The Concept Of Dropshipping | The Most Effective Mastery Method For Dropship In 2024

What is Dropshipping? How to develop an effective dropshipping strategy?

In this article, Bluefocus will address these questions and introduce you to the basic contents to start dropshipping business. You may have heard the term dropshipping (or dropship) on MMO forums, business discussion groups, and elsewhere.

We want you to understand that there is no easy money-making model, and dropshipping is no exception. You need to research thoroughly and find a suitable direction to succeed and generate stable income with dropshipping.

Table of Contents

Dropshipping Concept

Dropship, or Dropshipping, is a sales model that bypasses the shipping process. You will handle all other processes but skip the shipping step to the customer, which is entrusted to the manufacturer or warehouse, depending on the dropship model you pursue.

You can understand the operational process of a dropshipping order as follows in the following model

When a customer purchases an item from your website for $100
You place an order with the supplier for $80
The supplier packages and ships the product to the customer with your information. You retain a profit of $20.
All of this process happens invisibly, and the customer only knows you as the sole supplier providing the product and selling it to them.

Reasons for the development of the dropshipping sales model

No need for a large capital to start
No need to rent a physical space
No risk of inventory
However, this is just the most basic model for dropshipping.

Popular Dropship Models

Before embarking on dropshipping, you should familiarize yourself with the two most popular dropship models and decide which one to choose: the Traditional Dropshipping Model vs. the Modern Dropshipping Model to start.

Traditional Dropshipping Model

When you hear the term traditional, it means it has been around since the early days of dropshipping.

This model operates very simply:

You list products from suppliers on your website for sale
When a customer purchases through your website and pays you
You place an order with the supplier, and they ship the product to your customer
Your profit is the difference between the selling price to the customer and the purchase price from the supplier, after deducting advertising costs.

The advantages of this model:

No inventory
Wide range of products
Minimum order of 1 product

However, it also has significant weaknesses:

Difficulty in controlling product quality
Long shipping times as suppliers are in the US while customers are in Japan (average 12-20 days)
High order cancellation rate

To overcome the weakness of long shipping times, the Free Plus Shipping model was introduced around 2015.

Usually, products shipped from China have low product prices and very cheap shipping fees due to the use of e-Packet service, but the shipping time is very long.

Therefore, many sellers have adopted this model by:

Setting the product price at $0, and customers only need to pay the shipping fee
Shipping fees to customers range from $9.99 to $19.99
The total cost of the product and e-Packet is only about $3-5
In this way, customers feel they are getting a great deal, so they are willing to pay the shipping fee. Moreover, they are willing to wait 14 to 20 days to receive the item, as it is free and they only have to pay the shipping fee.

There is a drawback that the Free Plus Shipping model does not last long. With the emergence of apps like Oberlo or Dropified, which allow bulk posting of products from Aliexpress to Shopify-based websites, creating a dropshipping website becomes easy, and hundreds of thousands of similar websites are established.

At that point, customers become smarter, and they realize that nothing in this world is free. Product quality is also a major issue.

The Free Plus Shipping model is almost non-existent around the 2017-2018 period. The market has returned to the traditional dropshipping model, but with more substantial investment.

Modern Dropshipping Model

When selling a product that takes 15-21 days to ship to customers, it poses a significant obstacle to scaling your business and providing a satisfactory customer experience.

That’s why the inventory-based dropship model was born. Here’s how it works:

You place a large order with the supplier and send it to the warehouse you rent in the US
Customers place orders on your website and make payments
Then the warehouse ships the items to the customers on your behalf within 3-5 days

The significant difference between the modern dropship model and the traditional dropship model is the reduced shipping time to just 3-5 days, with the risk of inventory. When products don’t sell, inventory can become a financial burden for you.

The benefits of this model include:

Providing the best customer experience
Getting the best deals from suppliers because of ordering in bulk
Ability to respond to market demand spikes as products are readily available in US warehouses

However, you should thoroughly test the product quality before deciding to place large orders and should consult reputable suppliers on Alibaba, Taobao, DHGate.

Dropshipping with Fulfillment by Amazon

The trend of selling on Amazon is becoming increasingly popular in Vietnam, and if you notice, selling on Amazon is a form of the modern dropshipping model.

You may not know, Fulfillment by Amazon (FBA) is Amazon’s order fulfillment service, which includes:

You sign up to sell and list products on Amazon
You send standard inventory to Amazon’s warehouse
Customers purchase, and Amazon ships to them

When using the modern dropship model, you need to rent any warehouse, but with FBA, that warehouse is Amazon’s. Therefore, you need to have an Amazon seller account to start, and registering successfully is not easy.

How much budget do you need for dropshipping?

If you want to start dropshipping, you will need some capital. Depending on the traditional or modern model, the capital you need will vary.

Many types of expenses you will need to cover include: website design, product image design, advertising, staff, storage,…
If you are an individual and follow the traditional dropship model, the recommended expenses for you include:
Website design: $400 to own a relatively professional e-commerce website on the Shopify platform
Image design: $100
Facebook advertising: $300
Total: You need about $800 to start dropshipping, or less if you can design the website and product images, packaging yourself. With this model, you have no inventory.

