Dropshipping: This is the story of how I got $7k in sales in my first month (and growing) at 20% net
My (second) ecommerce site is www.foundry35.com which sells new age tech like drones & 3D printers as well as outdoor gear. Ecommerce has been a good way for me to get my foot through the door in the world of entrepreneurship & owning a business, and I’ve been doing it full time since I left my job in March of last year. I sold my half of my first site to my partner to start a pure dropshipping site which went live March 17 and did just over $7k in sales in its first month. It’s been basically all PPC driven and has still netted over 20%.
Having been on both sides of the table – held inventory vs dropshipping – I would say there are benefits and downfalls of both models, but that dropshipping is the way to go for someone just starting out, and still a very viable business model, albeit a competitive one.
It’s all information-driven (in the sense that you never have to physically see or store your products) and the only requirement is a laptop, which is incredible in its own right and very 4 Hour Work Week-esque. I’ve outlined the key steps below that I followed but would be glad to give advice or direction to anyone interested in doing something similar.
- Form an LLC in your state. Fill out the actual legal forms online or fax them in. Don’t use Legal Zoom. This is required and will cost a couple hundred bucks but is needed to open an account with any distributor.
- Open a Shopify store. Don’t worry much about the name. Keep it short and memorable. Pick a responsive, attractive theme. Only use stock images from brands for sliders (and product imagery later), and just use a simple & beautiful font for your logo. Don’t worry about branding.
- Think of a product/brand you’re personally interested in, Google “[product/brand name] distributor”
- Do some digging, find a distributor with lots of brands (dozens or hundreds, but probably not thousands – too many brands can be overwhelming and above the scope of a small dropship business)
- Apply for and open an account – this should be free. Get the distributor’s product file/inventory feed.
- Start doing market research. Go brand by brand in the product file, and search Google Shopping for ~5 products per brand. For each product, record the lowest price in a new column in the product feed.
- Once you’re done finding prices for all brands, go back and do some math. If the lowest online price is below the wholesale cost of the item, or the gross margin (1 – Wholesale Cost/Online price) is less than 10%, it’s not a viable product. If neither of those is the case, then list the brand! Keep in mind the drop shipping fees for distributors, which I’ve seen range from $2 – $7 per shipment in addition to shipping costs.
- Make a job listing and hire a VA on Freelancer.com for $2/hr to upload products. I’d say ~500 products is a good target starting out. Find the average discount for lowest prices per brand and set your own prices to be near the lowest price you found (while maintaining at least 10% gross margin), and use that discount across the brand to easily ballpark a competitive pricing strategy. Use the Power Tools Suite app to speed this up.
- Install the Google Shopping app in Shopify, and make sure all of your products have the requisite data for a data feed.
- Create an AdWords account, make sure to get the free $100 in Ads (Google it, I think Shopify provides this as well), and push your data feed to Merchant Center. Create your Shopping campaign and take your ads live. I’d cap ad spend at $20/day and start all products with a $0.25 bid to see if you can get some traffic.
- Flesh out the site a bit and link to a live Facebook account, Instagram account, Twitter account, and basic blog with an intro posting. These aren’t vital, but show that your site has a real live person behind it.
- Keep a close eye on your ads, polish the site and graphics, create lots of collections and organize the site to reduce clicks, and make sure to do a test checkout to make sure everything is working properly.
submitted by manofmeans