What is Drop Shipping?

What is Drop Shipping:

What is Dropshipping

Shopify Dropshipping:

What is drop shipping?

Drop Shipping is a business model where you sell other people’s products and do not keep any inventory in stock.  

According to ShopifyDrop shipping is a retail fulfillment method where a store doesn’t keep the products it sells in stock.

Instead, when a store sells a product, it purchases the item from a third party and has it shipped directly to the customer.

As a result, the merchant never sees or handles the product.

You source products from suppliers and mark them up to your customers on your website. (Get a Free 14-Day Shopify Trial)

Then, once a sale is made you send the information to your supplier.  They then takeover and ship it directly to your customer and you keep 100% of the profits.

This is an extremely attractive business model because there is little to no overhead.  All you need is a laptop and an internet connection.

Drop Shipping also allows you to increase your income without directly increasing the amount of time needed to manage the business.

Drop Shipping Business Model:

  1. Find a product you want to sell from a supplier.
  2. Brand your product and promote it on your store.
  3. Start making sales.
  4. Send shipping information to your supplier.
  5. Supplier will package and ship the product to your customer.
  6. Keep the profits!

Step 1.) Setting Up Your Store

When you first start drop shipping, you will want to create a store on Shopify.

Shopify allows you to source and fulfill products from just about anywhere and showcase them on your site however you’d like.

There are other sites, such as Wix & WooCommerce, but Shopify has the best backend platform by far.

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Shopify Dropshipping

Step 2.) Choosing A Product & A Niche

When starting any online business venture, it’s important to pursue something of interest so you don’t quit.

Always make sure there is a demand for this specific niche so you know you can profit.

Also, never make big decisions based off of your own opinion.  Always react to the data and do what your customers want!

Once you have found a product that is selling and you want to start scaling, it’s important to make sure the product description is flawless.

The copywriting on your website will determine if people buy your product or not, so it needs to be overly convincing.

Read More: Writing Product Descriptions That Sell

Drop Shipping Suppliers:

When searching for a supplier, it is a good idea to find someone who has already built a solid reputation.  

This will ensure that they are going to be reliable, easy to communicate with, ship your products quickly, and be able to work out any issues with your customers.

You should always try to contact the supplier before trying to market the product to make sure that the product is legit and is in demand.  

For example, if you see a product has 20k orders and the supplier has 5 stars, you will know that that supplier is reliable.

Once you start to make some sales and see profitable campaigns, you can even contact your supplier and try to get a cheaper price because you are going to be moving so much of their inventory.  

This will just increase your margins and also increase your return on ad spend significantly as the amount of orders goes up.

Find Cash Cow Products:

When trying to find a winning product, you must effectively test to determine if it will be profitable or not.  

To do so you must first determine a product that is in demand and people are currently buying.

Then, you will want to do some market research and find out what demographic will react to this product.  

When you are doing market research make sure to take notes on the competitors and how they are advertising their similar products.

This will allow you to focus on your exact target market that will provide you with the greatest return.  

What is Drop Shipping

Testing on Facebook:

When testing products on Facebook you should test different locations, ages, genders, devices, interests, ad copy, creative images, and behaviors.  

After running several different ads and ad sets to see which metrics are performing the best, Facebook will show you how much each action costed and what the return on ad spend was.  

When you look at this data you will be able to determine if a product is going to be profitable or not.  

If the product is generating you a positive return then you start to scale the campaign to reach more customers and make more sales.  

If the product is not generating you a positive return on your investment, delete the campaigns and restart the process with a new product.

Profit Margins:

Depending on the product and the branding of the store, profit margins can be anywhere from 30-100%+.  

With a general drop shipping store, the typical profit margin is 30-40%.

Google Trends:

Google Trends allows you to see what is being searched every single day.  

You can also see the popularity of trends overtime.

For example, if you are looking up swimsuits, the highest point of the trend is going to be in the summertime.

Uber Suggest:

Uber Suggest is a keyword tool that allows you to see search volume and cost per click estimates.  

This is good for anyone who is wanting to run any pay-per-click campaigns or write any type of content.

SEMRush:

SEMRush is a software that allows you to view your competitors marketing strategies and also how your business is performing.

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Step 3.) Marketing Your Online Store

To start off, almost every business has 1-3 products that generate the majority of revenue.

So, it’s a good idea to shape your marketing campaigns and brand image around these products.

When drop shipping, it’s crucial to know how much each customer is worth to you.  

For example, you may lose money getting someone to purchase your product for the first time. 

But, if you know how much it costs to acquire a new customer, you’ll be able to estimate the growth of your company and scale rather quickly.

Keep in mind, it’s always going to be more cost effective to market products to people who have already purchased from you rather than trying to always get new customers.   

So, never forget about the customers you already have!

