HOW DOES DROPSHIPPING WORK AND HOW DO YOU MAKE MONEY FROM IT?

Have you ever dreamt of having your own business but don't have a big budget to start? But you are determined, and you feel like you can make eCommerce work if given a chance. If this is you, then you’ve come to the right place. We have an answer to your dilemma, and that is via dropshipping.

A study from Adobe claims that Covid 19 gave e-commerce a boost of $183 billion in sales, and 2022 is expected to be the first trillion-dollar year for e-commerce. These statistics make it evident that it has never been a better moment to start an online business.

With the increase in online shopping, there will also be an increase in business opportunities.

One of these opportunities is Dropshipping.

With the help of this article, you will learn everything about starting your own dropshipping business and making money with it.

While the internet has created many new opportunities for small businesses, it can also be quite daunting. One of the most popular ways to start an online business is through dropshipping. But what exactly does that mean? And how do you make money with it?

The basic idea behind dropshipping is to sell products without having inventory on hand, which means there are no costs associated other than shipping fees, advertising costs, and the price of the products themselves.

Dropshipping is a business model that has been around for quite some time. It does not require a lot of risk and capital because it doesn't involve stocking any physical products. It was made popular by companies like Zappos and others who were successful with it.

You already know that in the classic business model, the entrepreneur has to buy and store inventory, which can be pretty costly. The basic idea behind dropshipping is to sell products without having inventory on hand, which means there are no costs associated other than shipping fees, advertising costs, and the price of the products themselves.

The dropshipping business model is different because it operates on a "storefront style.”

Here is a simplified outline of the dropshipping process:

1. You market a product to attract customers;
2. Customer visits your site and purchases;
3. You buy the product from your supplier and send them your customer’s details;
4. Your supplier sends the product to your customer.

As you can see, the product doesn’t even go through you.

The customer is purchasing a product from your site, and you are buying it from someone else. Your profit is the markup between what you paid for the wholesale item and your own retail price.

It is pretty fair for you to profit from the markup because what you are doing is providing a way for customers to purchase products at your site.

The markup you place on the product should at the very least follow this formula:

Product Price =

Original Price of the Product

+ Marketing Cost of that Product

+ Operational Cost per Unit

+ Intended Profit

The Operational Cost per Unit is the cost of running an online store divided by how many units of a product you expect to sell for the month.

The Intended Profit, of course, is how much you want to earn from selling the product. Depending on the original price of the product, this could be anywhere from 30% to 100%.

Why wouldn't your customer just buy the product themselves from your supplier? They would save money, and it is the same product!

True. But remember, your service is (1) information and (2) convenience.

Initially, your customer wouldn’t know of the existence of such a product without your help. They wouldn’t know how they would benefit from the product without you showing them.

Plus, they can purchase without having to go through any trouble of searching around on other sites, spending hours in research.

Having organized all the items in a targeted niche store gives customers a sense of comfort, knowing they are buying the right product for their needs.

You have done all the work for the customer, and you get to make some profit off of that.

...your customer wouldn’t know of the existence of such a product without your help.

Now that you know how dropshipping works, you might be wondering how much money you can potentially make? Well, that is difficult to answer.

It all depends on the product and how many are sold in a day. Some people work on their dropshipping business as a side hustle and earn hundreds of dollars a month. Others work on their dropshipping business as a full-time job and make thousands of dollars per month.

The thing with dropshipping is that it can take some time to get going, but once the ball starts rolling, things will start to become easier.

The profit margin will depend on the price of your product and shipping rates. If you want to profit from selling shirts, for example, with a $25-$35 sale price, it would be best for the purchase cost to be not more than $15, including all costs such as shipping and packaging, and marketing. This way, you can make a $10-$20 profit per shirt sold.

Suppliers will be your key point in the success of your business because they are selling to you for wholesale prices and in a smaller volume. You will make money from the difference between what you buy the product for and what it sells at, minus any marketing costs that need to be covered by the profits as well.

Frankly, regarding potential earnings, there are no definite answers. It will depend on the volume of your business, how much you spend on marketing and advertising, as well as a few other things.

But dropshipping is a scalable business, which means the sky's the limit when it comes to potential earnings.

Dropshipping is not a get-rich-quick scheme, nor does it guarantee success for everyone who endeavors to start this type of business. But as they always say, if you want to succeed, you should look into other people (or businesses) that have already seen success in your arena.

So here are some examples of dropshipping businesses that have achieved massive success:

While this store doesn’t focus on a particular niche, their best sellers fall under home furniture and decorations.

2. Pet Boutique Co.

One look at the business name, and you already know what this webstore is all about -- pet-related products.

3. Meowingtons

This is a great example of “niche-fying” your store or going deeper into one category and focusing on a specific angle.

4. Dude Gadgets

This dropshipping store aims to focus on vehicle-related products and sporting goods, such as car blemish-removing products, car-specific cup holders, bike reflectors, and more. However, it does include unrelated products in their store, which means their “inventory” depends on what’s selling best at a specific time.

Do you know what is common among these top-performing dropshipping stores? It’s their advertising strategies that focus on social media and native advertising.

On a related note, read this article on the Top E-Commerce Trends for Native Ads.

It may be easier said than done, but with the right strategy, you can succeed in dropshipping, much like the examples we shared above.

You may have heard many people saying it is easy to start a dropshipping business, but the truth of the matter is that it does not come without hard work. Like any type of business, it requires time, commitment, and the right strategy.

It is also important to note that success will not come overnight. It may take some time for you to grow your business, and it could potentially continue being a side gig, but that does not mean that the opportunity is lost. Having the right mindset is crucial because it will help you stay motivated and focused.

While learning all about dropshipping so you can understand this business style more is vital, taking action is much more important. Don’t let the vast amount of information available online prevent you from starting. In short, don’t go into analysis paralysis.

Start by signing up for Anstrex’s Dropship spy and automation tool. Play around with it so you can better understand how it works, then start getting serious and look for products that you think might work as a first product to launch.

Try it now while the tool is still in Beta! It will surely be your partner in success.