Gone are the days that valued secured government jobs. Studies show that the current generation is reluctant to work for a company that isn’t in sync with their values and beliefs. Everyone wants to be their own boss and create a niche for themselves.

In the current market scenario, the primary preferences that everyone would be looking for to start a new business venture are,

  • Location flexibility
  • Less capital investment
  • Least overhead expenditure
  • Easy to start
  • Easy to test and scale

So the best plan is to start a marketplace business. The current market observation proves that setting up an online store is the best bet. And if you want to avoid the hassles like,

  • Developing and producing products
  • Tracking inventory
  • Setting up warehouse
  • Managing shipping

Then drop shipping model is your answer.

Look like the exact criteria’s for a perfect “how-to-get-rich-quick” scheme doesn’t it?

But as the saying goes “Don’t judge a book by its cover”, there is a lot that goes on behind the scenes. Let’s swoop in and see how to set up a drop shipping website.

Studies show that about 33% of global online marketplace stores use drop shipping as their business model. Amazon used a drop shipping method for more than 34% in 2011. And you can only imagine how the numbers might have grown ever since.

Not only are the business owners profited, but the manufacturers who participate in drop shipping are 18% more profited than the ones who rely on conventional channels, since they’re not as dependent on the inventory space of retailers.

What is drop shipping and why has it gained the spotlight?

Drop shipping is a supply chain management method or an order fulfilment strategy where the business owner, retailer does not take responsibility for the inventory but instead transfers the customer’s orders and shipment details to either the manufacturer, another retailer, or a wholesaler, who in turn ships the goods directly to the customer.

In simple terms, drop shipping is a business plan which allows the selling of products they’ve never handled, from destinations they’ve never visited; to consumers they’ve never met.

Before diving in on the technicalities, let us understand the cons of this business plan as well. This will help us be fully informed, prepared and start in the right direction.

  1. Low profit margin: The majority of retailers make their profit on the difference between the wholesale and retail price. But, given the low investment capital and minimum expenditure there are many competitors selling the same goods for extremely low prices to gain customer base. This will in turn create pricing issues which will lead into low profit inflow. Hence choosing a viable niche of products is of utmost importance.
  1. Inventory issues: It is easier to keep track of stock when your own inventory is being handled. But when you’re sourcing from multiple warehouses/ retails/ manufacturers, which are also fulfilling orders for other merchants, inventory can change very frequently. For this you will require robust multivendor marketplace software which can handle all these complexities.
  1. Shipping issues: Running an online store business is not feasible with just one shipping partner because what a customer might have ordered need not be from one single producer. This leads to shipping complexities. Shipping from each of the locations might cost heavily on your pocket.
  1. Supplier issues: You will be held responsible for every little detail that goes wrong in delivering the right items to your customers. Mediocre or low-quality products, missing items, botched shipments, low-quality packing and the list goes on. This will not only frustrate the customer but also damage your business’s reputation.
  1. Limited customization: The products that are sold are not our own and hence there is very little room for customization. The suppliers have total control over the products. There may be a few suppliers who will accommodate your requests but you will have to comply with a minimum order quantity to make it feasible and affordable for the manufacturer as well. And this will lead to a large cut from your earnings.

There is a great deal of notes to take into consideration before you jumpstart your business. You will need an authorized permit like seller’s permit, tax license and much other documentation.

All the legal apart, the steps to start your online business are,

  • Selecting the right niche: This is one of the most important steps that can make or break your business. The points to mull up on in your mind while selecting a product are,
  • Think from a customer’s point of view. What might you like to buy?
  • Research on what’s selling online the most
  • Identify your market; start off by planning and selling for a smaller group of customers. This will help you analyze and drastically reduce your margin for losses that can be incurred
  • Once you have finalized on your niche/market see what the media engagement is in that niche
  • Observe your competitors. You could start off by studying the likes of amazon, eBay and many others to see what technology they use, what business plan they follow, how their responses to other nuances is like – order refund, exchange and others. Once you have an idea, you can observe your competitors in the same niche as yours to get a better plan, and do’s and don’ts.
  • Evaluating your profitability: Given the capital investment is less; you have to plan in such a way that your chosen niche will actually prove profitable.
  • Finding the right supplier: A core part of your business is the supplier. So choosing the right supplier for your chosen niche is a pivotal step. Things to keep in mind while finalizing on your supplier are his/her-
  • Experience
  • Expertise
  • Fees
  • Shipping time
  • Quality of goods
  • Building your website: With all these ready, all you now need is an online platform which will put you in touch with your customers. This is why you need sound multivendor marketplace software. Starting from a domain name, hosting you will need a whole functioning website to actually put all your plans into action. There are a lot of ways in which you can build or even buy your own website.
  • Building your own website from scratch: If you are technically sound or can afford a tech team you can build your own website, just the way you want it. You can also use free software’s like WordPress which will be cost effective as well.
  • Using SaaS platforms: You can also choose a marketplace software vendor who provides you with a ready to use platform on a monthly or yearly fee basis. The only drawbacks being,
  • You will not be able to customize further
  • Not an open source coded platform and hence for every technical glitch you will have to reach out to the vendor
  • Using Turnkey solutions: Most feasible way to build an online store is by using the turn key solutions. The turnkey solutions company will provide you with ready-made software you desire through which you can start off your business. Here the difference is, it is an open source code. Which means you will be given the code to your marketplace platform as well. They can also help you customize the website according to your needs at an affordable price. This is a onetime payment solution.

Now that you are fully geared to start your own business and be your own boss, we wish you the Best of Luck!

Infographic created by FMH Conveyors – flexible roller conveyor

Author By-line:

Jessica Bruce

image 1

I am a professional blogger, guest writer, Influencer & an ecommerce expert. Currently associated with ShopyGen as a content marketing strategist. I also report on the latest happenings and trends associated with the ecommerce industry.

Follow me on Twitter @Jessicabruc (https://twitter.com/Jessicabruc)

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