The Allure of the eCommerce Drop Shipping Model

The Allure of the eCommerce Drop Shipping Model
November 2, 2017 Liz
eCommerce Drop Shipping

Since opening Cat Lovers in June and Elegant & Organised in September in 2017, I’ve been asked many questions about the drop shipping fulfilment strategy. Cat Lovers began by stocking just 8 mug designs and was supplemented by over 200 drop-shipped gift ideas. Once I began to make sales, I would roll the profits into buying popular stock and I now stock 70 types of product. This strategy helped me to identify popular products and to then self-fund the stock purchases. Elegant & Organised is currently 100% drop-shipped and will remain so into the foreseeable future.

If you’re not familiar with drop-shipping, it’s a retail fulfilment 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

The strategy for each online store is different because the customer needs are different. Approximately 70% of buyers on Cat Lovers are buying items for gifts and a 2 to 4 week lead-time for delivery is not desirable when in a hurry. Whereas, Elegant & Organised buyers are purchasing for themselves and don’t mind the 2 to 4 week lead-time in exchange for low prices.

Through the phenomenon of drop shipping, I was able to add a wide range of products to my niche Shopify online stores. I’m dedicating this post to publishing the questions I have been asked most commonly, feel free to reach out with your own questions.

Do you think that (insert any industry) is oversaturated with drop shippers?

If you look close enough at any niche, you’ll find a lot of drop shippers selling similar or the same products, but you shouldn’t let that deter you. It would be rare to start a business without any competitors – but you do need to find a point of difference.

If you’re truly passionate about a niche, then I recommend doing an analysis of whom you think the biggest competitors are. Assess their website and social media profiles.

List down what you think they are doing really well, as well as what they need to improve on. The goal is to determine whether or not you can do better and turn their weaknesses into your strengths. Look at the website design, the product range (variety and depth), the brand promise, contact details, shipping strategy, the blog, social media profiles (content and engagement), Google/Facebook reviews and so on.

Branding is incredibly important. Branding goes way beyond just a logo or graphic element. When you think about your brand, you really want to think about your entire customer experience… everything from your logo, your website, your social media experiences, the way you answer the phone, to the way your customers experience dealing with you.

As more businesses pop-up online, it’s increasingly difficult for customers to choose which products to buy and from whom – a credible brand will win.

Is drop shipping an ideal way to start your own business to learn business management?

Not exactly, however, it’s a fabulous way of turbo-charging your learning of marketing and branding. Running a successful drop shipping business is all about curating the right type of products for your chosen customer, picking trustworthy suppliers, solid branding, creative marketing and excellent customer service. All of which you can pretty easily do on your own up to $10,000 in revenue per month.

Running a drop-shipping business won’t necessarily give you true business management experience. If we define the meaning of business management: “includes the activities of setting the strategy of an organisation and coordinating the efforts of its employees to accomplish its objectives through the application of available resources, such as financial, technological and human resources” (Wikipedia).

So unless you employ a team of people to run the business with you at some point, there are many facets you won’t have to bother with as a drop-shipper.

If you re-word the question: ‘Is drop shipping an ideal way to start your own business as a beginner?’ Then my answer is hell yes! You can grow a real business out of nothing with minimal investment (you will need money for advertising, if you don’t have any, go earn some first) and minimal risk (if a product doesn’t sell, you’re not stuck with dead stock).

Is it a good strategy to make a general drop shipping store to test and then niche down depending on where my sales come from?

It’s a perfectly acceptable strategy and I’ve heard of other drop-shippers doing this – creating a general store and finding profitable niches to split out into new stores. Just be careful with your branding along the way, stay true to it and focus on the core customer you are serving.

In saying this, it’s pretty easy to determine what products are likely to be successful looking at Amazon best sellers, how many have sold on eBay, how many have sold on AliExpress, how many searches there are using Google keyword planner, SEMrush etc. If data doesn’t exist, testing for yourself is the way forward.

You may have heard this before, and I’ve found it to be true, your store will generally have around 1 to 5 products that will always be “hot sellers” and the rest will be bought through up-selling/cross-selling. Figure out your “hot sellers” and advertising will be that much easier.

Are there any secrets in Facebook ads that I should know before starting drop shipping?

I wouldn’t call these secrets, but this is what I have learned running Facebook ads:

  • Make sure the niche is large enough, use Facebook audience insights to get estimates for the interests and locations you want to target.
  • You will need a lot of ad money, regardless of what anyone says you will waste some of it figuring out what works, it’s a reality. If you have no money, you need to go earn some first, at least $500.
  • Split test ads, don’t assume you know what will be successful, your audience will surprise you.
  • You must install Facebook Pixel; it’s so freakin’ smart once it has collected enough data, so start tracking from day one.
  • Be very careful with spelling errors and grammar, I’ve seen ads run on Facebook and Instagram that get hammered with abuse because of it. Always look professional.
  • Interact with people that comment, it’s a great way to build rapport and credibility, remember social media is a two-communication thing.
  • Enjoy the learning process. Wasting money sucks, but finding ads that work and then scaling them up feels amazing!
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Liz is the owner of Vivid Marketing and Cat Lovers. She has a well-rounded business background within small and large organisations, as well as over 7 years experience in marketing. Liz's ambition is to help small business owners promote their business through digital channels.