DISCOVER: Choosing the Best Platform to Advertise On

Social Media:

When starting a long term store, it’s important to have all social media channels congruent.  

When all of your social media channels are pushing out content consistently that gets people back to your website to make a purchase, you will always be at the top.  

For example, if you own an eCommerce store and you are trying to sell t-shirts and you never post on social media, how will anyone ever know?

You must keep your brand in front of your consumers and they will eventually convert.

What is Drop Shipping

Maximize Your Ad Spend:

It’s important that I note, you should always have a clear call to action in your ad campaigns.  

If you run an ad and it doesn’t have a call to action it is a waste.

Chances are, if you don’t tell people to claim their item, they probably won’t.  

Now, with that being said, you shouldn’t say “buy, buy, buy.”

But, you should always be subtly trying to get your potential new customers to convert.

With the power and the reach of social media today, if you do not have a solid Instagram for your Shopify store you will be left behind.  

Brands today are putting a lot of money into social media and taking advantage of their following. 

They are monetizing them as much as they can in order to generate the profits they want.

Facebook eCommerce Strategy:

Facebook is one of the best platforms for eCommerce marketing.

Over 2 billion people login to their Facebook and Instagram accounts daily.  This means there is almost unlimited potential to the amount of people you can reach.

To start off, there are several different marketing objectives that Facebook offers including:

  • Brand Awareness
  • Reach
  • Traffic
  • Engagement
  • Video Views
  • Lead Generation
  • Messages
  • Conversions

The majority of your campaigns will be conversions focused (Add to Cart, Purchase, etc.)

But, when you are just getting started you are going to want to run some brand awareness campaigns.

The best way to do this is to come up with a company video and run some video view campaigns to get people interested.

Then, once you start seeing some positive engagement on your ads you can start to narrow down your audience.

You can create custom audiences of people who performed specific actions on your ads or on your website.

This will allow you to lower your cost per conversion by only targeting people who have shown interest.

Once you feel like your product is a winner and people are showing interest, it’s time for conversion campaigns.

Typically, the objectives go from View Content, to Add to Cart, to Initiate Checkout, to Purchase.

But, I have found that Add to Cart and Purchase work significantly better.  You will just have to split test and see what works best for you.

Lookalike Audiences:

This is where the magic happens and the real profit starts coming in.

Facebook allows you to create audiences of 2-10 million people who look and act like your existing customers.

In other words, Facebook will go find you a whole new list of hot new potential customers to promote your winning products to.

Lookalike audiences work the best when you are running ads that have already been proven to convert and have social proof.

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Retargeting:

Retargeting is an art that if done right will reward you in just about every way possible.

Have you ever seen something and recognized it from somewhere so you decide to take a closer look?

That is what retargeting is.  When you run campaigns to your customers, that should not be the only time they see your brand.

You must consistently run different ads to these customers to build up trust and get them to want to be apart of your movement.

Retargeting will also significantly lower your cost per conversion and allow you to invest more into getting new customers.

Facebook Pixel:

Before you do anything, you will want to install a Facebook Pixel to your Shopify store.

The Facebook Pixel allows you to gather actionable data on the visitors of your website to better focus your targeting.  

It also allows you to create custom audiences based on people who performed a specific action on your website.

Social Proof:

When running Facebook ad campaigns, social proof goes a long way.  

For example, when people see a post with a 20k likes they are more likely to engage, rather than if there was only 10 likes.  

Psychologically people’s minds gravitate towards what others are doing.

So, if people see a campaign with 1 million views and thousands of comments, they will want to be apart and ultimately purchase.  

It is crucial that you have tested the product and audience to make sure it is profitable before investing in post engagement.

If you spend money on a product that there is no demand for, you will not be very successful.

Touchpoints:

On average, a consumer needs about 5-7 touch points (times seeing your brand) before they decide to make a purchase.  

So, it is important to have a plan laid out before you start marketing.

This will help make sure you are nurturing your customers the whole way through your funnel for maximum return. 

When you get your brand in front of the right consumers consistently, they will start recognizing and become paying customers.

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Email Marketing Campaigns, Flows, and Automation:

Email Marketing is essential to capitalize on all of your customer contacts that have been given to you.  

On average, we have seen revenue increases of around 20%.

Also, from various stores we have analyzed, around 50-70% of people who visit your store will abandon their shopping cart.  

Mailing providers allow you to setup auto-responders that will email anyone who leaves without purchasing.  

You can also setup email flows to up-sell and cross-sell other similar products.

This will allow you to automate and significantly increase your overall revenue.

One of the best programs for eCommerce email marketing is Klaviyo.  

Klaviyo allows you to easily implement all of these different email options and automate the majority of your campaigns.  

Another great mailing provider is MailChimp.

This is important for all Shopify stores because it costs you nothing and will allow you to generate more cash flow to reinvest into your business.

