How does the dropshipping business model work?
Starting a dropshipping business can be daunting. There are a good selection of resources online, but a lot of them are from ‘Business Gurus’ that tend to try and sell you the lifestyle with gimmicks. In addition, a lot don’t teach you the method and skills to do this; in this article, I cover everything you need to know about starting a dropshipping store from scratch in 2021.
As an example, we will be talking about a store that generated over $275,000 in less than 30 days. We’ll be covering how you could easily make something comparable to this exact same store if you were to start today, including how you can loosely follow a basic template and hopefully recreate similar results.
Is dropshipping really profitable?
This article is going to be packed full of information so let’s go ahead and check out the profit margin on the store that we’ll be analysing. The date range for this data is February 20th through March 17th, where it made over $276,000 in sales.
$83,000 was invested in the product, and $158,000 was spent on ad spend, which gave a total profit margin of $29,000 on this store in less than 30 days.
If you’re looking to run a profitable ecommerce brand and make similar results to this with your dropshipping store, then four main points will go into running it successfully. Let’s call them the confirmation keys:
- Product confirmation
- Supplier confirmation
- Landing page/website confirmation
- Creative confirmation
We’re going to be taking a detailed look at each of these, so definitely bookmark this article so that you can come back later and use it as a source of information.
Product Confirmation for Dropshipping Business
So the first thing is product confirmation. The likelihood of you being prosperous with dropshipping really comes down to having a leading item. Luckily, there is always a high demand for new, trending, specialist and problem-solving products. With this in mind, you can be the supplier of those quick fixes.
Next, we need to decide how to determine which products will succeed. It’s wise to settle on items that a buying audience feels like they need. Ultimately the products that perform best are products that provide a solution to buyers problems. Then you should investigate to see if these items are trending and being bought right now. So you’re not just looking into whether an advertisement has a lot of views but whether it has a lot of positive, robust engagement.
The aim is to determine what is popular currently and then tap into that success for yourself. You’re just developing and refining it. Remember, you’re not trying to start from scratch here. There are also many free tools to help you with product confirmation.
The simplest way to see your competitors ads for free is to act as though you are a customer. Whenever you see ads on your newsfeed, interact with them on any of your social media accounts. Go through their entire sales process. Do everything besides actually purchasing their product.
This will make the social media algorithm naturally think that you’re interested in purchasing products, so they will continue to serve you a lot more advertisements. Of course, it’s totally free to take full advantage of this; just don’t be alarmed if your entire timeline ends up covered in ads.
If you’re looking for a paid tool for this process, AdSpy is a great place to start. With these ad research tools, it’s best to look at what is currently trending in the last 30 days. When you head over to AdSpy, firstly, you’re going to want to set a few filters. The first step is to set the ‘as seen’ filter to the last 30 days. You really only want to see shopping adverts, so the call to action is, ‘shop now’. Whether you use AdSpy or another advertisement research tool, these filter settings should remain the same.
Straight away, it’s going to show lots of different products that are popular right now with massive amounts of interaction. So whilst you’re inspecting these items, you’re looking for ones that draw your eye to them straight away because that is a product that will most likely also be attractive to a large audience. You have to sell a product that will be marketable to an enormous audience of people, so the broader, the better, if you want to scale up to big numbers.
This one looks good. It’s a beach towel, and this has received 2000 comments, over 5500 shares, and it’s obviously pretty popular right now.
So before you start viewing the ad, you need to ask yourself some questions whilst you watch:
- Does this answer a source of difficulty?
- Does this have a quality or feature that is impressive?
- Does this appeal to the majority?
- What are people on social media saying about this product?
Let’s go ahead and investigate further. All right, so it’s a towel. We know that it is sand proof, it’s large, and they show excellent product shots of it in use. They also offer some science behind the product and some extra features like its additional storage capacity.
Straight away, I can see that this item answers a source of difficulty. We also know that it has impressive features. However, the most powerful thing about this product is that it’s a great summer item, so we know that although it’s seasonal, it will be very popular during those summer months.
Now, let’s see what kind of comments people are making about this product. Right away, you can see people are commenting, “We love ours”, other people are saying, “It was great for the grandson to sit on”, and “I bought one of these years back”. So there is really positive dialogue about this particular item.
Next, It’s best to view and scan over the website of your potential competitor. Instantly, you can see that this is not a very good ecommerce site.
This is how you can continuously wipe out your competition. It allows what’s working in the market to continue to work for you and accommodates you in eliminating your competitors because you’re simply doing it better than them.
So we just covered product confirmation; the second thing we need to look into is supplier confirmation. This step is about sourcing the best supplier and ensuring a high enough profit margin to consider moving into the next phase. If we visit AliExpress, we can see in more detail what the profit margin could be on this item if we bought it from there.
Where to find a dropshipping business for sale
On AliExpress, they are selling this item for just over eight dollars plus free shipping. So we know that the potential profit margin on this product could be significant because the competitor is selling them for between twenty and thirty dollars.
You always want to have a substantial profit margin for any product you’re selling. So with supplier confirmation, you want to investigate the whole available market, not just one supplier platform. Keep in mind that there are many other suppliers that you can use, like CJ Dropshipping or Oberlo and lots more.
Here is the same beach towel that we found on AliExpress, but on CJ Dropshipping. The price was over eight dollars on AliExpress, and their free shipping would take 30 to 60 days to arrive; that’s 1-2 months!
