What is dropshipping ?

One thing is certain about dropshipping... It's a hot topic.
Scam? Great opportunity? Bad strategy? The best business to start?
Together, we’re going to demystify all of that.
Spoiler alert: Dropshipping is not only still a viable method, but it’s also a growing business model that will continue to expand year after year.To make it simple, drop shipping is a business model that allows a trader to sell products without owning them, choosing instead to transfer the order and shipment details to another company for fulfillment.Each time a customer makes an order, the retailer sources the item from a third party and makes delivery to the customer. This has been embraced for many nascent businesses that are informed online.”In other words, drop shipping is a means of selling products on the internet without purchasing or owning any products. When a customer pays for a certain product through your store, you place an order to the supplier and they deliver the merchandise to the
customer

What are the pros and cons of Dropshipping ?

Global market size: The global market for drop shipping has been anticipated in the market research reports to grow at a CAGR of 28.8% between 2021 and 2027 and reach $591.77 billion in the market size.Common product categories: Currently, fashion products account for the highest percentage of sales in drop shipping followed by beauty and personal care, and home décor.Here’s an infographic to illustrate how the drop shipping model works:

Pros

Cons

FOR THE EXAMPLE, WE TOOK THIS PRODUCT

WHY IT CAN BE A WINNING PRODUCT FOR YOUR DROPSHIPPING WEBSITE

Branded

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OEM

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White Label

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Market studying of the targeted Market to validate the opportunity

Market analysis is a detailed assessment of your business's target market and the competitive landscape within a specific industry. This analysis allows you to project the success you can expect when introducing your brand and its products to consumers in the market. Market analysis includes quantitative data, such as the actual size of the market you want to serve, prices consumers are willing to pay, revenue projections, and qualitative data, such as consumers' values, desires, and buying motives.

Choose your dropshipping niche

Determine the market segment to target with specific products for a given audience. Be strategic; look for niches with stable but not saturated demand. Choosing the right dropshipping niche is crucial for achieving optimal sales.=> Set up actions to collect various types of data, such as surveys, questionnaires, opinions, forums, and discussions. This will enable you to compile analyses and key figures for studying the market.=> Use tools such as Google Trends or e-commerce-specific market analysis platforms to get a clearer idea of the areas in which you can grow with confidence.=> Analyze market trends: Keep an eye on the latest trends and identify less saturated niches where demand exists and competition is less intense.

Analyze demand and competing marketing strategies

Analyze demand and competitors' actions in your field. Conduct keyword research, examine target customer demographics, and assess average product prices to uncover market opportunities.=> To collect data on these different points, study your competitors' websites, social media, and marketing strategies to understand their strengths and weaknesses. This analysis will help you identify opportunities for differentiation and anticipate potential challenges.

Evaluate profitability and market figures

The final step in analyzing the dropshipping market is determining the price of the product. This involves understanding what your customers are willing to pay and what your competitors charge for similar products. Doing so can help you set a competitive price that maximizes profitability without alienating your customers.You also need to calculate costs related to your project, such as delivery costs, marketing expenses, and fees associated with your CMS and online tools. Creating a financial plan can also be a solution for assessing the long-term profitability of your entire business.

Best tool to find your niche ?

We have just explored the various steps for conducting a thorough market analysis. Here are some tools you can utilize during this process:Choice of dropshipping nicheHere is the primary tool you can use to identify a suitable niche for your products: the goal is to uncover new trends or tendencies, as well as growing or declining markets...Google Trends is easily accessible and enables the search for important information to understand the market clearly. Minea is also a website to keep updated the last updates of Ads on different social media.

Best tool for insights ?

Before launching your dropshipping activity, you need to be sure that there will be demand on the market. You also need to have clear insights about your competitors to differentiate your business.AhrefsThis tool’s main objective is to find useful keywords for all the nichesBy viewing if a keyword is very searched or not, you can determine the potential demand for your product.

• Clear here to discover the tool

Pricing Strategy

Now that you have a good idea of the Dropshipping Business Model, we will proceed to see how you can create an effective Price Positioning Strategy.
Here are the 3 main steps to apply an effective Pricing StrategyCost Analysis ⇒ Start by computing all costs related to your business: supplier costs, shipping costs, transaction fees (from payment platforms), website hosting, and marketing expenses...When all costs are known, set the minimum price required to cover costs.Desired Profit Margin ⇒ Decide on the profit margin (earning from each product sold) that would be considered reasonable. Common margins in dropshipping businesses are between 30-50% above the wholesale price (can vary depending on your niche). Make sure your pricing resonates with your image and the quality of your products to draw customers while keeping profitability.Maintain your pricing to be in harmony with your image and the quality of your products to draw customers in while keeping profitability.Competitive Pricing Analysis ⇒ Investigate the pricing of equivalent products by the competitors in the market. This would assist you in positioning your price; You can make it a little lower to appeal to price-sensitive customers or raise it in case your product has distinct characteristics or is of better quality. Alter your pricing approach after the competitor’s assessment to make sure you are not only competitive but also meet your profit objectives.

