of the drop shipping model.
Let's talk about how to set up
your first dropshipping store.
If you're looking to make a serious
business out of dropshipping,
it's important that you set it up
the right way, as most suppliers
won't actually work with you,
unless you're a legally registered
business, at which point you'll
gain access to wholesale prices.
Here are some of the most
important steps for making
your business legit.
Decide on a business structure,
legally register your business,
set up a business checking
account and credit card.
Lastly, abiding by the tax
regulations in your region.
Listen, I'm not a lawyer or an
accountant, and we don't have
time in this video to go into
this in depth, but I'm going
to link an article below that
will tell you everything you
need to know to get started.
Step number two, finding
the right products.
All customers aren't created
equally and finding the
right products will really
help set your drop shipping
business up for success.
It's recommended that you
look for a niche market.
A niche market is a segment of
a larger market that has its own
preferences, identity, and needs.
Why are niche markets so
powerful for drop shipping?
Because they help you differentiate
and ultimately reduce competition.
Here's an example.
Smartphone accessories for
traveling content creators.
Here are some general
categories to get you started.
Hobbyist products.
People absolutely love
their  hobbies and will spend
mind-boggling amounts on  training
or tools that support them.
Business products, business clients
will sometimes be more price
sensitive, but they will almost
always order in larger quantities
than individual consumers.
Products with repeat purchases.
If you sell a product that needs
to be reordered frequently,
then you can grow rapidly by
establishing a loyal customer base.
In just a moment, I'm going to
show you how to use all my tools
to unearth profitable products.
But before that, let's talk
about some guidelines that will
help you narrow your focus.
Number one is pricing.
When picking a product, we
want to look for something that
will be able to sell between
the $40 and $200 price range.
And that's because this price
range will allow us to maximize
profit without having to provide
extensive presale support.
Also impulse buyers
generally buy things that
are between this price range.
Number two is minimum
advertised pricing.
And this is when suppliers require
that resellers price their products
at, or above a certain level.
If you can find a niche where
this is enforced, it's going to
save you a lot of headaches and
prices wars with competitors later
down the road, you never want to
be caught in a situation where
you're in a race to the bottom.
Number three is
marketing potential.
How many ways can you
brainstorm being able to
market this particular product?
If you can't think of any, it's
going to be a big barrier to
customer acquisition down the line.
Number four is accessories.
When people commit to making
a larger purchase, they
are less price sensitive
to high margin upsells.
Think about it.
Last time you bought a cell
phone that was $600 buying that
$40 phone case and $20 screen
protector seemed like a no brainer.
I call this the, do you
want fries with that effect?
Accessories can be a great way
to upsell your customers and
increase that average order
value and revenue longterm.
Number five, selling a product
that's hard to find locally will
increase your chances of success.
The reason for this is simple.
When people can't find a
product at a store in town,
they turn to the internet.
Lastly, smaller is often better.
The smaller the item is,
the easier and cheaper it is
to ship to your customers.
Now that we have some principles
laid down for finding the perfect
product, it's time to turn
to online tools, to be clear,
there are tons of unique ways
to find products, but these are
some that have worked for us.
Google is a great place to start
for brainstorming product ideas,
as it will give you insight into
what people are actually searching.
Google's autosuggest feature
will give you even better
insight into long tail keywords.
Another amazing tool for
market research is answer the
public, which will give you
insight into actual keyword
phrases that people are
searching for on search engines.
Another great resource for
brainstorming product ideas
is simply going to online
stores and checking out
their curated product lists.
Amazon's new and interesting
finds, eBay's trending on eBay,
and Alibaba's first look at
next season's products can be
gold mines for product ideas.
You can also check out social
shopping sites, like Pinterest,
Fancy SSENSE, Wanelo and Etsy.
Social shopping sites
incorporate social aspects,
like product sharing and
user engagement features that
give you insight into how a
product is popular at a glance.
Another great way to generate
product ideas is by creating a
mind map, mind maps are incredibly
effective at getting information
in and out of your brain.
Mind maps, stimulate great
ideas by using a powerful
graphic process that unlocks the
dynamic potential of your brain.
While it may be old fashioned,
if it's not broken, don't fix it.
Now let's talk about keyword tools.
It's much easier to fill
in again, existing demand
than it is to create a new.
So once you have a short list of
product ideas, it's important that
you validate them with hard data.
To do this you'll want to use a
keyword tool like SEM rush, Uber
suggest, or Google's keyword
planner to gain insight into
how many people are searching
for that particular product.
