Dropshipping: what it is and how it works

Did you know that up to 33% of the e-commerce sector is already using dropshipping? This model allows you to open and manage an online store easily and without a large initial investment, making it a very attractive way to start selling online. We tell you what you need to know to start earning money with dropshipping.

What is dropshipping and how does it work?

Dropshipping is a retail e-commerce model in which the store does not have its own stock of products, but purchases them directly from the supplier each time a sale is closed and has them shipped directly to the customer. Typically, this provider is a manufacturer or wholesaler.

Step by step, the process would be as follows:

1. The merchant opens an online dropshipping store where he displays the products he wants to sell.
2. When a customer decides to buy a product, they pay the merchant directly. He sends a purchase order to the supplier and pays him for the product at the cost price. The difference between the cost price of the product and the sale price is the profit for the trader.
3. The supplier ships the product directly to the customer.
4. Finally, if there is a customer service problem, it is the merchant who is in charge of managing it for the customer.

Dropshipping is a very popular business model as it lowers the entry barriers to opening an online store. The merchant is relieved of tasks such as managing a warehouse, monitoring inventory levels, or managing shipments. All of this means lower start-up and maintenance costs, plus much more flexibility to manage your store from anywhere and offer a wide selection of products.

Of course, we must bear in mind that dropshipping also has some drawbacks. Margins are often quite low, inventory control can be difficult, and if we offer products from several different vendors, shipping logistics can be complicated. Therefore, before opening a dropshipping store, you have to be aware of these cons and think about how you are going to manage them. How Does Dropshipping Work

How can I start dropshipping and earn money?

1) Research your market

One of the most important keys to making money with dropshipping is to hit a  demanded product niche and in which the competition is not excessive. Here are some ideas to investigate:

• Consult several lists such as “the 20 fashion products to sell online” and take note of the most repeated.
• Analyze search trends with Google Trends and Google Keyword Planner.
• Once you are clear about what your star products are going to be, search for them on Google and analyze the web and social networks of the first stores that appear to get an idea of ​​the competition.

2) Choose a provider

In the next section we have shared some of the most popular providers for dropshipping in Spain, but I recommend that you also investigate some specialized in your niche. Contact the most promising ones to ask about minimum order quantities and shipping times. You can even order a sample product to see what the shopping experience is like and confirm if the quality is as expected.

3) Create your own dropshipping site

There are many options to create your e-commerce, from simple and low-cost solutions that do not require programming to more complex tools. In this article, we talk about the 20 best digital sales platforms of the moment.

In this step, you will also have to choose the name of your store for the domain. It’s best to avoid using your own name and go for something generic that you won’t have to change as your business grows and evolves. Also, keep in mind that it is easy to write and remember.

4) Promote your e-commerce

Dropshipping profit margins tend to be low, so in order to generate substantial income, you will need to focus on increasing sales by promoting your store. Here are some ideas to start promoting your business on a limited budget:

• Do content marketing, for example, a blog with reviews and user guides of your most popular products.
• Disseminate your content through social networks.
• Take care of the  SEO of your store so that it ranks well in search engines. Normally the results are more noticeable in the medium and long term, but it is an investment that is worth it.
• Run low-budget Facebook and Google Ads campaigns to see which products perform best and what your costs per click/conversion are.

5) Measure, optimize, and repeat

In the world of marketing we say that “what is not measured does not exist”, so periodically check the reports of your online store to find out what is working and what is not and optimize all your dropshipping processes more and more.