To remember...

The most straightforward method is simply offering free shipping on all deliveries and then just writing the cost into your product sale price.Free delivery is a great way to entice a visitor to your store into becoming a customer, even if the delivery isn't technically free. Additionally, most customers prefer the simplicity of not getting to the check out to see how much the shipping will cost.So let's say, for example, the product costs $5, the shipping is also $2, and you intend to double your money on each sale. You would combine these two costs and then double them to get your sale price.($5 Product Cost + $2 Shipping) x 2 = $14 Sale priceThe above is a very rough formula, but the final price should take into account your costs.
For a full pricing strategy guide.

• Check the article

Payment Structure & Order Fulfillment

Payment Flow: In this dropshipping model, the customer pays your business, and then you pay the supplier. This keeps control of transactions centralized within your business.Manual Fulfillment: This is the traditional approach where, after a customer makes a purchase, you manually place the order with the supplier. You provide the customer's shipping details, and the supplier ships the product directly to them. This method gives you control but can be time-consuming, especially with high sales volumes.Automatic Fulfillment: This method is more efficient and involves using agents or third-party services to automatically fulfill orders. These agents regularly check the orders placed by customers and handle fulfillment twice a day or as necessary. This can save significant time, especially as your business scales. Some agents offer fulfillment services directly, or you can outsource this task to a dedicated service provider.

Payment Solutions

PayPal: A widely trusted and recognized option with buyer protection, though it comes with transaction fees of 2.9% + $0.30 per transaction.
Stripe: Offers flexible, easy integration with e-commerce platforms, and charges the same fees as PayPal (2.9% + $0.30 per transaction).Shopify Payments: For businesses using Shopify, this integrated solution simplifies payment processing and avoids additional transaction fees when exclusively using Shopify.Klarna: Offers "buy now, pay later" options, making it attractive to customers who prefer paying in installments.

Payment Structure & Order Fulfillment

Fee Overview: Beyond product and shipping costs, a dropshipping business encounters several types of fees, including:
Platform Fees: Monthly fees for e-commerce platforms like Shopify (ranging from $29/month for basic plans to $299/month for advanced plans).
Payment Processing Fees: Fees from PayPal, Stripe, or similar payment processors (2.9% + $0.30 per transaction).Shipping and Handling Fees: Costs associated with packaging and shipping orders. For example, fulfillment centers like ShipBob charge $5 to $10 per order depending on weight and destination.Website Maintenance Fees: For platforms like WordPress and WooCommerce, domain registration and hosting fees are additional costs.
Subscription Fees: Monthly fees for apps, plugins, or additional services such as email marketing (e.g., Klaviyo charges around $20/month for email marketing services).Customer Service Fees: Outsourced customer support (e.g., Zendesk charges $19 per agent/month), or chatbot services (e.g., Drift starting at $40/month).Taxes and Duties: Sales taxes based on customer location, and import duties for international shipping.
Miscellaneous Fees: Includes fees for refunds, disputes, or chargebacks (e.g., PayPal charges $20 per chargeback).

Legal Structure & Business Considerations

Legal Entity: Registering your business (as an LLC, sole proprietorship, etc.) is crucial for legal protection and tax benefits. Depending on where your business operates, international compliance may be necessary, especially if you're selling across borders. For example, in France, you might consider registering as a local entity for easier legal and tax management.Business Structure: While paperwork isn't the priority in the early stages, it's important to eventually formalize your business structure to protect yourself and the business.Micro-Enterprise: A simple, easy-to-manage structure suited for small-scale ventures or startups. It has fewer reporting requirements but limited scalability.
SARL (Limited Liability Company): Offers more legal protection and flexibility than a micro-enterprise, making it suitable for businesses ready to expand.
SA (Public Limited Company): A more complex structure meant for large-scale businesses with significant revenue. This setup provides maximum legal protection but involves more detailed compliance and financial reporting requirements.Choosing a Structure: It's essential to select a structure that aligns with your business's current stage and future growth plans. Structures can be changed later as the business expands, but it's important to start with the right one for your needs.

Logistics

Starting a dropshipping business requires mastering logistics, from selecting reliable suppliers to managing shipping and customs. Choosing the right partners is crucial since you never physically handle the products.
It's important to work with suppliers who guarantee quality, fast delivery, and good customer service.Look for partners with a solid reputation, clear contact details, and reasonable delivery times.Checking product quality by ordering samples and ensuring communication is efficient will help maintain smooth operations and lead to happy, repeat customers.