If you'll be selling primarily
in the US it's important that
you focus on the local search
volume and ignored the global
results, as that's where most
of your customers will be.
If a search term has many
variations that are actively
searched for, that's a really
good sign that this market
is fairly deep with a lot
of variety and interest.
Also keep an eye on the Allin
Title and how many results return
for a particular term is this
will give you a really good
idea of how much competition
you will face in this niche.
If you're using SEM rush, this
process will be so much easier as
their tool Market Explorer gives
you insight into competitors,
keywords, audience, interests,
and demographics, all at a glance.
Once you've used all the tools I
just mentioned, head over to Google
trends to gain more insights.
Take a look at the
search volume over time.
Ideally the niche you're
entering should be growing.
Then take a look at
top and rising terms.
This will give you a snapshot
about which related search
terms are growing the fastest
and which related search terms
are currently the most popular.
After that take a look at
geographical concentration,
which will let you know where
people are located when they're
searching for a particular term.
This is really powerful as
it will give you insight
into where your customer base
for a particular niche are
most heavily concentrated.
Lastly, take a look at seasonality.
And this part is
crucially important.
If demand for product radically
shifts at different points
in the year, you're going
to want to know about it.
If you're starting a single
product store, make sure to really
take your time to evaluate your
product choice fully as it's really
gonna make the difference between
your store sinking or swimming.
Once you've chosen your product,
you'll want to take some time to
conduct a competitive analysis.
Too much competition, and you'll
have a tough time acquiring traffic
and competing against established
players, too little competition,
and that can indicate a tiny
market size, which will really
limit your potential for growth.
To conduct a competitive analysis,
run a Google search and take
note of the top ranking sites.
Make sure to take a look at how
they present themselves with their
messaging, imagery and design.
Since backlinks are a large ranking
factor for search engines, running
your competitor's websites through
link Explorer, is going to give
you a really good idea of how hard
it's going to be to outrank them.
Zero to 50 linking root domains
will likely be the low end
for most worthwhile markets.
50 to 250 linking route
domains will likely be the
sweet spot for individual
dropshipping entrepreneurs.
As it offers the best work to
reward ratio and likely shows
a decently sized niche market.
If there are over 250 linking
root domains, unless you're an
SEO Ninja, it's going to take some
serious time and commitment to
build that amount of unique links.
This isn't necessarily a deal
killer, but be prepared to go
up against some serious players.
Now let's talk about
finding a supplier.
Two of the most common approaches
are to find a supplier manually
by using supplier databases.
And the second is to use a Shopify
app that instantly connects
you to thousands of suppliers
for the latter we
recommend a Oberlo.
A marketplace developed
by Shopify that connects
you to products to sell.
This makes finding a
supplier so much easier.
You can browse AliExpress and
import products to your store
with the click of a button.
Here's some other handy features
that this route offers access; to
millions of products, fulfilling
orders automatically, easily
monitoring inventory levels.
Calculating inventory margins
automatically, shipping and
tracking orders and measuring
delivery performance.
Here's a pro tip, when looking for
a supplier on a Oberlo look for
one that have Epacket shipping,
Epacket is a shipping option
offered by third party logistics
providers that allows merchants
to provide fast and affordable
shipping for light packages.
While using an app like
Oberlo is undoubtedly
simpler for new dropshippers.
There are some compelling
reasons as to why you might want
to find a supplier manually.
The first is lower shipping times.
By finding a supplier manually
you can look for one that's
in a geographic location
that you are targeting.
And the second is control.
By finding your own supplier,
you'll have more control over
packaging, branding and quality.
It's important to note that
finding your own supplier can take
quite a while, sometimes weeks.
And you'll also need to
qualify the supplier yourself.
If you're going to go this
route, it's critical that you're
able to differentiate between
legitimate wholesale suppliers
and retail stores posing as
them a real supplier will buy
directly from a manufacturer
and we'll be able to offer you
significantly better prices.
Here are some red flags.
Ongoing fees.
If a supplier asks you for an
ongoing fee, just for the privilege
of doing business with them,
they're likely not legitimate.
And the second is they
sell to the public.
If a supplier sells to the
public, they're probably not
legitimate, as a real wholesaler
requires a wholesale account
that you need to be approved for.
If they're selling to the
public, they're definitely
selling at inflated prices.
There are a few ways to
find suppliers manually.
The first is Google, but know
if you do this, you're going
to have to search extensively.
Wholesalers are
traditionally terrible at
marketing and promotion.
So you'll probably have to go
into the double digits of the
Google search results pages.
You might need to try various
search queries and make
sure we use a lot of keyword
modifiers, like bulk distributor,
reseller and warehouse.
