Drop shipping is one of the most popular ways to make money in Malaysia. The reason for this is because when you drop ship, you do not need to buy any products. Instead, you take ready made products, sell them and earn an affiliate fee. This means that you can start making money drop shipping even if you do not have money.
Though you do not need much money to start, you do need basic business skills to be successful.
In this post, I will explain to you what drop shipping is and how you can finally make money drop shipping.
Are you ready?
First, What is Dropshipping?
An arrangement between a business and the manufacturer or distributor of a product the business wishes to sell in which the manufacturer or distributor–and not the business–ships the product to the business’s customers .
As a drop shipper you do not have to carry any products. Your main role is to market your supplier’s products and collect payment from your customer. Once your customer has paid, you will forward the order information to your supplier and pay them for the products ordered. When your supplier receives the order information and payment, they will package and ship the product to your customer.
You can see how this works in the graphic below:
So How Do You Make Money as a Drop shipper?
Like any business, you make money by selling to your customer at a price higher than that you pay to your supplier.
The only difference is that as a drop shipper, you don’t have to buy and keep products. All you have to do is show your customers what products are available and help them make a buying decision.
Your main role as a drop shipper is to market your products and provide customer service.
For example, say today you are a drop shipper for perfumes. Your supplier sells you the perfume for $10. You put the perfume for sale on Instagram for $13.
Say someone decides to buy the perfume from you for $13. They bank in $13. You then forward their order information to your supplier and pay your supplier $10. The difference, $3, is for you to keep as profit.
Though the drop shipping process appears simple, not everyone will succeed in it. This is because they are making mistakes that stop them from achieving their financial potential.
In the next section, we will explore these mistakes. By the end of the section, you will be well aware of the mistakes you should avoid to succeed as a drop shipper.
Let’s have a look at them now.
Common Novice Drop shipping Mistakes
#1 Believing that drop shipping is passive income
Like franchising, some people believe drop shipping can help them generate passive income. They think, ‘Since other people are helping me to send the products, I don’t have to work hard.’
This is not true.
Like any business, building a drop ship business is hard work. To get the results you want, you must be ready to put in the time and effort to get it.
#2 Believing that you don’t have to invest money
Although you do not need a lot of money to start drop shipping, that does not mean you do not need any money at all.
In reality, you will need some amount of capital to start. As a drop shipper, you need to view yourself as a marketing agent. Your expenses will be the same as a marketer. This may include social media advertising and graphic design fees. This is especially true when you do not have graphic design skills and rely on others to get it done.
Even if you use a service like Fiverr, the lowest price for a graphic design is $5!
#3 Using the same generic photos as your competitors
One of the biggest mistakes drop shippers make is that they use the same generic product photo as other drop shippers.
Of course, when customers see the same exact photo, all they will look at next is the price. They ask themselves, ‘Is this seller cheaper than the other one?’
If not, they move on to the next one.
With not much to differentiate yourself from your competition, you have to aim to be the cheapest. But when you reduce your price, you also reduce your profits. At times, too much price competition may even mean you do not make any profit from your sales.
Avoid this mistake by investing some time and effort in producing unique photos.
#4 Not willing to invest time learning marketing
Since most drop shipping in the crowded online space, you need to know how to use online marketing to stand out.
With good online marketing, you can reach thousands of customers from your mobile phone. When you have a large audience, you will have a higher chance of making sales on your products.
Even if you have no experience in online marketing, it is easy to learn. You can learn them online from online marketers such as Neil Patel. Or you can join online marketing workshops if you like in-person classes better.
Don’t be the drop shipper who builds a website or Instagram account and expect customers to come. While that may have worked ten years ago, it will not work today.
It is no longer enough to just have an online presence. To succeed, you must know how to put your brand in front of your customers.
#5 Not talking to other drop shippers
Like any business, building a drop shipping business is hard. To survive, you need to connect with other drop shippers.
Other drop shippers will likely be able to give you advice on the business problems you are facing.
You can connect with other drop shippers by joining business communities. Other than that, you can reach out to drop shippers one by one.
No matter how you do it, building your network of drop shippers will become an asset in the long-term.
#6 Choosing the wrong supplier
Even if you do everything right, choosing the wrong supplier can doom your business.
While your supplier handles the ‘behind the scenes’ work, you are the face your customers see. If they have the habit of sending the wrong products or sending products late, you will be in trouble.
That is why you need to work with a supplier whose work ethics you can trust. You can test them by ordering a few products from them yourself or getting your friends to do so.
Steps to Creating a Successful Dropshipping Business
Now that you know the mistakes people have made, let’s move on to how you can create a successful one.
Step #1: Get your motivations correct
Know how much you need to work
As I mentioned before, drop shipping is not a way to make passive income. Like any business, you need to work hard to build your drop shipping empire. Once you have set your mind to do whatever it takes to succeed, you likely will.
Sell only what you know
If you are a man with no interest in beauty products, you may not be able to sell products. No matter how lucrative the business may be, you may still fail if you do not know how to best serve your customers.
