Dropshipping is a tough gig to break into if you don’t know what you’re doing. You’ve got to find suppliers, perform market research and determine your target audience. You’re doing all the legwork yourself and it can be more than a little overwhelming. Perhaps the most disconcerting step to take in this process is the first: determining which products to drop-ship.
There are no shortcuts to the top in any endeavor, and building a dropshipping business is no different. In this case, the journey that lasts a thousand miles begins with one step, but that first step is a doozy. Almost like you started out hip deep in a mud pit.
Well, allow us to throw you a rope and help you escape this initial inertia with a bit of good old-fashioned education. Today we’re going to clue you in on how to determine popular and profitable products to drop-ship.
Together, we’ll accomplish this by:
- Examining product popularity/trends
- Price checking
- Examining profit margins
- Critiquing your choices
- Contacting suppliers
So without further ado, let’s take it from the top.
Examining Product Popularity
The most important question to ask about any potential dropshipping product is always: “Will it sell?” Unfortunately, asking is easier than answering. This is because answering always requires a tedious little chore called market research.
There are many different ways to research popular or trending products online. Take a look at SaleHoo’s video describing market product selection on eBay for a quick rundown on our preferred methods. For a more in-depth look, let’s not limit ourselves only to eBay.
Amazon Best Sellers is an awesome place to begin your market research. Here you can discover which products are flying off of Amazon’s warehouse shelves at the highest frequency. Not only that, but Best Sellers data can reveal which vendors are doing the most volume, which items are making it onto the most Wish lists, and which items are being gifted most often.
Sounds good right? So how do you do it?
First, go to the Amazon Best Sellers page. Then begin browsing the categories and subcategories that pique your interests, and look at individual item rankings. Keep a list of all the items you see that interest you, or strike you as an item you could see yourself selling.
No two dropshippers have the same method for choosing products to sell. It’s an extremely divergent process that differs wildly from person to person, but there are a few things you can look at to help you on your way.
- Risk- This is a combination of high price and low sales volume, and it’s something you’d do well to avoid. High-end electronics are good examples of high-risk products.
- Accessories- Accessory items (like smartphone cases) are always a good bet, because they open opportunities up for upselling and cross selling. Profit margins on accessories are usually much higher than the items that they accessorize.
- Scarcity- If it’s hard to find locally, it’ll be easier to sell online.
- Size- Simply put, shipping on large items is more expensive, and offering your clients free shipping is always a huge plus. So try to keep your items itsy bitsy.
- Distinction- How can you put a unique spin on the product you’re trying to sell? If these items are available from wholesalers at good margins already, it’s likely you won’t be able to compete on price alone. You may have to look into adding value through other means.
You can also read our guide on the best products to sell online.
Next, you want to see how many duplicate items you can find of each item you’re interested in selling. You want to compare prices across multiple Comparison Shopping Engines (CSEs) like eBay or Etsy. Not only do you need to check retail prices, but supplier prices as well. If you’ve already signed up or are interested in doing so, SaleHoo’s wholesaler directory can be a big help in this regard.
Record all the relevant data about your items into a spreadsheet. You’ll want to include:
- The item name
- The lowest price you saw listed
- The highest price you saw listed
- Sales volume
- And some general observations you make about the product
Keep the spreadsheet you create updated and refer back to it frequently. Doing so will keep you organized and informed about the different items you’ve chosen to drop-ship.
It must be emphasized that this is a LONG process. It’s simple enough perform, but if you want to be successful at it, you’ll have to put the proverbially requisite 10,000 hours in order to become a master researcher.
Examining Profit Margins
Now that you’ve got a good list going, and you’ve measured the prices for both buying and selling the items, it’s time to determine what kind of money you can make per sale. A good profit margin starts at 100%. If you can’t sell your products for at least twice what you’re buying them for, it’s probably not worth your time.
The best price range for you to actually sell your individual products at is around $70 to $150. That way you can be assured that you’ll be making a decent chunk on every sale, regardless of volume.
You’ll be surprised at how much markup you can get away with when you’re buying products wholesale. The average wholesale item gets annihilated with so many small fees that a markup of 1000% isn’t at all uncommon.
Critiquing your Choices
You’ve done all the relevant research, the margins look good, and similar items from other sellers are moving at an acceptable volume. Now it’s time to do a bit of reflection on your products. Ask yourself the following questions:
- What sets my products apart from my competition?
- How can I add value to my Unique Selling Proposition?
- Are my products available at big brand brick and mortar retailers like Walmart? (Hint: this is a bad thing.)
- Are my products only temporarily popular, AKA trendy? (Keyword research will help you answer this question.)
- How can I market these products?
- Will I be selling on my own website or through a CSE such as Amazon or eBay?
You have to think critically about the product choices you’ve made, and really examine whether there are any roadblocks to the movement of these items. If there are, then you need to address the issues before moving on to your final step.
Now that you’ve made your final checks against your market research and settled on a list of items you wish to sell, it’s time to get some samples from different suppliers.
Once again, if you’re already a paying member, our wholesale directory should be your first stop. However, you may want to try your luck outside of the reputable SaleHoo umbrella. Because in many cases, wholesalers don’t have their own websites, and have to reached via email. This can be a tricky proposition. You might first want to check out our comprehensive list of dropshipping suppliers before moving forward to next steps.
When contacting a supplier by email, be sure to represent yourself as an established business. If the supplier recognizes that you’re new to the trade, they will assume that they can’t make any money from you, and will ignore your messages. So be polite, persuasive, and professional in all your correspondences.
Once you do get into contact, inquire about free samples to judge the quality of the items. Often they’ll provide you with a few, depending on the product that is, and you’ll only have to pay for the shipping.
One more note about suppliers, never rely on a single source. Dropshipping is a cutthroat business on every side, and you can’t depend on every wholesaler. It’s always a good idea to diversify the influx of your products.
If you can follow these 5 steps to a “T” and think creatively as well as critically about your position in the market, then there’s no reason you shouldn’t be able to make a powerful passive income. So get started with your price comparisons right now, and if you have any questions about the methods we’ve discussed, let us know in the comments section.