Drop Shipping – Step By Step | How Does Drop Shipping Work?
How Does Drop Shipping Work? Part 1
Recently, I attended a business mastermind at Boise, Idaho. It was a significant investment, but the value of being able to chat with the high-level entrepreneurs that attended was worth the price tag.
So in my head, before I got to this event I thought the whole thing (all the presentations and everything that was going to be shared) was going to be next level stuff almost. Things that I would have never even thought of! And honestly there were a few things like that, but the majority of it really was bringing people back to the basics.
I'm really happy that I went to the mastermind group in Boise, Idaho. I will be going again. What I took away from it in my notebooks, which is seriously pages and pages of notes, is that the basics are the most important. It really doesn't matter where you're at.
To keep with that, I’m going to share the basics of drop shipping and go step-by-step on how drop shipping works! Check out the video or read my transcript at the bottom. If you have friends or family that are still confused about how you’re making your money, this is the perfect post to share!
Step One: Choosing a Niche
Niche selection (also known as product selection) means choosing the products to sell in your eCommerce store. One of our methods at Drop Ship Lifestyle that has led to the success of thousands of our students is picking a niche specific store. This means: one core product per store. We suggest this method as it is better for your conversion rates.
Niche selection is a step that people always overthink. Even in the introductory, one-on-one webinars, the conversation is always centered around niche selection. It’s most common to get stuck at this step, and we always explain that it’s just a mental thing. If you overthink this step, and put the idea in your head that, “If I get this wrong my whole store will fail,” you’ll be stuck at this step.
Here’s the thing about step one and niche selection though: You just have to find niches that meet these three pieces of criteria:
- Price point - This part is easy: the higher the price of your product, the greater your profit margin will be!
- Saturation from other brands - See if there is brand loyalty, or if there are only a few big players, like Yeti and Coleman coolers.
- Targeting the right buyers - Target people with disposable incomes that aren’t extremely wealthy. Even though you are selling expensive products, you want consumers buying your products without needing lots of customer service.
This criteria is how we select a profitable niche with our Drop Ship Lifestyle method. The main focus is moving forward and not getting stuck in step one.
Don’t over-complicate it, don’t make it too difficult, but get that one niche that meets all of the criteria. I am sure you are going to think of tons more than one, so make a list. And then you move on to step two of the process.
Step Two: Researching the Market
Now that you have a list of a few (or several) potential niches for your drop shipping store, you have to see what the market is like! Market research is a topic that like niche selection, is discussed and taught in great detail here at Drop Ship Lifestyle.
In step two, you are literally going to Google and looking through product listing ads. You’ll need to look through regular organic searched ads. You are looking at different blogs that are relevant to your potential niche and you are trying to find other websites that sell these products already. These companies are your future competitors.
Market research is how we verify that the niche we picked in step one is in fact, ‘drop ship-friendly.’ What that means is we need to find other websites that are actually drop shipping those products. Not other websites that are selling them, that have them in their warehouse or in their retail location. No, we want to find websites that are drop shipping the product you selected in step one.
And good news, researching the market of your potential niche is incredibly easy. In the member’s area of Drop Ship Lifestyle, we have screen shares of every step you go through in doing this research.
Once you picked your niche, researched the market, and found websites drop shipping these products, you can move on to step 3!
Step Three: Building Your Store
One of the biggest parts of how drop shipping works lies in step 3: building your store and creating your website. This is the point in the drop shipping process that stumps many people. Often people think during this step either: “Why am I going to create a website when I don’t have any products to sell yet?” or “I have no idea how to build a website online, but it looks complicated..”
You have to build your store first. Because you can't get approved to sell for any of the brands you found in step two until you have a website that you could show to your future suppliers.
Now the reason that is true is because these companies won’t work with anyone who picks up a phone and calls them, saying, "Hey, this is Anton, I saw you sell desks. Can I drop ship your products?"
The suppliers will be like, "Well, who are you? Where are you calling from?" And you won’t be able to answers those questions.
So these companies that you want to sell for, they need to make sure that you are legit. And the quickest way to see that you're legit is to show them your website. That way they can click around, check it out and say, “Yes.”
Suppliers need to envision their products in your store and see that you actually have something, other than you just saying, "Hey, I want to drop ship your products.”
Step three of the process is building a gorgeous looking drop shipping store that not only will people want to buy from, but one that your future suppliers will be happy to have their products displayed on. And that is how step three of drop shipping works.
Now, after you’ve completed the first three steps of setting up a drop shipping store, it’s time to take a deep breath, marvel at your work, and then get right back to it because we have more work to do!
Step Four: Supplier Approval
After you’ve gone through the first two steps of finding your niche and researching the market. The next step in creating a drop shipping business is to build your Shopify store. Once you have a great looking drop shipping store that is up, you move to step four: supplier approval.
