drop shipping 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 drop shipping
business
and all you need to get started is a
computer an online store
and some basic marketing knowledge
[Music]
now if you've heard about drop shipping
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 drop
shipping
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 gonna 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 drop
shipping business on shopify
first things first let's define what
drop shipping actually is
drop shipping 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 lets drop shippers 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
up front on inventory drop shipping 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 drop shipping
since you don't have to buy in bulk
right away it's also easier to test the
market
a lot of drop shippers 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 dropship products aren't exclusive
it can be hard to command
sizable profit margins number four is
little to no customizability
with drop shipping what you see on the
supplier's 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 they're
anyone who sell products directly to the
public
at a markup notice how a drop shipper
isn't listed in the supply chain that's
because drop shipping is an invisible
service
it's not a role drop shipping 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 fifteen dollars with shipping
included
then you put them on your online store
for forty dollars with free shipping
now when a customer places an order you
pay the supplier fifteen
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
wouldn't your customer
turn around and just go buy from your
supplier well there are a few reasons
the first is that manufacturers and
wholesalers typically have what are
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 drop shipping store
if you're looking to make a serious
business out of drop shipping 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 and 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 online 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 forty dollar and two hundred
dollar price range
and that's because this price range will
allow us to maximize
profit without having to provide
extensive pre-sale 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 price 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 many it's gonna 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
six hundred dollars
buying that forty dollar phone case and
twenty dollar 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 long term 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 an 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 auto suggest 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 essence winello 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 an existing demand
than it is to create a new one 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 ubersuggest 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 ignore 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 all-in title and
how many results return for a particular
term
as 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 going to 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
competitors websites through link
explorer
is going to give you a really good idea
of how hard it's going to be to outrank
them
0 to 50 linking root domains will likely
be the low end for most worthwhile
markets
50 to 250 linking root domains will
likely be the sweet spot for individual
drop shipping entrepreneurs
as it offers the best work to reward
ratio
and likely shows a decently sized niche
market
if there are over 250 linking route
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 burlow 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 are 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 burlo
look for ones that have e-packet
shipping e-packet 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 drop
shippers 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 will 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 to 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
90s 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
one-time 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 will
require proof that you're a legal
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
receive 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
well there are plenty of good suppliers
with outdated websites
features such as an online catalog
searchable order history
real-time 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 long term
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 set up
luckily shopify also has an option to
help automate this process
by adding a custom fulfillment service
in the back end
regardless of whether you're using a
burlow 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 will 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 is going to 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
drop shipping merchants is having tunnel
vision
on per-order profits and losses when
fulfillment issues go awry
it's critical to accept that drop
shipping 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 aren'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 e-commerce merchants face 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 6 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 is
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 patent
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
tick tock
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 are 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
one-size-fits-all approach
now let's talk about conversion
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 they 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 shipping it's vital that you have a
long-term perspective
building a drop shipping business is
just like building anything else of
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 drop
shipping journey
and while beginning a 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