Dropshipping tools

Dropshipping tools like Order Management Systems (OMS) help streamline order processing and inventory management, making logistics more efficient.OMS centralizes orders from multiple channels, handles partial shipments, and ensures quick transmission of orders to suppliers for faster processing.It also helps manage inventory by sending alerts when stock levels are low and preventing stockouts by synchronizing real-time updates between suppliers and sales channels.Tools like Shippingbo, Printful, CJ Dropshipping, Spocket, and Oberlo are popular choices, with Shippingbo, for example, offering basic features at around €29 per month. These tools allow dropshippers to focus on business growth while maintaining operational efficiency.

Order Processing

Order Processing: An Order Management System (OMS) is essential for efficiently handling orders from various channels. It centralizes all orders, allowing you to manage them in one place. If a customer purchases items from different suppliers, the OMS automatically manages partial shipments, ensuring each part is sent to the correct supplier for fulfillment. This tool also streamlines order transmission, allowing suppliers to process and ship orders quickly, improving efficiency and reducing the chance of errors.

Inventory Management

Effective inventory management is key to dropshipping success.Since you don't hold stock, an OMS helps you manage inventory seamlessly by syncing in real-time with your suppliers. It sends alerts when stock levels are low, preventing stockouts and ensuring customer satisfaction.
The OMS also allows you to adjust inventory based on sales data, reserve stock for specific events, and maintain smooth operations by preventing overselling.
Popular OMS options include Shippingbo, Printful, and CJ Dropshipping, with tools offering various pricing structures and features to suit your business needs.

Personae Time

In this section, we will discuss the utility of personas with a clear definition, explain why it is useful to employ them, how to create a good persona, and how to apply it to dropshipping. All of this will be integrated into a powerful and effective marketing strategy.A customer persona is a semi-fictional representation of an ideal customer based on real data and informed assumptions. It is a detailed profile that helps businesses understand their target customers, their behaviors, needs, and expectations, allowing them to better tailor their marketing, sales, or product development strategies.

What elements do you need to focus on ?

How to define it ?

Having a persona in a marketing strategy is highly beneficial as it allows for a deeper understanding of your audience, leading to more targeted and effective campaigns. It helps you grasp customer needs, motivations, and behaviors, allowing for personalized messaging and better audience segmentation. This ensures that marketing, sales, and customer service teams align their efforts, improves decision-making with data-driven insights, and enhances product development to meet customer expectations more closely.To define a customer persona, it's important to consider industry-specific characteristics, such as sales cycles, regulations, and trends that influence customer behavior. You should also study competitors and their target audiences, segment your market (B2B vs. B2C), and assess unique needs within your industry (e.g., safety in healthcare). This process ensures that your personas are relevant and tailored to your market, resulting in more effective marketing strategies.

How to apply it to dropshipping?

Define Your Niche and Target Audience: Research your market to identify a specific niche (e.g., fitness, baby products) and develop personas based on demographics, psychographics, and behaviors. This allows for market segmentation, helping you tailor your approach for different customer groups.Personalize Product Selection: Align your product offerings with the needs and desires of your target personas. By offering products that resonate with each persona, you can differentiate your store and attract more buyers.Create Targeted Marketing Campaigns: Customize your messaging to address the interests and pain points of your personas. Use specific channels (like social media or email) to engage your audience with personalized promotions.Optimize the User Experience: Design your website to align with persona preferences, ensuring a user-friendly experience. Implement customer journey mapping to improve online interactions and increase conversions.By applying these steps, you can create more targeted, relevant campaigns, leading to higher conversions and customer satisfaction in your dropshipping business.

Choosing your good KOL's

A KOL or influencer is a person with a reputation in a specific field and is perceived as an expert or authority by their audience. They are used to promote a product or service.
Their influence is based on their expertise rather than theіr popularity.

Useful tips

Case study Problematic : Boku

The product is not an innovation as such, and they are not the only ones to offer this type of product. For example, on AliExpress it's possible to buy a similar product for 3 euros a piece. But how do they convince customers to buy their product at 200 euros?
This case study aims to show how a strong brand identity can justify such high prices.

Case study Presentation

Hello Boku is a brand offering hygiene-related products, in particular bidets that function as practical, easy-to-install Japanese toilets. Their modern design offers a real alternative to traditional toilets. In addition to bidets, the company also offers a range of accessories to complete the customer experience.

Boku Strategy

Case study Strategy : Plushie Depot

Case study Presentation

Plushie Depot is a store specializing in the sale of plush toys. Its model is based on dropshipping, a type of e-commerce in which the company sells products without needing to stock them.
Plushie Depot uses both whitelabe (unbranded) and branded products. However, none of the products bear the Plushie Depot brand direcisely, which does not make it an OEM (Original Equipment Manufacturer).

Mixed Dropshipping

Plushie Depot can bе cоnsidered a mixed dropshipping model that sеll whitelabel and branded, but they don't allow the products themselves to be branded with their label: they use those of the manufacturer or the brand itself which is sold on other platforms. Their differentiation bases mainly on a more optimized customer experience, more transparency, and morе personalized product descriptiоns, which allows them to charge higher prices thаn the same prоducts on AliExpress.