Dropshipping explained
Dropshipping is a form of retail distribution in which a store does not keep an inventory of the items it sells. The selling merchant does not own or store inventory, which is the most important difference between dropshipping and conventional retail. Instead, the seller fulfils orders by buying inventory from a third party - usually a wholesaler or manufacturer - as required. According to a Forbes article, dropshipping is once again getting a lot of buzz online, thanks to the e-commerce boom.
When a store uses the dropshipping model to sell a product, it buys it from a third-party vendor and has it delivered directly to the consumer. As a result, the vendor is free of direct inventory management. The customers are eligible to pay the retail amount that you quote, you pay your producer or supplier the agreed-upon price, which may be marginally higher than wholesale; the remainder is a benefit.
Dropshipping as a business
Dropshipping is more cost-effective than buying wholesale in Canada because it is a lower-risk model that allows companies to grow quickly. Although the cost of products can be marginally lower when you wholesale Canadian goods, you must purchase bulk inventory and pay for the shipping of goods and shipping to your customer, and this will probably cost much more than dropshipping.
According to Statista, e-commerce retail trade revenues in late 2019 totalled nearly 1.85 billion Canadian dollars, with nearly 28.1 million Canadians making online transactions. The retail e-commerce industry is projected to produce more than 33 billion dollars in revenue by 2024, up from 25.4 billion in 2019. Between 2019 and 2025, the global dropshipping market is expected to develop at a CAGR of 28.8%. Because of the growing popularity of online shopping and the growing trend of cross-border e-commerce trade, the market is expected to expand significantly. As a result, the rise in demand for dropshipping services is primarily driven by the e-commerce industry's growth. Fashion, food & personal care, electronics & media, furniture & appliances, apparel & accessories, and other categories are among the most common online shopping categories in Canada.
You may, however, tap into the global market by starting a dropshipping Canada business.
Benefits of dropshipping
- Inexpensive - Starting a drop-shipping company is relatively easier when it comes to investment. Websites like Shopify and Big Commerce will get you up and started for about $30 a month, depending on how you set up your account.
- Ease of business - Getting started with drop-shipping is simple (although actually being profitable will take more work). There will be no need to order goods in advance or store them.
- No delivery - You will not be liable for shipping orders to customers.
- Relatively new - Dropshipping has been around for some time now and will take off well as a prospective business, by judging its requirement and demand in the market.
Risks involved in dropshipping
- Competition - This can be fierce since anyone, literally anyone, with an account can buy the same items. You'll need to find a way to set yourself apart from other sellers of identical products. This requires work, to bring out trust and develop your base of loyal customers.
- Costs - While drop-shipping is relatively inexpensive, it does come at a price. According to Forbes articles and studies, dropshipping performance necessitates researching and evaluating tested techniques, which cannot be achieved quickly.
- Customer service - You'll have to deal with customer service because you carry the weight of processing the order, which can be tiring and cumbersome.
- Problems with order handling - You're wrong if you think you'll shortlist vendors/suppliers, set up a website to sell, and be done. The most difficult aspect of dropshipping is handling orders. You should expect to receive orders for any product variety because you will be listing products on your website according to the vendor's catalogue of variations available such as sizes, colours, and so on. It's likely that the item variety you're looking for is out of stock at the time you place your order. You'd have to cancel the order and deal with consumer disappointment in this case. As a Drop shipper, this could damage your reputation.
Create a business plan
Finding your niche will be the first of the many steps in any business, and the same goes here. With this, a specific target audience is also identified. Having the end customer personas in mind will help set an admirable standard for the website and marketing material. Also keeping in mind the huge competition in the market is a must, since this will help decipher the right way to stand out and be the first choice. You are responsible for designing a website and your own brand, as well as selecting and promoting the items you want to sell, in the dropshipping business model.
Your company is still in control of shipping costs and setting rates with a healthy profit margin. When it comes to starting a dropshipping venture, you'll need to invest heavily in two important commodities: time or money. You're going to be disappointed if you expect a six-figure salary from six weeks of part-time employment. You'll be much less likely to get frustrated and leave if you approach your company with reasonable expectations about the investment needed and your profitability.
How to set up a dropshipping business?
#1. Decide on a structure
Structure and partnerships are most important parts of beginning any business. You can be the individual proprietor or run it as a corporation with other partners. Setting up a partnership firm might also be one of the most protected ways to begin. Get your finances worked out simultaneously, which will be the biggest frog you’ll have to eat.
#2. Market research
Doing the requisite market research is the correct approach in learning how to start a dropshipping company. You can explore a niche you're interested in and make decisions based on how lucrative it can be, just as you would if you were opening a retail store and investigating various sites, rivals, and trends. However, coming up with product ideas to sell is the keystone which can go either ways - propel to success or not get recognized.
#3. Choose your supplier
Choosing a dropshipping supplier is an essential part of starting a dropshipping company. Without vendors, a dropshipping company would be unable to ship goods to consumers and would therefore cease to exist. You’re clear on what goods you want to sell and decided that they're profitable - now it's time to find a dropshipping provider who can provide you with the high-quality service you need to expand.
#4. Set the right price
Set a price for your goods. Make sure you do your research to figure out supply and demand, as well as the rates your rivals are asking. You may not have to compete exclusively on price, but you must be competitive. Add up all of the costs of selling the product, from shipping to marketing to ensure it remains profitable to you and to your customer. If you're importing goods from another country and selling them in your local market, make sure you price them correctly, otherwise the HST (harmonised sales tax) would prevent you from competing with other local stores that carry and sell the same items.
#5. Choose a platform.
Here are some open avenues:
- Shopify, Magento, WooCommerce, and Big Commerce are all dropshipping-friendly e-commerce sites. Compare the available features and pricing to find the best option for your niche market.
- Choose dropshipping-friendly e-commerce apps.
- Using a dropshipping app that integrates with your current e-commerce or data management apps (such as WordPress).
- Use a complete dropshipping solution that takes care of everything from your website to your suppliers.
- Find your own drop shippers and manually enter their goods.
- You can also use a custom ecommerce platform to find your own drop shippers and manually enter their products, or you can import via APIs and handle the rest.
#6. Build a good e-commerce store
To start a dropshipping company, you'll need an ecommerce platform like Amazon. This is where you can send traffic, sell goods, and take payments. The e-commerce platform should let you sell in multiple locations, including online, accept multiple currencies, and handle goods and payments with ease. A good structure will appeal well to the end customer.
Final Thoughts
Some of the best dropshipping companies in Canada are Wholesale2B and CJ Dropshipping, AliDropship and Salehoo Canada. They are very well established and have a lot of trust, name and fame to their credit. We can observe that building a good dropshipping company, like any other business, necessitates considerable dedication and a long-term outlook.
When it comes to starting a dropshipping company, there are endless possibilities. Continuum has the experience to be your business partner to help you turn your dropshipping business plan into action. We can introduce you to your ecommerce business model and help you make dropshipping profitable for you. Our process is unique and tailor made to ensure assistance with all your ecommerce web store development, mobile commerce app development & digital marketing needs.
The key is to identify a niche, or a topic or market on which you will concentrate your efforts with a particular target audience. You'll need to get people to come to your web, and the best way to do that is to show them the stuff they'll want.
Launch your dreams. Start Dropshipping today!