And yes, drop shipping using our proven-successful method has to happen sequentially. Don't do step four before three. Step three has to come before four.
When you start talking to suppliers, you will be directing them back to your site. If you want the scripts and emails that we use when we are talking to the suppliers, it's all available Drop Ship Lifestyle in the members area.
At this point, you're reaching out to all those suppliers you found when you did your research in step two. You are not using paid directories, you are not Googling, "How to find drop ship suppliers.”
You are not doing any of that.
This step is you simply reaching out to brands that you found during your market research of step two.
During these calls and emails, you will be telling the suppliers details about:
- Who you are
- Your website
- Where you are calling from
- That you are already getting approved for accounts
- And that you’re getting ready to start making sales
So now, with suppliers supplying the product we choose during the niche selection in step one and before we start getting traffic and sales, we go to step five: optimizing for conversions.
Step Five: Optimizing for Conversions
Step five in how drop shipping works is all about optimizing for conversions! What this means is completing a few tasks that will make more people buy when they visit your store.
Once we have our site built, we have our products loaded up, there are a few things that we have to do to make sure when people find us that they are going to buy from us. This is called conversion rate optimization. It is a step in the drop shipping process that is super, super important!
During this step there are a lot of little tweaks that we make to increase this conversion rate. We optimize our stores for conversions, once we have those products loaded up. Some of our favorite little tweaks for your drop shipping stores are:
- Use urgency and utilize expiring coupon codes.
- Create pages like “About Us” and F.A.Q.’s so customers view your business as trustworthy and secure.
- Target shoppers who have abandoned their shopping cart
Those are just three, but there are dozens of little tweaks that will bring you more, bigger sales. Read this for a more in-depth breakdown of how to optimize your store and value of your leads or get ready to move onto step six: getting traffic!
Step Six: Getting Traffic
Now, it is time for step six: getting traffic! At this point, we have our niche. We did our market research. We built our website. We got approved for suppliers. We uploaded their products. We optimized the website for conversions. Now it is time to bring on the traffic. This is another step where people start overcomplicating things when they really shouldn’t
At Drop Ship Lifestyle, we use different traffic sources. I have used dozens of them over the years. The only one that you have to focus on and master until you're doing, you know, $50,000 a month in sales is Google Product Listing Ads (PLAs). So these companies that you want to sell for, they need to make sure that you are legit. And the quickest way to see that you're legit is to show them your website. That way they can click around, check it out and say, “Yes.”
This is by far the highest converting source of traffic for your drop shipping store. If you set it up and optimize it the right way, you are going to get the lowest cost per lead or cost per sale; Basically what you are paying to drive sales to your website.
It’s exciting to say, this is where there is so much money to be made. This is something a beginner can do and learn to master within a few months' time. This is where all your focus should be when you are first starting out: mastering Google PLAs.
Again, there are more sources of traffic for your drop shipping store, but the purpose of this kind of overview of how drop shipping works is to not overcomplicate things.
So focus on these ads until your store is getting to do at least $50k a month in sales. Then you can move on to expanding your horizon with traffic sources. When your store starts bring in this volume of sales, it is also a good time to move onto step seven: automation.
Step Seven: Automation
For us, step seven is automation. Now, there are a few ‘disclaimers’ to this step since I don't believe there is any such thing as a fully automated business. One of those fantasy businesses where you are just having money every day without touching a single thing, and “life is great.”
With the help of automation and outsourcing, you could get down to spending as little as ten to thirty minutes working on your drop shipping business. There are so many processes and details that can be automated, and possibly even outsourced with the help of a virtual assistant.
With automation and outsourcing, you can eliminate simple repetitive tasks or processes that tie you to your computer. Remember, take your time and do it right. Finding the best outsourcing shouldn’t be rushed!
So that's pretty much the seven step process to how drop shipping works the best way I could describe it. There’s even my favorite ‘bonus’ step on how I like how to keep the drop shipping business model simple.
Next time someone asks you, “How does drop shipping work?” You can explain (or show them this post) that it all starts with niche selection and market research, then creating your website before getting your suppliers. Once you have suppliers then you optimize for conversions, and then push traffic going to your store. After you start making money, and the sales keep coming in, then focus on automating or outsourcing as much as you can.
From there on out, there are a million other things you could do to make your drop shipping store better. But you shouldn't have to do any of them until all of that is functioning, until you did everything above, step by step. Once that is all up, it’s running, it’s working, it’s making you money, then it’s a great time to dive into the rest of the world of eCommerce!
Focus on the basics, make it happen, get results. Then start asking me the more advanced questions, start asking about what else we are doing on top of this. Start going through all of our additional courses in Drop Ship Lifestyle and that's when you can really, really scale things up.
A great place to ask your questions is during the Q&A section of my live webinar that’s coming up. Register now for your place and get ready to learn more about step 1 of the drop shipping process! See you there.
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