Don't Let The Economic Downturn Deter You

START-UP FINANCE – banks are now taking less risks and lending less money. If you are setting up for the first time they may see you as quite high risk, even with a very good business plan. Luckily dropshipping requires a lot less start-up capital then a traditional retail business. Try and use personal savings and ask for small loans from different friends and family to raise the money you need to star your business.

COST OF WAREHOUSE - a massive benefit of dropshipping is not having to hold stock, you can run the whole business from home. Although the property market may be falling banks are making it harder for you to ‘get your foot in the door’ (see what I did there!). Last year 85%-90% LTV (loan to value) was readily available from commercial banks, today LTV’s are much lower, typically 65%-70%. So if you need a business premise you have to raise more equity. As a dropshipper forget paying for an office, run the business from home!

LOW RUNNING COSTS - running your business from home means much lower running costs. Working from home you can also claim back a percentage of your gas/electricity etc costs from HMRC. Energy costs are also surging, some large companies are facing the prospect of a 100% rise in annual energy bills!

ECONOMIC CYCLES - all economies go in cycles, we have been in a long upturn and have now entered into a downturn (slowdown). This is a natural cycle. Start making money from dropshipping now and when the economy starts to pick up again your business should really thrive.

TOUGH TRADING CONDITIONS – This has become a popular phrase amongst retailers but don’t let it make you think starting a retail business is a bad idea. Online sales are still rising so it is still a great time to become an online retailer. Tough trading conditions also mean you have to excel to succeed, this will keep you on your toes and make you get the most out of your business. Tough trading conditions will also mean companies going bust, including big companies, watch your competitors fall as you get bigger and you know you are on the right track!

I posted in May about why now is an ideal time to invest in your e-commerce site despite the economic downturn. This post ties in nicely with that one so I highly recommend you also read that post.

Sources: The energy cost figures were taken from the “Surging energy costs hit UK plc” article and LTV figures were taken from James Caan’s article “Opportunity knocks when the gloom seems deepest” , both articles were published in yesterday’s Sunday Times.  

The First Customer Payment!

Whether it takes 1 day, 1 week, 1 month or even longer after fully trading on your own ecommerce website it is a great feeling and in some ways signifies the real birth of your business. It shows your website can convert customers; your price, payment options and website all satisfied the customer enough for them to buy. It is important to build on your first sale and continue pushing your business.

I like to think everyone has their own ‘business ball’, the faster you can get it rolling the more profit you make and the more growth your business can experience. Your first sale is like the first roll off the start line, you only reach the finish line when you sell the business in many years time for lots of money!

Now you have started your business ball rolling you want to build up momentum, know what you are good at and really work on it, and what you are not so good at get someone else to work on it! Try and find out how your first customer came to your website, if it was a particular form of advertising then repeat it over and over again (as long as it makes financial sense!) . Soon you might work up to an average on 10 customers per month, then build up to 20, then to 40, and before you know it you have hundreds of happy customers every month!

Many online businesses lose momentum (not just dropshipping ones), sometimes because the owner loses interest and sometimes the business ends up completely fizzling out and disappearing. Get your business ball rolling and don’t stop pushing, keep pushing and the business will eventually have a large customer base and be bringing in regular good quality profit.

You can only stop rolling when you sell the business and the money is safe in your bank account!

Avoid The Baddies!

What is a Scam? This is when a website just takes your money and runs. This is illegal and it is important you avoid falling for a scam.

Here are the telling signs of a middle-man or scam website:

• Contact details – these are very rarely listed on middle-men and scam websites. Real dropship businesses will normally list their email, phone number & physical address (needed for returns!). If a website only has an email address listed then email them asking for a phone number and physical address, if they don’t reply or give you the details then avoid them. Some middle-men may list a phone number, however it may just be an unanswered line. So if you are unsure about the website give the number a call, if they answer then enquire about a product. If you ring 5 times and they don’t answer then you know the score! Checking out contact details is probably the best single way to find out about a website/company.
• Payments – scams often have high value products listed with payment via a payment processor like e-gold. If a website only offers a processor like e-gold as an option then avoid them.
• Substantial set-up fees – Many legitimate dropshippers charge a fee to join (for various reasons) so don’t assume all dropshippers charging a fee are a scam, because they aren’t. However the ones that charge a ridiculous amount, EG £100, are to be avoided. Once you have paid and are in the members area you will likely see a crappy product range with prices that leave no profit margins for you.
• Product pricing – scammers often list high-value products which have big demand (ipods etc) at prices which are way below the retail price. Suprise suprise the product never turns up and your emails aren’t being answered. On the other hand be wary of companies who don’t list prices at all on the front-end of the website and expect you to pay to join them. Give them a call and ask them if they would kindly email you a price list of products for members. If the answer is NO then stear clear of them.
• How professional is the website/communication – look out for spelling errors, bad design, poor quality images and poor grammar. A professional business will make sure all of these are not present on their website. When you call/email the company how quickly do they respond, is the response concise and professional, did they even answer your question?