In case you are a team or a business, investing thoroughly in the modern dropshipping model (or Fulfillment by Amazon), the costs will be much higher. You can suggest costs as follows:

Product research and quality testing: $150
Ordering and shipping to warehouse (or Amazon warehouse): $2500 with enough inventory to sell for at least 2-3 months
Website design, images: $850
Operational staff: $800 ($400 x 2 employees)
Advertising: $2000
Other expenses: $1000
Total: You need about $7300 in capital if operating as a team or business wanting to implement the modern dropship model or Fulfillment by Amazon.

These are bluefocus‘s suggestions, you can start with a smaller or larger investment depending on the scale. And one thing to remember, nothing guarantees you success with dropshipping. However, you may lose your investment in this sales method, so make sure you have other stable sources of income instead of quitting your job and investing all your capital in this model.

Effective Dropshipping Methods for Beginners

To start selling dropshipping products, you need to prepare many things including products, inventory, branding, website, operations, and more.

Generating Ideas and Choosing Products to Dropship

Here are some ways to get ideas for products you can dropship:

Brainstorm: You may already have countless ideas for products in your head, such as your hobbies, products you like, current trends, or interesting products you’ve heard of. Write down everything that comes to your mind, regardless of whether the product is a best seller or not.
Research: Visit other online stores and see what their best-selling products are and what products are on sale. Some large online platforms have databases of best-selling products in specific categories, through which you can see current trends and decide what products to sell. You can refer to AliExpress Most Popular Products (updated weekly), Amazon Best Sellers, Ebay Daily Deals, Lazada Top Sellers, LightInTheBox Top Sellers List.
Social Media: You can also browse online shopping platforms on social media such as Pinterest, Polyvore, Fancy, and Wanelo, which offer millions of products for you. Create an account and follow topics that interest you. From there, you’ll get ideas for products to sell.

After you have listed all the product ideas you have come up with, narrow down those ideas and choose the best product to sell.

Then, look for products that haven’t been noticed or haven’t been sold by many people but have a large potential customer base.
Some product categories have seen significant development in recent decades. You can choose some categories such as clothing, footwear, jewelry, electronics, phone accessories, toys, etc.
According to Bluefocus, the best products to sell should have prices ranging from $40 to $60 (including a 200% profit margin). There is a rule you should remember: the cheaper the product, the higher the likelihood of customers buying it.
You should assess the feasibility of your product idea by entering the product name into the Google Keywords Analysis tool. Check the keyword ideas and see the monthly search volume for this product. Ignore product ideas with low search volume and potential.
You can also access trends.google.com and enter the product idea to check the trend of that product. Is the trend for this product increasing or decreasing? And is it worth trying or not?

Conducting Supplier Search and Selection

Finding reliable suppliers is a concern for almost everyone intending to do dropshipping business.

You can search for suppliers through platforms such as AliExpress, Alibaba, DHGate, Taobao, Oberlo, …

‘When using dropshipping, you may not know the customer experience with the product because you have never held the product in your hands, as it is sent directly from the supplier to the customer.

To succeed with dropshipping, you need to understand the customer experience and choose reliable suppliers.

Here are some tips for finding reliable suppliers:

Cheapest isn’t always the best: To understand this better, first, you need to understand how AliExpress works.
Imagine a manufacturer selling a high-quality jacket named “Blue Jacket” for $40.
Now, a competitor enters the market with a similar jacket but of lower quality. To reduce the selling price to $15, this company uses more polyester instead of cotton.
When customers search, they see two similar jackets, one for $40 and the other for $15. Which one do they choose? In most cases, they will choose the cheaper one without knowing that it’s of lower quality.
As a result, the company selling the high-quality jacket for $40 will be dissatisfied because sales decrease. Eventually, they will start producing lower-quality jackets and sell them for $15 to compete with the other company. Thus, the high-quality $40 jacket is replaced by the lower-quality $15 jacket.

This is why the quality of products declines. Therefore, for products on AliExpress, the quality of the product is directly proportional to the price. Many sellers sell the same product. If you see multiple sellers offering the same product at the same price, but one seller offers it at a significantly lower price, understand that they are sacrificing product quality to achieve that lower price.

Finding suppliers with a positive feedback rating of over 95% is crucial when sourcing products:

The rating system, especially reviews, for sellers is significant on any online marketplace. Imagine you’re shopping in a marketplace, and someone loudly warns you that the seller next door is a scammer. Would you continue shopping there? Most likely not.
A similar principle applies to online shopping. Look at how buyers rate sellers and listen to their opinions. Then, seek out sellers with the highest positive feedback ratings.
The Feedback Score evaluates the sales performance of sellers, while Positive Feedback indicates the proportion of positive reviews from customers about the supplier’s products. Always look for sellers with a positive feedback rating of over 95% and at least 2000 Feedback Score.