What is Shopify Drop Shipping

Branding:

When you are building a business for the long-term, you are going to want to build a strong brand.

Especially when you are drop shipping products that other people may be selling too.  This will set you apart from your competition and set you up for success.

Ultimately, building a brand around your store will make customers want to become repeat customers.  

Better yet, when there is high demand you can charge a premium price resulting in a higher profit margin. (Kylie Cosmetics, for example)

When your visuals are enticing people will pull out their wallets and make a purchase.

The better your graphics and images are, the more sales you will get.

How to Take Product Images:

When you are taking images of your product you want to make sure they are as enticing as possible.  

Include high quality photos of as many angles of the product you feel necessary.

On average, we include 5-6 photos per product.  

Product images are a game changer when it comes to drop shipping, especially if you never purchase the product yourself.

The people who separate themselves from the rest are the ones you don’t notice are drop shipping.

Another thing to keep in mind is to keep the background of the products congruent.  

When all background images are the same it’s aesthetically pleasing to the customer and will draw them in.

Studies have actually shown that the same background image could even build trust between you and the customer.

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Step 4.) Order Fulfillment

After you make a sale on your Shopify store, you will have to fulfill the order so your customer gets what they paid for.

A great application to automatically fulfill your orders is Oberlo.  

Oberlo will take your customers shipping and billing information and automatically checkout and ship the item to your customer.  

Oberlo is a great application that is designed to work in sync with drop shipping businesses.

This will save tons of time as you start to receive a large number of orders per day.

Shipping Cost:

Depending on where you are sourcing your products from, your shipping costs should be relatively cheap.  

For example, AliExpress offers ePacket shipping which is 12-20 days and is usually around $1.

When drop shipping products from the United States, shipping will be more expensive but will be much faster.

When choosing a supplier to drop ship with, the one with the fastest shipping should be your go to.

Then, after you pay for shipping and fulfill the order, the item will be shipped directly to the customer. 

Drop shipping is that simple, and you collect the profits on each and every sale.

What is Drop Shipping Explainer Video:

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What is Drop Shipping

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21 Responses to What is Drop Shipping?

  1. Allan

    This is an amazing article. Thanks for all of the great insight. I have been looking into starting my own drop shipping business for a while now and this definitely made it clear I should get started sooner than later! Happy Drop Shipping 🙂

  2. Lauren

    Yes! This article is awesome, well detailed and easy to comprehend. It will be a very nice learning point for new Shopify store owners.

  3. Gary B.

    “Also, never make big decisions based off of your own opinion. Always react to the data and do what your customers want!”. Now this is one of my favorite takeaways from this article. It drives a point home that all marketers should live by. All too often with make rash moves based on our own opinions or mere guesses when we should be making every move based on cold hard data. This is the smart way to play the Ecom game!

  4. Myles N.

    From what I understand is Droshipping is not that different from a affiliate narketing at least concept wise. In here the seller acts as the middle man. Its cool and less of a hassle since all products comes from the supplier itself. How cool is that?

  5. Dora

    I love the concept its affiliate marketing amped up to a whole new level. Instead of driving traffic to sites I am gonna drive traffic to an actual store? I get a share of that sales profit I assume? Where do I sign up for this? Who do I contact?

  6. Mohammed

    I am an internet Marketer so it is needless to say I have experience in this. With that said, I would not suggest to anyone to just jump in immediately without knowhow. When I was a rookie I was a failure it took years for me to just see an income. It is not as easy as it may seem. Research is vital to this and do that first.

    • That’s very true. But, if you have a winning product and are good at marketing to the right audience you should have no problem building an income with dropshipping!

  7. Sydney

    This is all part of the big digital evolution if you ask me!!! Print has e books, Visual/ TV has the net so it is not surprising that from physical stores we have this. Is it safe though? I am not sure if the article tackled it. For that matter how can I buyer ensure quality? To me physical purchase is always better.

    • You just have to find the right supplier. I would recommend ordering the product yourself first so you can see what the packaging and quality of the products look like. It also helps to look at reviews and see if anyone is a returning customer, if so, they are probably a quality supplier to order sample products from.

  8. William

    Wow Alex, this is a superb dropshipping guide! I read your article word for word and not only is it well-written and easy to understand (even for a newbie like me) but I didn’t find a single typo! The only thing I’m wondering about now is how long I should test before chucking a campaign?

    • Thank you Will! I would say you should definitely gather enough data to see if it is going to be profitable before killing any campaign. Depending on the price of what you are selling, you should at least spend 1-2x of break even price. Also, if you are targeting a cold audience, you will need to spend even more than that when testing a new product.

  9. Jeffrey

    I like this article so much it’s awesome. I’ve also gone through your other posts too, and they’re very much appreciated, and I’m just waiting for your next update on Shopify Drop shipping

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