If we take a look at the same item on CJ Dropshipping, the same product is just over ten dollars with free shipping, but it’s only 3 to 7 days to wait for shipping instead of 30 to 60 days. So this is what I mean by examining the entire market and doing supplier confirmation because they’ll all have their own advantages and disadvantages.
Build the Store
Now that you have investigated the product and your potential supplier, the next thing you’re going to do is build your store. There are various store types that you can try out. There are general stores, one product stores, and niche focus stores, but it’s usually best to begin with a general store theme.
This is because it allows you to sell whatever you like that’s currently trending. Therefore you don’t have to be limited to a single niche. So, for example, if the beach towel product is selling well today and a cat scratching post is doing well tomorrow, you’ll want to be able to test that out too.
Remember that your advertisements send potential buyers straight to the landing page of the product on the advert. Therefore if you’re advertising the beach towel, it’s not going to take you to the cat scratching post; it’s going to take you straight to the towel listing. It’s estimated that 95% of all traffic that visits your website from a Facebook advert will never leave the landing page.
So now let’s go ahead and look at the general store that we talked about at the beginning of this article. This store was created all-around one product, and it made $276,000 of sales. Again, this is a general store; they kept it simple, easy to browse with quality images. It even had its featured product at the top of the page so that repeat visitors could go directly to it.
Bear in mind there is no easy fix when it comes to your landing page converting traffic into paying customers. Remember, it’s not about starting from scratch but improving what’s already popular so that you do better than your competition.
That’s precisely what they did right here. They definitely kept it focused on simplicity and ensured that they featured high-quality benefits.
It’s clear that they made sure to focus on generating as much income as possible and the most effective way to do that is with upselling. It’s best to have around three upsells on each product. The first can be a quantity break by discount, for example, “Buy 2 get 10% off”, “Buy 3 get 15% off”, so you’re always incentivising people to buy more.
The second way to quickly and naturally upsell is using ‘Frequently bought together, just like Amazon. And another simple method is by using a popular tool called Sweet Upsell. Basically, how it works is that once somebody’s already purchased from you, you can say, “let me give you the chance to buy another for a 15% or 25% discount”, and it then instantly charges their card for another sale, right there and then.
You can see that it looks exactly like this, and you can try out a trial with Sweet Upsell for free, so definitely check them out.
Alright, so we’ve validated the product, we’ve validated the supplier, we’ve validated the landing page, and lastly, it’s time for the creative confirmation process. This is crucial because your creative is the backbone of your dropshipping business, it’s what helps you to stand out from the crowd, and it’s vital when it comes to winning the bid whilst advertising with Facebook ads.
So here’s what you can do with creative so that you can wipe out your competition. The first thing it’s best to do is make a pros and cons list of your competitors. Choose three competitors to start with when you’re doing this yourself, but we’re going to analyse one for this example.
I’m going to go ahead and check out that same beach mat competitor from earlier and see what we could improve on. All the while I’m viewing their ad, I’m making a strengths and weaknesses list:
- They’re showing both men and women using the product. This is important to do with every video that you have.
- The second is the 3D imagery; this always works really well in any ad you put out.
- They are showing high-quality features and benefits, not just it being sand proof, but they’re also showing that it has extra storage.
- Lastly, they’re using high-quality imagery and high-quality videos in general.
All in all, it’s a good ad, but here’s how to improve it. To start with, each ad should feature the problem and the solution it provides straight away. But, unfortunately, they didn’t do that; there’s just focusses on people lying down at the beach at the very beginning of their ad. There’s also no copy, CTA or watermark, and that’s where you can definitely gain a competitive advantage.
The next step is to either create the video yourself or pay a professional to make it for you. If you’re short on time and don’t mind spending money, I would 100% advise you to outsource this process to an agency or a professional freelancer.
It’s typically best to start by creating three videos, with only one thing being changed each time. The change that tends to produce the most results is usually the scroll stopper (the first three seconds of each advert). So you can keep the rest of the videos the same, but the scroll stopper will vary.
So now that you have a great video, it’s all about testing your product, and the best way to do that is with creative testing. You’re analysing the front-end metrics so that you can win the bid from your competition by only changing one thing at a time.
This will most likely be the scroll stopper, but you can play around with your picture, copy, CTA, anything you want, and this is important when it comes to running your dropshipping business successfully. So, where do you get your ad copy and headline? Truthfully, if you’re not an experienced marketer, it’s usually best to outsource copywriting to a professional.
After creating your advert, you can start a cold audience interest testing campaign that you structure with a CBO of £100. Inside the CBO (campaign budget optimisation), you test out around ten different interests with your one winning creative. As you move forward, it’s essential to analyse the incoming data and scale up what’s working.
Launch your dropshipping startup today
Finally, ensure that you have fantastic customer service. If you want to be able to sell on a massive scale eventually, you need to reply to all enquiries and be sure that your customers know exactly what stage their order is at in the purchasing process. This way, you can have excellent customer retention and a fantastic Facebook feedback score.
So that’s it, that’s the entire strategy. This is every single thing that you need to start a dropshipping business from scratch, just like many successful dropshippers and ecommerce brands out there. Now you know everything there is to know about starting a dropshipping business in 2021.
It can be a challenging process but hopefully, the tools and information covered here make it seem less overwhelming. If you need support with your online business and are looking to grow your sales further or even get set up, contact us today. One of our team will reach out to set up a call and discuss the support you need.