If you want to build extra income and reach your retirement goals, an online business selling physical goods is a great way to start. E Commerce is a booming market that is wide open for new players. According to eMarketer, ecommerce sales will see double-digit growth through 2020, topping $4 trillion, and dwarfing economic growth in developed countries.
And contrary to popular belief, you don’t have to create your own products to sell, or buy them in bulk from retailers. If you learn how to drop ship, you can start a scalable online business from scratch to boost your retirement income. Here’s how.
What Is Drop Shipping?
Drop shipping is a retail model where the products a business sells aren’t stored in the same place. In fact, when the business sells a product, they immediately purchase the item from a third party supplier who then ships it directly to the customer.
Simply put, you handle the transaction—including customer service–while someone else deals with the shipping and handling. You don’t stock your own inventory, but keep it with the wholesaler or manufacturer to fulfill orders.
There are a lot of benefits to learning how to drop ship. With this model, you can make a lot of money online because:
- It requires less initial capital and overhead
The real draw of drop shipping for most people is the fact that you don’t have to front a bunch of money for inventory to start. You actually don’t have to purchase any products until you’ve successfully made a sale! This also means you don’t have to manage your own warehouse, keeping your monthly overhead costs low.
- The location of your business is flexible
Because the physical products aren’t stored with you, the location of your business is flexible. You can reasonably run the business from anywhere with a good internet connection (That’s what I do!). There are a lot of benefits to retiring abroad and running your business remotely.
- You can sell just about anything that interests you
You don’t have to pre-purchase any of the items you sell, which means you can offer just about any product that interests you, without worrying about the price of stock.
- It’s easy to scale
When you know how to drop ship the right way, more business doesn’t necessarily mean more work for you. Most of the process is done by your suppliers — you just need to manage the orders. And if you do end up tripling your sales, you can always hire on a remote worker to help you manage it all.
Ready to learn how to dropship? Here are the steps to follow.
Step 1: Pick a niche, validate it, and find your suppliers
Success in e commerce is increasingly dependent on establishing expertise in helping consumers navigate different choices. Shoppers are now going to niche-specific sites to buy, not online superstores or brick and mortar retailers. Niche stores provide more tailored advice and a better selection of specialized products.
The sweet spot for profitable niche products is a price range of $300-$1000. This price range should insure a good profit margin and also require specialized sales information. Shoppers also will not be reluctant to buy in this price range if they perceive the online store is a niche authority and trustworthy. Here are three tips for selecting a potential niche to validate:
- Think of purchases you, your family, or friends have made recently
- Browse the categories of super-store drop shippers like Wayfair and Hayneedle
- Consider any items around your house that are not locally available with a good selection
In these cases, consider if more detailed and specialized information would help a potential buyer. Make a long list of ideas for potential validation. Here’s an excellent article that dives much deeper into niche selection.
Finally, finding suppliers is obviously also critical to succeed. Most manufacturers have retail partners that are either brick and mortar or online, or both. Top brands can be identified by looking at competitors and using Google to find out their contact information. Going to the manufacturer’s website can also tell you how many products they have and if they operate in any other related niches.
At first, you will only need to identify potential suppliers—at least 20 or 25. Ultimately, you will need to contact them as an online niche specialty store.
Picking profitable products for your drop shipping business can be tricky. You need to find niche products that don’t have a lot of competition from other “niche sellers”.
If you need help finding the right product or any other step in this process, I recommend checking out Anton Kraly’s Drop Ship Lifestyle. This site has some great in-depth training materials for each step.
Step 2: Set up your site
At first blush this may seem like it’s the most daunting aspect of selling physical goods online. Nothing can be farther from the truth. Platforms like Shopify and Bigcommerce are intuitive and there are plenty of online resources to help learn how they work. Finally, outsourced workers with deep knowledge can be found on sites like Upwork.
Another strategy is to also sell on established online marketplaces like Amazon, eBay, or HOUZZ, if permitted by your suppliers. These marketplaces have a built-in audience and attract traffic on their own. This tradeoff is selling on third-party sites will also come with a fee structure you must consider. Testing products on a marketplace is often a great way to see their commercial appeal. The major limitation with this strategy is the inability to build a niche authority, as opposed to just selling products.
You can easily set up an independent ecommerce store using Shopify, Bigcommerce or another platform. These platforms make selling online extremely easy and the costs start as low as $29 per month. I know many, many people with no prior technology training who now operate online stores. My wife and I had no experience with this until after we bought our first store.
Step 3: Get your suppliers
This may be my favorite step in building an online business. I love calling suppliers. Many people do not!
You only need to remember suppliers want to sell more of their products and they don’t want to waste time. If you show them you mean business and you know their industry and products, you’ll land the supplier almost every time. Open a dialogue with them and you will learn even more that you can use with other suppliers or customers.
The best way of doing this is to build a great looking test site with terrific images and content. In addition, you need to be able to tell the supplier what your unique approach is that will help you position their product successfully. This can include unique website features like video, creating specialized content, and any other supplier specific marketing you may have planned.
Step 4: Get traffic
Once you set up your own ecommerce site, you’ll need a strategy of attracting traffic and getting customers. Most online stores market use a combination of strategies using Google AdWords and Facebook ads. You can learn the basics of using both strategies for free, but I suggest investing in more specialized training.
Other ways to generate traffic are:
- Marketing to your store’s social media audience
- Reaching out to influencers and the press
- Optimizing your listings for search engines
- And many other strategies
In setting up ad campaigns you can also get an outsourced worker to do the set up and do the fine tuning yourself. My own ultimate strategy was retaining a specialist in advertising. I made this decision after proving the store was viable and deciding I want to scale it up. I recommend this only after learning the basics and running the business on your own for a while
Step 5: Manage your orders
Once you have your store set up, managing the business is straightforward. There are 4 basic activities that take place:
- A purchase is made and you collect their payment
- You send your supplier a purchase order and your credit card details
- The supplier ships the item directly to the buyer.
- You confirm the shipment via email with the customer.
If there are any customer service issues (returns, refunds, etc.), you will handle them as a middleman between the customer and supplier.
Growing your business
Steps 1-5 are really all there is to setting up and running a dropshipping business. But if you want to grow it over the years, you’ll need to develop a longer term strategy. You’ll want to continually optimize your site and product listings for conversions.
In any niche there are trends to stay on top of. There are always new products introduced. There are also new suppliers who enter a niche.This is an obvious way to grow your product selection. You may also find other sub-niches that are a great complement to your store, like things often bought together.
If you are able to reach a reasonable level of business, you will want to consider employing outsourced help for customer service, product uploading, bookkeeping, and other jobs. When you have this up and functioning profitably, you have an attractive asset to sell or a fairly passive income generator for retirement.
That’s really all you need to know to get started on your first drop shipping business. But learning the fundamentals of how to drop ship is the easy part. Drop shipping is not a get rich quick scheme. It will take patient and diligent work to succeed. I have put in the work and can attest that the results can be amazing.
If you want to build a business that can support you through your retirement years, you can definitely do so through drop shipping, like I have.
Again, Anton Kraly’s Drop Ship Lifestyle can help with this. It digs deeper into the logistics of building a drop shipping business that scales to your abilities and requirements.