Conclusion
The points listed in this article WILL NOT make you bullet proof, you could still fall into a scam or end up selling products via a middle-man which could cost you financially and lead to you having to pick up the pieces of unhappy customers. If you have applied the points in this article to a website you are thinking of using and are still unsure about them then ask for further opinions on forums.

If we all avoid these middle-men and scams then eventually they will disappear, even if it takes years! If we cut out all the middle-men then the dropship industry would be more trusting and honest which would encourage more sales and dropshippers to expand benefiting all of us!

If you have other ways of spotting a scam or middle-man please make a comment below or drop me an e-mail.

Save Time Not Packing

1. You have the ability to start an online store with very little inital investment. Every business needs money to start-up, however the low cost of domains, free ecommerce software and various methods of free promotion mean you can start selling products online using only a small sum of money.
2. You can spend more time promoting, less time packing. If you sell in the traditional way (buy in bulk and sell on) you will have to spend a certain amount of time on each order packaging the product up and then going to the post office. With dropshipping you visit the dropshippers website and place your order, this time saved can used to develop other areas of your business.
3. Access to a much greater range of products. If you buy and sell products the chances are you won’t have enough capital to buy all the products you want (this could be many hundreds of products) or you may not want to risk so much in case the products don’t sell. Dropshipping means you can use a range of dropshippers to sell a large range of products without increasing business risk.
4. You can run everything from home. When your business really starts to pick up you should still be able to run your business from home, you may need to start using your dining room instead of your bedroom but you still save a lot of money on moving into new premises like a traditional bulk buying business would.
5. You don’t have to deal with customer returns and warranties. The dropshipper has to look after returns, so when any customers wish to return a product you just have to notify the dropshipper and supply a refund once the product is returned. This saves a lot of time compared to if you had to inspect every return and then go about selling the product again or writing it off.

All of the benefits listed evolve around saving time and money, both of which reduce business risk. If you have any other reasons you really like dropshipping which aren’t listed you are welcome to put a comment below.

Here is a situation many online sellers have found themselves in:

You come across a dropshipper who on the face of it looks quite good; flashy design, profit promises, fancy product pictures etc. But you want to actually experience the service first hand before using them as your dropshipper for your hard earned customer base.

So what do you do?

The only way to experience how good the drop shippers service is is to buy from them. Go through their site (may need to create an account to see prices) and list all the main products you want to sell a long with pricing. Preferably order a lower cost product to reduce your risk in case the website isn’t legitimate. Then once you have the product you can either sell it on, or keep it for future reference should you decide to start selling the product (having a physical product can often be great for customer queries) .

Benefits Of Test Buying

• You learn if they deliver goods on time
• You find out how they package products
• You see how good the product itself is & whether it was described accurately

Potential Problems

Some dropshippers require an upfront fee, in this situation paying a £30 fee just to test buy is obviously not viable! If this is the case you could try contacting the company and asking if there is a way you can make a special order on a specific product. If you explain you are looking to start selling lots of their products they are unlikely to turn you away when you could make them lots of money!

Another potential problem is the company could be a complete scam and you lose your money and end up with no product! When you come across all dropshippers always remember to check their contact page and drop them an email first to see how they react, you should also place posts on business forums or message boards to see if anyone else has experienced the company.

Conclusion

Test buying is a great way to find out how good a drop shipper really is, it gives peace of mind in a way someone telling you they are good just can’t do. If the service is poor you know you aren’t going to be able to use them as a solid base to build your business from. However if they provide a flawless service you know you can sell to your customers with confidence and increase your business profits!

Dropshipping is a small industry in the UK, part of the reason is because many people haven’t heard about it (yet). If this is your first time reading about dropshipping here is a breakdown of how dropshipping works.

Traditionally running a retail business has meant you have you to buy the stock up front in bulk and then hope to sell it all. With dropshipping you sell products which are held by the ‘dropshipper’, once you have a sale you send the order to the dropshipper and they dispatch the item to the customer. The dropship process means you can sell products without even having to see them!

The Dropship Process:

1. You find a dropshipper
2. You advertise their stock (on own website, ebay etc) under your own business name
3. Once you have made a sale you then purchase the item from the dropshipper
4. You give the dropshipper the customers address and they dispatch the product direct to the customer.

Your Profit: 
Your profit is the money left over from your sale after you’ve ordered with the dropshipper and paid any other cost of sales (E.G paypal fees).