Many sellers see dropshipping as the perfect ecommerce business model and it’s not hard to see why. You don’t have to purchase stock in advance, have a warehouse or even ship orders. In theory, all you have to do is find products, list them for sale and send the orders to your suppliers. Sounds like the ideal business, right?
Well, in reality, it’s a lot tougher to build a successful business using dropshipping than sellers think. The process might seem simple, but there’s a lot of challenges. Unless you’re highly efficient it can be very easy to make mistakes.
To find out what it takes to build a successful dropshipping business we spoke to Connor Gillivan, who has sold over $25 million of products using dropshipping. Connor has been running ecommerce businesses since 2009 and is also the co-founder of ecommerce outsourcing company FreeeUp.
We talked about the reality of dropshipping, the methods that Connor used to build his business and whether using the same approach could still be successful on Amazon today.
What dropshipping is really like
There has always been a stigma surrounding dropshipping that it’s a “get rich quick” business model. There are a lot of websites out there saying they’ll teach people how to make stacks of money using dropshipping.
When Connor started his business, he kept the information he’d seen in the back of his mind. But, he also knew that starting a business is always difficult, regardless of the model, and that nothing was going to be easy.
What Connor learned was that dropshipping is like any other ecommerce business model. It doesn’t matter whether you’re wholesaling, private labeling or dropshipping, there’s a lot that goes into it. There’s plenty of moving parts and you need to become an expert at dropshipping in order to succeed.
It’s not just a case of spending an hour here, and an hour there and making a quick profit. You really need to get into the operations of:
- Developing supplier relationships.
- Making sure the product is delivered to customers quickly and accurately.
- Providing great customer service when it’s needed.
There’s a lot of steps and it’s a difficult business to master. But, Connor believes it is one that is totally manageable if you take the time to learn it.
The business model that made $25 million in sales
When Connor got into dropshipping, he didn’t really know anything about the business. He and his business partner were interested by the Amazon marketplace and started buying and selling textbooks at first. But, once they learned about dropshipping, they were really intrigued by the whole idea of never having to touch the products.
Over the years, they created systems and processes that would help them build strong relationships with suppliers. That was the key to their success.
The first step was to find suitable brands, reach out to them and talk to their wholesale department. They would explain that they had:
- A great reputation on Amazon
- Robust systems to process orders
- A strong team handling customer service
Their goal was to prove that they were reputable and could be trusted to sell that company’s products on Amazon.
They were primarily interested in U.S. suppliers who already had a good brand for their product. This resulted in them working with a lot of manufacturers that sold toys, baby products, home goods and sporting equipment.
In essence, the strategy was to seek out a lot of suppliers that other dropshippers weren’t using, and list a lot of products. Then they would slowly eliminate the products that weren’t selling and keep the products that were.
Will the same strategy work today?
This method worked out really well for Connor back in 2010, as Amazon was growing its marketplace and there were far fewer third-party sellers. A lot of brands didn’t understand what Amazon was bringing to the ecommerce space, and they needed educating. Connor’s business really tapped into that, approaching brands to help them sell more online through Amazon.
There are still dropshipping opportunities today. But there are more sellers to compete with and fewer brands whose products aren’t already selling on Amazon. The best route now, Connor says, is to start with product research instead of supplier research. Find ASINs you can really focus on and push hard to build sales, while also looking for similar products.
He recommends looking for products with high bestseller rankings but fewer than five sellers. This indicates that if you can create a good relationship with a supplier to dropship this product, then there is room for you to become the top seller. Once you have one successful product, repeat the process to find others with the same potential.
Watch our interview with Connor Gillivan here or read on below…
Four tips for building a dropshipping empire
1. Find a mentor
If you’re new to dropshipping it’s a good idea to find a mentor. Ideally, you want to find someone that has done it in the past, or is still doing it now, and who is willing to share some of their secrets and strategies with you.
One of the most difficult parts of running a dropshipping business is getting it all set up. So, if you can find a mentor who can help you do that, you’re going to be able to move a lot quicker than if you were doing it alone.
Putting in time at the start to find a mentor who’s going to be able to invest some of their time in you, can really help you grow your business in the long-term.
2. Use trial-and-error
The best way to approach dropshipping is with a trial-and-error attitude – it’s very unlikely that you’ll find the perfect supplier first time. It’s going to take time, a number of different suppliers and a number of different products before you hit on a setup that works for you.
Go into the first three to six months with the aim of trying out five different product categories. Likewise, try out suppliers of all different sizes and maybe even from different countries.
Once you find what works, focus on those products and suppliers. But as your business continues to grow, don’t be afraid to try new things or take new approaches, even if it doesn’t work out.
3. Keep stock levels up to date
It doesn’t matter whether your supplier is in the U.S., U.K. or China, one of the most crucial parts of running a dropshipping business is making sure you have your supplier’s up-to-date inventory levels at all times. If your stock levels are not accurate, things can go wrong very quickly.
For example, you run the risk of getting orders for products that are actually out of stock. This puts you in the situation where you can’t fulfill orders. Cancelling orders affects your Amazon Cancellation Rate. It’s also bad for your relationship with the supplier, if you keep placing orders they can’t fulfill.
Inventory mistakes are a common reason why sellers turn their back on the dropshipping model. So, have a manual process (or use software) to make sure that all the products you are listing are actually in stock with your suppliers.
4. Outsource repetitive tasks
The dropshipping business model has a lot of moving parts. There’s product research, finding suppliers, building relationships, listing products, optimizing those listings, customer service, managing inventory levels and many other necessary tasks. As you expand, it’s going to take a lot of your time to manage the entire process. In fact, once you get to a certain level, it can be impossible to handle without getting help.
So, once your business is up and running, Connor suggests that you start looking at which tasks could be outsourced to virtual assistants or freelancers. These could be in your own country, or overseas. What’s important is that they are people who have experience of working with Amazon or eBay stores.
Ultimately, outsourcing parts of the process frees up your time, so you can stay focused on growing the business and using your energy on the areas where you can make the biggest impact.
Selling online is never easy
Dropshipping may seem like the perfect business model. But, as you can see from Connor’s experience, there is far more to it than merely listing products and forwarding orders – there’s a lot of hard work involved.
Whether it’s finding the right products, building relationships with suppliers, having well-optimized listings or keeping tabs on inventory levels, you need to do it all if you’re going to be successful.
Don’t let this put you off though. Yes, there is a lot of work involved, but there is with any business. The key is to take your time, study the business, try things out and never be afraid to ask more experienced sellers for help.
It’s not a “get rich quick” scheme, but if you put the effort into building a dropshipping business the right way, you’ll reap the rewards in the long-term.