Supplier responsiveness:

You can conduct a quick test by sending an immediate message to suppliers to assess their responsiveness. Then, observe their response time, English proficiency, and their understanding of dropshipping based on your inquiry. If they reply with automated messages or irrelevant responses, you may consider bypassing collaboration with them. However, prioritize working with sellers who respond sincerely and enthusiastically, demonstrating a willingness to address your queries.

You should Order Samples to Check

One of the crucial steps in assessing product quality is to order samples from the supplier for hands-on evaluation.
Without experiencing the product firsthand, you won’t know how customers might perceive it. Therefore, order sample products and scrutinize their quality. If you find them satisfactory, then proceed with selling to customers. This ensures a sustainable business future and customer satisfaction.
You don’t need to purchase samples for all the products you intend to sell, as it could be costly. However, consider buying samples for key products you plan to promote.

Seeking a Warehouse in the US

You need to find a warehouse in the US to cater to storage and order fulfillment services when customers place orders.

Here are some criteria to consider when choosing a warehouse:

Competitive pricing policies and enthusiastic seller support.
Support for order fulfillment and cancellations.
Preferably operated by Vietnamese individuals for ease of communication.
Integration with ecommerce platforms such as Shopify, BigCommerce, etc.

Note: You should sign a contract with the warehouse to safeguard against legal risks or disputes in the future.

Designing Branding/Packaging

When you want your product to be packaged in branded packaging, cardboard boxes with your brand logo, request this from your supplier, and they will assist you with it for an additional, reasonable fee.

Shipping to the USA

You need to ship your goods to the warehouse you’ve rented in the USA. However, you can request your supplier to arrange shipping for you if they can arrange it or have shipping partners.

If your supplier doesn’t offer international shipping services, you can hire a third-party shipping service. They will pick up your goods and ship them to your warehouse in the USA.

Shopify is the Go-To Solution for Dropshipping

When utilizing the dropshipping business model, your website plays a central role and is a crucial aspect that cannot be overlooked but requires a systematic investment.

There are many website platforms you can use for dropshipping such as WooCommerce, BigCommerce, Wix Commerce, among others. However, in this article, Bluefocus only discusses Shopify, which is the most popular and best platform for those looking to start with dropshipping.

Shopify was built and developed since 2009, but it started gaining popularity within the dropshipping community from 2013 onwards. Until 2020, Shopify became the number one choice for dropshippers. Why is that?

Shopify is easy to use

Especially for beginners. It boasts a user-friendly interface that allows you to navigate effortlessly. Tasks such as adding products, managing, and customizing the interface are done through simple drag-and-drop actions, requiring no programming knowledge whatsoever.

anh e13 giao diện

The admin interface is neatly organized, and the onboarding process helps new users understand which tasks they need to complete to be ready for branding and website promotion.

According to bluefocus statistics, Shopify is over 25% easier to use than BigCommerce and more than 10% easier than Wix Commerce.

The feature of Connecting and syncing products/orders with dropshipping suppliers

Introduced in 2015, Oberlo is Shopify’s application that allows for the synchronization of all products/orders between Aliexpress and Shopify with just one click.

The process of connecting and syncing:

Connect your Shopify store with Oberlo.
In Oberlo, select the products you want to import from Aliexpress to Shopify.
When you receive orders from Shopify, go to Oberlo to place orders from the supplier and ship them to the customers.
Advantages: Oberlo and Shopify allow you to utilize the vast supplier ecosystem of Aliexpress and automatically place orders from suppliers when orders occur.

Fulfillment request from the warehouse when orders occur

If you’re using a third-party warehouse and orders occur on a website using Shopify, you have 2 options:

Fulfill via API: Connect to the warehouse’s API (if available) and send order information for the warehouse to process the order.
Fulfill via email: Send an email to the warehouse with order information for them to process and ship to your customers.

Setting up PayPal/Stripe Payment Gateway

Shopify allows you to connect with the world’s most popular payment gateway, PayPal, with just 1 click, enabling you to receive payments from all around the globe.
Additionally, you can register for credit card accepting payment gateways such as Stripe, 2CheckOut, etc.

Utilizing Facebook Ads, Google Shopping automation

One of the advantages of Shopify is that it allows you to connect with Facebook Ads and Google Ads accounts to automatically create ads on these platforms.

Facebook Ads: Connect the pixel and create Dynamic Ads on facebook, Page Post, Dynamic Retargeting, etc.
Google: Connect with Google Merchant Center, synchronize product feed, and automatically create Google Smart Shopping ads.
TikTok: Connect and automatically create video ads on the TikTok Ads platform.

Conclusion

Bluefocus emphasizes the pivotal role of dropshipping in e-commerce, highlighting Shopify as the ultimate solution. With its user-friendly interface and seamless integration with essential tools like Oberlo, Shopify simplifies the dropshipping process. We underscore Shopify’s dominance in empowering entrepreneurs to launch and manage successful dropshipping ventures. Aspiring dropshippers can rely on Shopify’s robust features and extensive support to thrive in the competitive online market.

Facebook, News