Step #2: Pick the right supplier
Picking the right supplier can determine whether you succeed or not. Here are a few criteria you can use to decide whether you want to work with a supplier:
Are they local?
People who shop online expect to get their products fast [source link]. Though overseas suppliers may supply you cheap products, they fail to deliver fast.
If you want them to deliver fast, then the sale is no longer worth it. The cost of shipping will make it hard for you to earn any profit from the sale.
Pick a local supplier so that your customers can get their products fast. Fast delivery will encourage them to order from you again.
Can they send the right products on time?
As a marketer, you are only half the equation. Your supplier can destroy your hard-earned reputation by making a mistake.
As a minimum requirement, your supplier should be able to send the right products quickly to your customers. In Malaysia, the expected delivery time is between 2-4 days. More than that, the customer may consider ordering from another seller the next time around.
A good supplier will be able to deliver the right products within the expected time frame 99% of the time. You do not want to work with a supplier who is sometimes fast and sometimes slow. If they do this, you may end up losing half your customers.
Good profit margin
The main purpose for you to start drop shipping is to gain profits. Before you work with a supplier, ask yourself, ‘Is the cut they give me worth my time and effort?’
For example, if you are gaining 15% per sale, is it worth selling? Or if you are only gaining 5% per sale, is it worth selling?
There is no right or wrong answer. The answer depends on the situation. You need to do calculate your costs and weigh it against the money you stand to make. If you get an overall profit, then proceed with the supplier. If not, feel free to look for another supplier.
The key here is to not settle for a supplier who gives you a cut that is too small for you to sustain yourself.
Provides good support in case of wrong product or faulty product
You must be aware that bad things can and do happen in business.
Your supplier must be one that:
- has the experience to fix any problems that come along the way
- willing to do it at their own cost – if you had to fix the problems at your cost, it would eat into your profits. Remember that you are a marketing agent. Your fee only includes your service as a marketing agent. Your supplier must do everything else.
- you can communicate with them in real time to have the problem fixed… it would be bad if you had to wait for many days for the supplier to get back with you on the issues.
Suppliers who are unwilling to provide support can be detrimental to your drop ship business as the profit margin they provide you may not be sufficient to cover the cost of rectifying faults.
Alternative: Sign up with an agency that already has drop shippers within its network
It can take a lot of effort to look for suppliers. You can instead sign up with a local drop ship agent who has put all the suppliers in one place.
These are websites such as Kumoten which lets you sign up for free.
The advantage is that you can pick and sell from the resources available to you. The disadvantage is that you are limited to the products that they have in their system.
For a healthy mix, I would recommend that you sign up for these networks as well as source products outside of websites such as Kumoten.
Step 3: Create a Brand
Many drop shippers overlook this step of creating a brand. They spend little or no time thinking about what their brand is about.
Without a brand, your customers are likely to buy from a cheaper seller when they find one. To prevent this from happening, you need to create a brand your customers can identify with.
- What makes my brand different?
- What benefits can I give my customers that my competitors cannot?
These questions will help you create your business’s unique sales proposition (USP). Your USP will be where you can form your brand.
Step 4: Become a Marketing Expert
As a drop shipper, you must be a marketing and customer service expert.
If you do not have any idea how to do marketing or customer service, it helps to go online and learn.
Here are some good resources to help you learn.
Drop shipping is the same as any other business. To be successful you need to be good in building and sustaining your business.
Step 5: Take daily action
The more time and effort you put into your business, the faster you will see results. If you want to make serious money from drop shipping, you need to look at it like a full-time job.
It is not realistic for you to expect a high income from drop shipping if you only work on it a few hours a week. If you start an Instagram account but only open it to do marketing once a week, you will fail.
Most successful drop shippers work 100 hours a week at the beginning of their business to get it up and running.
Like any other business, the only way to succeed is to put in your time and effort. If you let too many excuses get in your way, your drop ship will fail.
Step 6: Measure
“If you can’t measure it, you can’t improve it.” – Peter Drucker
Measuring your performance can mean the difference between succeeding or failing. But most drop shippers don’t do it because it is hard, especially at first when the numbers are small.
To separate you from failed drop shippers, you need to start measuring from Day 1.
Create a spreadsheet to track (in order of importance):
- Your monthly sales revenue – is it increasing or decreasing?
- Your average order size
- The number of followers you have on your social media accounts – is it increasing fast enough?
Only when you measure from month to month can you see if you are making progress (or not). When you find that you are not making progress, find out why. Then make changes to your business and measure it again to see if your changes help.
Drop shipping is a popular way to start a business. This is because you do not need a lot of capital to start. Your supplier will package and ship your customer order. All you need to do is sell.
Though it may seem simple, many still fail to make a sustainable income through drop shipping. This is because they make common novice mistakes in drop shipping.
That does not mean that drop shipping is passive income.To succeed, you have to treat your drop ship business like a serious business.
Follow the steps outlined in this article and learn from mistakes you and other people make. After you have followed these steps you will have a higher chance of succeeding.