Can you make a million dollars dropshipping?
So you’ve heard that Dropshipping is the new form of ecommerce, and it’s a great way to sell online while maintaining a low cost of entry. But what exactly is dropshipping? How much capital do you need to start a dropshipping business?
Do you need to pass any special licenses or certification in order to dropship or will any old T-shirt business do? Do you need to stock inventory at all? If so, how much money can you afford to spend on inventory upfront? What kind of inventory should your business focus on and why? Are there any downsides to starting a dropshesting business that we haven’t discussed yet?
What is Dropshipping?
Dropshipping is a type of retail fulfillment method where a store that doesn’t hold any inventory sells items that are stored and shipped by a third party. The store owner purchases product from a wholesaler or manufacturer and has it shipped directly to the customer as soon as an item is ordered. The retailer doesn’t keep inventory on hand and is only responsible for shipping the product.
Dropshipping is a form of fulfillment that has existed for decades. It became popular as an ecommerce model with the rise of the internet. Dropshipping is often confused with other terms, like third-party fulfillment, merchant fulfillment, and inventoryless retail.
The main difference between these models is who holds the inventory and is responsible for shipping items to customers.
How Much Does Dropshipping Cost?
The majority of dropshipping businesses don’t require a large initial investment. Most dropshipping retailers will spend between $500 and $3,000 on initial inventory if they’re starting with a product assortment that specializes in a few different types of items. The main costs associated with starting a dropshipping business are for startup marketing expenses, and shipping costs to fulfill orders.
For example, if you were to start a T-shirt dropshipping business, you would need to pay for a T-shirt design, the cost of printing the shirts, the cost of getting the shirts to your customers, and the cost of the website or app you use to sell the shirts.
Do You Need Special Licenses to Dropship?
There are no special licenses required to start a dropshipping business, and it’s not a closely monitored industry. There are also no laws that specify how much capital you have to have in order to start a dropshipping business. That said, there are a few things to keep in mind when starting a dropshipping business.
One thing to note is that your business may not be accepted by credit card processors if you don’t have a valid business address. You can get a virtual address from a company like DHL or FedEx. Keep in mind that you will still have to pay for the address and service even though you don’t actually use it.
You may also run into issues with drop shipping wholesalers when you’re starting out. That’s because wholesalers often require retailers to have a certain amount of capital in the business in order to get approved to purchase their products.
Is there any risk involved in starting a dropshipping business?
If you’re careful when choosing a product assortment and dropshipping wholesalers, then it’s unlikely that you’ll get scammed or that your business will be a victim of counterfeit products. That said, there are some instances when you could get scammed.
For example, a distributor could stop making a product that you’re selling, or demand that you stop selling the product because you don’t have the necessary licenses. There’s also the risk that a wholesaler could refuse to pay for products you sell, leaving you liable for payment. As with any business, there is some risk involved, but if you’re careful, you can mitigate a lot of those risks.
How much money should you invest upfront?
When starting a dropshipping business, the amount of money you invest initially on inventory varies depending on what product assortment you choose to start with.
For example, if you were to start a T-shirt dropshipping business and specialize in only plus-size T-shirts, you would only need around $1,000 to $2,000 worth of initial inventory. That’s because plus-size T-shirts are less expensive to stock than regular T-shirts.
You would also only need around $100 to $200 worth of startup marketing expenses. That’s because you can market your T-shirt business through Facebook and Instagram ads and would only need one or two websites or apps to sell the shirts.
Which Products Should You Focus On?
One of the first things you need to do when you’re considering starting a dropshipping business is to decide what product assortment you want to focus on.
You can start by researching product categories that are in high demand and then finding products in those categories that are undervalued by other retailers.
That said, you should also be sure that the products you sell are easy to source and drop-ship.
Dropshipping is a great way to start a business with low overhead and virtually no investment. That said, there are some risks involved with starting a dropshipping business. It’s important to be careful when choosing which products to sell and finding dropshipping wholesalers. It’s also important to keep in mind that in many cases, dropshipping retailers are liable for customer service and returns.