Entrepreneurs always keep their eye out for products and trends that could provide promising opportunities around which to build a business. And with the unstoppable growth of online shopping ways to make money are more plentiful than than ever before. One common sales model for online sellers is drop shipping.
Drop shipping refers to a situation where the online seller holds no inventory. When a purchase is made on their website the manufacturer or distributor is notified and automatically ships the unit to the buyer. This arrangement works very well for small online businesses as it enables them to streamline their business. The lack of inventory eliminates expensive rental costs. And they have no upfront expenses, sos they can promote multiple products at once, and thereby diversify their marketing risk.
But no matter how good the drop shipping model is for small sellers, not EVERY product should be sold on a dropshipped basis. Below are some considerations when deciding whether to sell a solution online.
Marketing Isn't Easy!
The most important consideration that many overlook is the ease of marketing a product – even if its something in demand that you can offer at a better price, you need to make sure you can generate a high volume of sales leads.
Search engine considerations are key here – if you can’t rank for the keyword related to a product it will be hard to sell. So, does the product have a lot of search competition? Thankfully, tools like the MozBar can give you an idea of how entrenched competitors are at the top of a search results page. If it is populated by established brands with high domain authority then it may not be an idea worth pursuing.
Another issue is marketing channels: does the product suit the marketing channel you have access/experience for? For example, advertising very low value items via pay-per-click might not work out well if the cost per click is too high. Your profit margin could be completely eliminated by a few errant clicks.
The Price is Right?
Is it in the right price range? Many dropship experts believe that the sweet spot for a product is in the $100-$200 range, since it is worth getting online while also not requiring too much deliberation. Products with a lower price might sell better, but the effort required to capture the sale might not be worth the effort required to capture the customer. Very expensive merchandise might have better gross revenues, but fewer buyers due to the higher price tag.
Can you make enough markup? This one is obvious, but its worth checking the price of other drop shippers to get an idea. If competition is too tight a deep-pocketed competitor could force you out of the game by lowering prices.
Can you add value to the product? The most successful drop ship ideas are ones where you can provide something extra to the customer, in the form of informational materials, support, or advice, for a cost that still makes it worth your while.
Does the product entail risk? Clothing and expensive electronics are products that have high return rates. Fragile products and consumables are high risk too during shipping.
Can you test the idea, with low entry costs? Products that can be tested on social media with ads, and don’t require big up front spends are ideal. This is the principle behind the lean startup movement – try to test your idea as soon as possible, and with drop shipping the cheaper you can test an idea the better.
Time is Money
Deciding whether to promote a product is tricky. It's easy to look at a product with high sales margins and think it's a guaranteed winner. But getting a product to the point where it sees a meaningful number of sales can take a lot of time investment. Your time has value so choose the products you promote very carefully.