Also when you find a supplier,
don't judge them by their website.
Wholesalers are absolutely
notorious for having poorly
designed 90's style websites.
Another popular way to
find wholesalers is through
supplier directories.
Now these are online databases
with pre-vetted suppliers
and they usually charge
a onetime fee for access.
Some of the most notable
supplier directories are
worldwide brands, Doba,
saleHOO, and wholesale central.
As mentioned earlier, it's really
important that by this point you
have your legal documents in order
as a lot of legitimate wholesalers
were require proof that your
illegal business before allowing
you to apply for a wholesale
account and revealing their prices.
Here are several things that
some suppliers might require.
Per order fees, to cover the
cost of shipping and packaging,
and minimum order sizes, which
is the lowest number you'll have
to purchase on your first order.
When qualifying suppliers
here are some questions
you should definitely ask.
Do you offer drop shipping?
Do you offer customization?
Can you put my company's
logo on the packaging?
Do you offer private labeling?
Are there any fees?
How should I send you orders?
As I received them?
How will you invoice me for orders?
Do you accept credit card payments?
And what is your refund
and return policy for
damaged or missing orders?
How long does it take for orders
to be processed and shipped?
And lastly, are you the
manufacturer of your products?
When qualifying a supplier, make
sure to look for these things.
Expert staff.
Top-notch suppliers will have
knowledgeable sales representatives
who really know the industry
and their product lines.
Dedicated support representatives.
Quality suppliers will assign
you a representative that's
responsible for taking care of
any issues you might encounter.
They're invested in technology.
While, there are plenty of
good suppliers with outdated
websites, features such as an
online catalog, searchable order
history, realtime inventory,
and customizable data feeds
are a pure luxury for an online
merchant and they can really help
you streamline your operations.
They can take orders via email.
Well, this might seem like a minor
issue having to call in every
order or manually place orders on
their website can make processing
orders a lot more time intensive.
They're centrally located.
A centrally located supplier
can save you a lot of money on
shipping fees, longterm, and
allow you to promise consistently
faster delivery times.
They're organized and efficient.
Some suppliers have amazing staff
and great systems that result
in efficient and mostly error
free fulfillment, but there
are others that will literally
botch every fourth order.
The trouble is it's difficult
to know which is which until
you start working with them.
If you're not using the Oberlo
app, which fulfills orders
automatically, every supplier
is going to have a different
communication method, which they
prefer for fulfilling orders.
Whether they prefer Excel,
email, instant messaging, or have
their own unique login system.
Don't worry.
The supplier will help
you get all that set up.
Luckily, Shopify also has an
option to help automate this
process, by adding a custom
fulfillment service in the backend.
Regardless of whether you're
using a Oberlo, or finding your
own supplier, it's definitely
recommended that you test the
product before selling it.
Although you'll probably have
to pay for samples, but this is
a small cost to make sure that
your customers will be satisfied.
Regarding payment, the vast
majority of suppliers we'll accept
payment in one of three ways.
Credit card, PayPal or net terms,
which means you have a certain
number of days to pay the supplier
for the goods you purchased.
If you go with net terms, you
may be required to give them
some documents as they are
effectively lending you money.
Sometimes your
supplier's gonna mess up.
It happens.
And when it does, it's important
that you take responsibility for
their mistake and remedy the issue
by providing customer support.
The internet has always
been a fairly transparent
place, but the rise of social
media has made your business
reputation even more important.
If you don't treat your
customers well, they'll often
let the entire world know,
including potential customers.
The biggest customer service
risk for dropshipping merchants
is having tunnel vision on per
order profits and losses when
fulfillment issues go awry.
It's critical to accept
that dropshipping can
get a little messy.
You'll be paying to clean
up these messes and you
shouldn't try and pass these
costs onto your customer.
If you weren't occasionally
losing money on individual orders
to make your customers happy.
Well, you're probably not providing
very good customer service.
However, just because you
take responsibility for
their mistake, doesn't mean
you have to pay for it.
In these situations, try reaching
out to the supplier and seeing if
they can help you make it right.
Now let's talk  about
marketing products.
The number one frustration that new
eCommerce merchants face phase is
lack of traffic to their stores.
Too many merchants spend months
making the perfect website
and creating the perfect brand
only to launch it to a world
that doesn't know they exist.
As it turns out the build it
and they will come mentality
does not apply to the
world of online businesses.
Marketing  and driving traffic
is absolutely essential to
the success of your business.
And you need to take some
initiative to make this happen.
