What is a dropship business model?
This is a business model that has very few startup costs. A drop-shipping business is when an owner finds a list of suppliers to supply products for their website to market or sell. These suppliers or wholesalers will “dropship” the product to the customer on the business’ (your) behalf. The business owner does not have to see or touch the product.
The Benefits Of Drop-shipping Are:
- Less Effort On Your Part
- No Inventory To Store
- You Can Be Anywhere In The World To Do This
- You Can Generate A Passive Income
The Negatives Of Drop-shipping Are:
Listing Fees. eBay charges a small fee per listing (the first 50 listings are free) as well as up to 10 percent of your total sale price (known as a “final value fee”).
With the already-slim profit margins through drop-shipping, these fees can quickly add up. Keep in mind that the key to making money by drop-shipping is volume.
Less Customization. Selling products on eBay is a great way to start an online business, but fewer customization options for your shop and listings can make it more difficult to stand apart from your competitors.
Frequent Monitoring Needed. You’ll need to stay on top of your listings if you want to maintain the volume needed to make money through eBay sales. There are online tools available that can help you streamline the re-listing process. You can use Watchcount to help keep an eye on your listings
Ultimately, it’s up to you to decide where you want to place the bulk of your time and effort when selling wholesale products online, but for many sellers, drop-shipping on eBay is a simple and effective way to make money.
How To Pick A Drop-shipping Niche?
You are looking to start a drop-shipping business that requires as little effort as possible while generating the most sales possible.
You are looking to sell to single people or families with disposable income who are used to shopping online and comfortable making large purchases over the internet.
You must keep in mind that in order to turn a tidy profit with drop-shipping, you want to sell high ticket items in large quantities.
You want to try and stay away from brand loyalty, here’s why. What kind of computer or cell phone do you have? Is it the same kind of brand as your last one?
Chances are if you own a Mac, the next computer you buy will also be a Mac. When selling online, you want to avoid selling products that customers already have a brand loyalty for.
For example, I would not try to sell TVs or electronics online. Most customers who are buying a TV do the research on which TV is best for them or purchase the same brand TV they have had in the past.
They already have researched which TV brand has the best picture quality, the best warranty, and the best reviews online.
If I wanted to sell the TVs that people are actually buying (Sonys, Panasonics, LGs, etc) there is no way I would get approved for an account with the same payment and pricing terms as Best Buy or any other big box stores.
So, what type of products should you look to sell? Products that customers are thinking about buying but do not already know which brand they should buy and products that customers would be comfortable buying from any manufacturer regardless of brand name.
Most Profitable Drop-shipping Niches & Products.
You can use these niches to consider,
- Aquariums
- Backpacking
- Deep Sea Fishing
- Home Brewing
- Bowhunting
- Model Trains
- Arts & Crafts
- Gardening
- Doll Houses
- Scuba-diving
Here are some examples of a couple of niche markets that you would want to target:
Let’s say I live on a lake and I decide I want to get into stand-up paddle boarding. I know I need a paddle board and a paddle but I have no prior knowledge of this sport or what brands are well known. I can care less what company makes the board as long as I can find some good reviews and the price is right.
This is a great example of a product to sell online. The average cost of a stand-up paddle board and the paddle is over $700, the average customer does not care what brand they are buying, and this sport is likely to appeal to the upper middle class that would be purchased with disposable income. Here is another example.
Mr. and Mrs. Smith move into a new home, there is a huge chandelier that hangs in the entryway. Mrs. Smith hates it. They go to the local Home Depot & Lowes but cannot find a replacement that they agree on.
They know what style they are looking for but they can not find it locally. Mrs. Smith goes online and searches for a 30” x 30” entryway chandelier. She finds a website with hundreds of options including one that she and husband can agree upon.
This is another great example of a product to sell online. Chandeliers are expensive, they appeal to the upper middle class, and the average customer does not care what brand they are buying as long as they like what they see.
The Drop-shipping Niche Selection Process
The key to making a lot of money with drop-shipping is to find high ticket products to sell. You can do this process across multiple niche markets. This is how to choose profitable niches and how it can actually be easy. There are 3 main criteria to follow. If you skip any of these, it will be a lot harder to reach your desired income goals.
Criteria #1: Price
The first thing is always the price. That means the product’s price, what you are going to sell this product for. When you are doing your niche selection, always look for niches that are $200 or more on average.
What does that mean in practice? Well, if you sold something like a water bottle, that’s not at least $200. So that is not going to be a niche that I get involved with.
Now, on the other hand, if it is something like a cell phone, that’s more than $200. That would pass the price test, but it would not pass the third test that I will get to shortly.
Let’s take something like an office chair that is over $200, that would be a good product. It passes the first test when it comes to niche selection.
Criteria #2: Target Market
Once we make sure our price is above $200, we look towards our target market. Now, if you are involved with marketing at all (if you ever studied marketing) you’re familiar with demographics. And the truth is you could break up the world into probably a billion different demographics.
But the purpose of this niche selection exercise is to learn how to find profitable niches in drop-shipping, so I am only going to talk about 3 of those demographics.
Now the first will be the lower income people. The second will be the upper middle class. And the third will be the wealthy. When you are looking into products and trying to find profitable niches, you should stay right in the middle. Your goal is to sell to the upper middle class.
There are a few reasons why. If you sell to people who don’t have money or to people that have too much money, what you’ll find is the amount of customer service that you (or your employee) have to put into your business is going to skyrocket.
When people don’t have enough money or very little to spend to buy your products, you better believe they are going to have more questions.
They are going to be inspecting the items more carefully. If anything is wrong or even if they think anything is wrong, you are going to hear about it non-stop.
With the wealthy, it’s the same thing. When they are investing money or buying products, they expect a certain level of customer service that requires really a different type of business owner. And there is nothing wrong with that.
But, just expect that if you’re going to go that route, you are going to be more of a concierge rather than someone that makes money online.
Again, that is why when you are looking at demographics. Remember, stick with the upper middle class. I define that as having a combined household income of above $100,000 U.S. dollars.
When people have that kind of money, they are very comfortable with spending online. They are used to buying items that are $200 or more. They are not going to be calling or emailing you as much.
They are going to be comfortable with the order process. And from what I have read and researched, they are generally happier with the products. You are going to deal with fewer returns.
So again, this demographic makes niche selection a lot easier. It makes your business run a lot smoother. It makes it a lot more profitable if you choose niches that fall into that target demographic. If that’s who the products appeal to.
Criteria #3: Brand Loyalty
Now, finally the last tip. Remember, it was price, then it was the target demographic. Now, I want to talk about brand loyalty. I mentioned earlier that while cell phones fall into the price range criteria, they don’t meet one of my other criteria and that is because of the brand loyalty.
When someone is going to buy a cell phone, in general, they are going to buy an iPhone or they are going to buy Galaxy or another Android phone, Right? But they already have a brand in their head of what product they want.
Same thing with people that are going to buy headphones. There is probably four or five big headphone companies out there. Right? There is Sony, there is Bose, there are Beats, and there is Sennheiser. There are all these big companies and people already know what they are going to buy.
So the third thing that you are going to look for when trying to choose a profitable niche is to pick a market that has no brand loyalty. It’s going to make a big difference.
That’s because if you try to sell in a niche where people already know what company they want to buy from, it’s going to make it that much harder for you to get suppliers. Harder for you to actually be able to sell these products, for you to be able to compete in terms of price.
It’s impossible. Plus if you stay away from brands, this will help to protect you from copyright infringement. And you will have far less competition.These are the things that you want to keep in mind if you decide to do drop-shipping on eBay.