How to Increase Your Dropshipping Success Rate
These days, more and more people are shopping online, which means that one of the best ways to be an entrepreneur is to become an online retailer. However, rather than managing and maintaining vast numbers of goods, the easiest way to handle your business is by dropshipping.
However, while dropshipping has quickly become the preferred method of online selling for small brands, it’s not necessarily a one-way ticket to success. In fact, many dropshipping sites fail because they don’t understand how to make it work.
Thankfully, we’re here to help. We’ve compiled a list of the four steps you need to take to ensure that your dropshipping business makes it past the first year. All you need is a smart business model, a lot of patience, and the right tools.
Related article: How to Dropship Like a Pro – An In-Depth Look at Dropshipping
What is Dropshipping, and Why is It Hard to Make a Profit?
Traditionally speaking, running a retail store meant that you had to keep products on hand and then sell them directly to the consumer. For many entrepreneurs, however, it’s not feasible to buy a massive amount of inventory. First, it can be prohibitively expensive to do so, and second, it comes with a variety of logistical problems (i.e., where do you store everything?).
Fortunately, today’s e-commerce stores don’t have to worry about having inventory. Instead, they outsource the fulfillment side of things to a third party. This is called dropshipping. Rather than packaging and mailing a product to a customer yourself, the manufacturer does it for you, and you keep a profit.
While it may sound easy, the fact is that your markup is going to be lower than you think. In most cases, drop shippers have incredibly tight margins, thanks to factors like:
- Stiff Competition – you’re going against a ton of other businesses, including titans like Amazon
- Dropshipping Costs – most manufacturers have tight margins of their own, so they increase shipping costs for smaller orders.
- Lack of Oversight – since you’re not the one handling the products, you can never know the condition of them. If you use a low-quality drop shipper, your customers will get incorrect or damaged goods.
Tips for Increasing Your Dropshipping Rate
Although the success rate for dropshipping is relatively low, it’s not impossible to make the process lucrative for your online store. Here are the best steps to take to ensure that dropshipping will pay off.
Step One: Focus on the Right Niche
The fact is that there is no way you can compete with department stores and Amazon. They have far more inventory, and they control the means of production and distribution. Instead, you want to narrow your vision to a specific niche, like pet grooming products.
When trying to determine the best niche, consider these factors:
- How easy is it for customers to obtain your products locally?
- What is the demand for your product category?
- What is the competition like?
- Do these products work well for dropshipping (i.e., not perishable or fragile)?
The other benefit of focusing on one niche is that you can make your marketing strategy more effective. You can choose several keywords related to the market so that you rank better in searches, boosting your presence online.
Step Two: Pick High-Profit Items
Typically speaking, the markup on drop shipped items is between $2 and $5, depending on the product and the manufacturer. Another factor that can inflate the price is the difficulty of shipping an individual product. For example, if your item needs extra packaging to arrive safely, that will increase your costs, which can lower your profit margin.
To help alleviate this problem, focus on selling mostly high-profit products as much as possible. Some examples include sleepwear, activewear, outdoor furniture, pet care supplies, and phone accessories. Do some research within your niche to see what can help your bottom line the most.
Step Three: Find the Right Supplier
In most cases, you won’t see or touch the products you’re selling. Ideally, though, you would have a few of your hottest-selling items on hand, just in case of a backlog in inventory. The worst thing that can happen for your business is a delay in shipping. Behemoths like Amazon have made consumer demand for fast shipping the default, which means that you can’t afford any setbacks.
The best way to alleviate this issue (along with product and delivery quality) is to find the right manufacturer. Compare different companies and reach out to discuss your business plans. Think of this as building a working relationship – if both sides get a good deal, you’re much more likely to succeed.
An excellent method for testing a supplier is to order a few products to see how well they handle the delivery. If everything arrives promptly and in good condition, reach out and establish a connection.
Step Four: Improve Your Website
Once you have everything else in place, the last step should be to upgrade your digital storefront. The fact is that the flashiest site won’t make a difference if your orders are delayed or products show up broken.
When it comes to improving your website, here are a few tips:
- Optimize Everything – use your list of keywords to ensure that product descriptions, URLs, and title tags are optimized.
- Use High-Quality Images – don’t rely on stock photos from the manufacturer. This is another reason to order your top-selling items; so that you can take your own pictures.
- Create Story-Rich Descriptions – it’s all too easy to make your products sound dull and lifeless. Don’t focus on the features; focus on how it will help your customers solve a problem. Weave a narrative into the description as much as possible.
- Streamline Your Checkout Process – if customers have to jump through too many hoops to buy something, they will likely seek out a competitor. Remove any unnecessary steps and experiment with a variety of updates to see what works best.