If you’re getting into the drop ship business model, you’ve probably wondered at one time or another:
What are the keys to a successful eCommerce drop shipping business?
How have all of these other entrepreneurs build successful eCommerce drop shipping businesses?
Can I do it too?
I started my first eCommerce drop shipping business in 2009 while still in college. I had always wanted to run my own business as I grew up and I never wanted to work for the “man” in a corporate and stuffy job. It just didn’t fit with my beliefs and the way that I was raised.
When I first discovered the drop ship business model, I was intrigued and super excited. It took me a bit to fully understand how it all worked, but once I got it, I could see a clear future for how it would allow me to live a life where I could live from anywhere I had my laptop and tap into the massive growth that the eCommerce industry was experiencing.
It’s now been over 8 years since I first started drop shipping in college and it’s been quite the journey. I made many mistakes in the process and learned a tremendous amount about what works and what doesn’t when it comes to building a successful eCommerce drop shipping business.
For some of you, this may be the start of your eCommerce drop shipping journey. If it is, congratulations 🙂 This could be the first step towards making one of your dreams coming true…just as it was for me.
In this article, I’ll outline the keys to building and growing a successful eCommerce drop shipping business.
If you stay focused on these keys, it will make the journey of building your eCommerce business much simpler and much more efficient.
The Keys to A Successful Ecommerce Drop Shipping Business
Ready to dive into they keys to building a successful drop ship business online?
Here we go…
Key #1: Finding the right drop ship suppliers to work with
You won’t build a succesful eCommerce drop shipping business unless you’re working with suppliers that are organized, can handle the drop ship business model, and care about your relationship with them.
When looking for suppliers to work with, you want to find ones that drop ship with other retailers as well. It shows that they have their operations together and you won’t have issues.
You need suppliers that will offer you decent prices so you can make enough profit on each order.
You need suppliers that respond quickly to new orders and provide tracking information on all orders.
You need suppliers that have a good return and exchange department so that if you need to set up a return or exchange, you know that you can have the customer send it back to the supplier and you’ll receive a refund quickly.
You need suppliers that have good products and take the time to create their product brands so that their products are in high demand.
When you find suppliers with these qualities, you put yourself in a position to succeed with them.
I can’t tell you how many hundred of suppliers my companies went through before we found suppliers that met all of these criteria.
We wasted so much time working with suppliers that just didn’t know what they were doing when it came to drop shipping and it made our job a hell of a lot harder.
When you are working with suppliers that get drop shipping down to its core, it allows you to become successful faster.
Key #2: Choosing the right platform to drop ship on
Drop shipping is a unique business model and leads to problems that you may not experience if you are wholesaling products and shipping them on your own or using a third party fulfillment option.
Because of that, it can be harder to drop ship on certain eCommerce platforms where there are specific metrics that you need to uphold when it comes to your orders, tracking, customer service, etc.
Amazon and eBay are prime examples. They have all of those seller metrics that you need to stay in line with and drop shipping definitely makes it harder.
But don’t get me wrong. I’ve sold over $25 million on Amazon through drop shipping. So it’s definitely possible to find success on eCommerce marketplaces, but you need to be careful with your operations so that you don’t run into issues and get kicked off.
If you don’t want to take those risks, Shopify is an amazing eCommerce platform where you can very easily utilize the drop ship business model. No metrics to meet with a platform catered to the drop ship business model.
As you get off the ground, just know what you’re getting into so that you can prepare for the potential roadblocks along your journey of growth.
Key #3: Keeping inventory levels organized
This is potentially the most important factor of a successful eCommerce drop shipping business.
You can’t run and build a profitable drop shipping business if you don’t have your inventory levels organized with your suppliers.
Here is how you look at it.
You have Supplier A. Supplier A is the one that is manufacturing and storing their products in their own warehouse. You create a relationship with them and you gain access to sell their products. They send you an inventory sheet of which products they have in stock and you list them on your store.
While you are doing this, there are also other sellers working with the supplier listing the products on their stores as well.
Every day and every week, the inventory for different products goes down depending on the sales from all of the sellers that the supplier is working with.
To make sure that you don’t get into a situation where you sell products that are not in stock with the supplier, you need an organized system to keep your inventory levels up to date.
My suggestion is to set up a schedule with the supplier where they send you their inventory levels 1x per day or 1x per week so that you can keep your levels up to date.
One of the quickest ways to get a bad reputation and negative reviews from customers is to sell them a product that you don’t have in stock. No one wants to hear that after they place their purchase.
You can avoid that by having a good system for organizing inventory levels with all of your suppliers.
If you don’t have this system, you will suffer.
Key #4: Having a good system for order fulfillment with your suppliers
Similar to an efficient system for updating inventory, you also need a good process for fulfilling orders with your suppliers.
Let’s say you are working with 5 suppliers. You get a sale from one of your suppliers, what is your process to make sure that you submit it to the right supplier and then get tracking information that you can send to your customer?
When you are setting up your supplier relationships, make sure to talk with the supplier about the best way to submit the order. What information do they need? What email should you send it to? How fast can you get tracking?
In order to build a successful eCommerce drop shipping business, you need to have your order fulfillment processes organized and ready to roll.
If you start getting hundreds of orders and don’t know where to send them, it can lead to delays which can lead to dissatisfied customers.
Customers don’t want to hear that you sent it to the wrong supplier. They want their product and they want it now.
Key #5: Negotiating prices with suppliers so that your margins are strong
When you are drop shipping with a supplier, you tend to get smaller margins than if you were wholesaling with them.
And it makes sense, right?
If you go to a supplier and you say that you want to buy 1,000 units from their inventory, they are much more inclined to give you a better discount than if you just want to set up a relationship where you MAY sell some of their products through your store.
With that in mind, you want to negotiate your pricing with the supplier as much as possible when setting up the relationship. You need to make sure that you have enough margin between the retail price and your cost that you can make a good margin for your business.
From my experience, a good drop shipping discount off the retail price is between 30% and 50%.
For example, if you are going to sell a product for $50 on your store, you should aim to get the product from the supplier for $25 to $35. That leaves you enough margin to profit and cover any other costs associated with drop shipping.
Key #6: Keeping customers happy
This should go without saying much. A key to any eCommerce business is to keep your customers happy at all times.
You cannot create a successful eCommerce drop shipping business if you don’t have amazing customer service where your customers are having a stellar experience shopping through your online store.
Put together systems and processes so that emails and inquiries are responded to within 24 business hours and you solve issues quickly.
Create policies by which you can offer partial refunds for mistakes that you or your supplier make to keep your customers happy.
Build a brand that caters to the customer so that their shopping experience is as positive as possible.