This is particularly important
during the first six to 12
months of your existence,
when no one knows who you are.
Following your site launch, you
need to dedicate 75% of your time
to marketing traffic generation
and SEO for at least six months.
It's really easy to get caught
up in perfecting your site
design or perfecting that logo,
but marketing it's ultimately
what's going to move the needle.
Now let's get into
some marketing basics.
First, we'll start with
crafting a value proposition.
Crafting a compelling offering
is a key place to start because
it's this messaging that's going
to fuel your marketing campaigns.
A value proposition answers why
someone would buy your product.
For example, this is the
value proposition of Slack.
Be more productive at
work with less effort.
Here are some value prop
elements that might inspire you.
Price, quality, features, benefits,
a feeling, a solution to a problem,
exclusivity slash a patents,
customer service or convenience.
Once you've crafted a compelling
value proposition, then it's
time to create a customer
profile that will help you
focus your marketing efforts.
And that's because there's a
lot of ways to get people to
your website but we're only
interested in attracting people
who will buy what we're selling.
So first you need to ask
yourself these questions.
What niche market
are you targeting?
For example, if you were
selling cruelty-free cosmetics,
your niche market would
be conscious consumers.
Then you need to ask what are
your customers interested in?
For example, Let's say
you're selling hiking boots.
We can reasonably assume your
customers are interested in nature.
Also.
How do your customers behave?
What books do they read?
What sites do they use?
Where do they hang out?
If you're selling cell phone
tripods, chances are your
customers hang out on TikTok.
Lastly be mindful of
demographics, age, gender,
location, and marital status.
For example, if you were selling
sports themed beverage coolers,
the demographics might look
something like middle aged, married
men located in American suburbs.
Once you've completed this it's
time to actually begin marketing.
Here's some of the most
common marketing channels that
dropshippers find success with.
Paid advertising, influencer
marketing, affiliate marketing
content marketing and communities.
There's so much to cover with each
one of these marketing channels.
We couldn't possibly do it
justice in this one video.
So make sure to hit that subscribe
button because we're going
to be doing dedicated videos
for each marketing channel.
For now, the most important
thing to remember is to adopt
the mentality of a scientist
and methodically test value
propositions and marketing
channels until you unearth
the ones that work for you.
It's  Important to remember
that every product and
every brand is different.
And there really isn't a word
one size fits all approach.
Now let's talk about conversion
and optimization and increasing
your average order value.
Since you're sending people to
your site, you're going to want
to make sure that your product
pages are optimized because you
want people to actually buy.
A product page can really make
or break a buying decision.
Here are some quick best practices.
First let's talk about price,
setting a price slightly
higher than your competitors
can be a great strategy as
it can increase the perceived
value of your product.
We wouldn't recommend being the
cheapest thing on the market
as it will ultimately be a
losing game and just slowly
eat away at your margins.
Building trust will be a
vital component of increasing
your conversions, reviews
and testimonials, customer
generated photos and money back
guarantees, are all powerful
ways of building trust and
reversing risk for your customers.
Urgency can be a powerful technique
for increasing conversions,
using flash sales and letting
customers know there's a limited
quantity of an item can help
them adopt a scarcity mentality
and put them on a time crunch.
And this can really help them make
a purchase decision a lot faster.
Using relevant product
recommendations to cross sell
and upsell your customers
can really help to increase
the average amount that spend
at your store per purchase.
Another great tactic
is order minimums.
Offering free shipping on orders
over a hundred dollars is a
great way to incentivize your
customers to add on extra items.
Lastly, we have loyalty programs
offering your customers a
discount or coupon for their
next purchase is a great way to
get them to keep coming back.
At Shopify, we think one of
the most important things to
remember is that just like
any other business with drop
shipping, it's vital that you
have a longterm perspective.
Building a drop shipping
business is just like
building anything else value.
It takes a significant level
of commitment and investment
over time to truly build
something that is successful.
For some reason, there's
this myth that persists that
people can build a six figure
passive income with just a
few months of part time work.
And that's just not
the way it works.
Thanks so much for watching
and hopefully this video has
given you everything you need to
start your dropshipping journey.
And while beginning of store
can feel daunting, really the
hardest part is just sitting
down and getting started.
And once you have your drop
shipping store, comment below,
because I'd love to take a
look, give you some feedback
and set you up for success.
Also, don't forget to like and
subscribe so you don't miss out
on more tips and tactics on how
to grow your online business.
Remember, we're a channel for small
business owners with big plans.
I've been your host Tyler,
and I'll see you next time
on Learn with Shopify.
