Dropshipping sounds like the best of both worlds. You make money selling products without having to put up the cash until you already have a buyer. You must remember, however, that success will depend on two things: supply and demand.
You need to make sure that you have a steady demand for and supply of the products you're selling. That means you've got to be careful about the products you choose and where you get them from.
The first thing you have to figure out is which products will sell. You can't rely on what you want, because you're not always the perfect representative of your target market. The only way to find out for sure is to examine buyer behavior.
Back in the day, market research involved tedious phone interviews, questionnaires, and focus group discussions. Today, you have most of the information you will need at your fingertips, if you know where to look.
A lot of consumers shop online, so you can track buying behavior such as what they are looking for, where they buy, and how much they are willing to pay.
The easiest way to find out what people are looking for is to use the keyword research tools that are available in the more popular search engines, usually for free if you register.
For example, Google has Keyword Planner, which is part of Google AdWords, and Yahoo has Bing Keyword Research. Other resources for market statistics are also available, but still based on search engine use. Some other free tools (usually requiring registration) that you may want to check out include:
You want keywords that get a lot of searches for obvious reasons, but these tools can also give you suggestions on related products that may also be getting a lot of hits.
For example, if you search for shoes, which is a very general keyword, keyword tools will suggest more specific items such as “running shoes” or “dress shoes.” If you type in "running shoes," it may suggest “Nike running shoes” or “Brook running shoes.” This can help you narrow your choices down.
When you've narrowed your choices down, or if you've otherwise decided to sell a particular product, you should check how they're performing in real time through online marketplaces.
At one point or another, most people who buy online have visited or bought from online marketplaces such as eBay and Amazon. Most online marketplaces are kind of cagey about publishing stats concerning transactional volume, but there are ways to find out.
A good resource for eBay sales stats would be the SaleHoo Market Research Lab. Members can search for specific products that get a good number of hits and find out how many people are selling them, how many sales there are, how easy the item is to sell, and what the average price is.
Immediately you have a snapshot of your chosen product's profit potential.
Now that you have determined which products are apparently performing well, you need to find out next whether you can get the products at reasonable costs and where from. Remember that as a dropshipper, you have the flexibility to choose what products to sell, but you are also at the mercy of where you buy your wholesale products from.
Your dropshipping business is only as good as the ability of your wholesaler to ship the products to your customers in a timely manner. So it is not enough to find a wholesaler that carries the products you need and sells them at a price you can live with; you also need to find out how professional and reliable the company is before you start selling.
First of all, the wholesaler should have an inventory monitoring system in place where you can track the products you're selling. You can't be flying blind when you're fronting for that supplier. If you do, you're going to catch hell when your supplier is unable to fulfill your commitment because the product is out of stock.
Remember that you will be the one who angry customers will be vilifying, so you have to be able to own your products even if they're never actually in your possession.
The second thing you need to check is whether the wholesaler is easy to get in touch with. While there is no real reason why a foreign company won't be as apt to fulfill your needs as a local one, physical distance and language barriers can often become problems when coordinating deliveries and processing returns.
It is a very real danger that you could be dealing with a bogus or unreliable operator that will promise you the sun and then leave you on the dark side of the moon. Test the waters with a supplier early on by personally making several small purchases, and having them delivered to different addresses to see how the orders are handled.
If the delivery is poorly managed, find another supplier. Even if you end up with a smaller profit, in the long run, you'll avoid major headaches.
And of course, you need to canvass for the best deal you can get for your products. If your costs are too high, the profit margin may not be worth the trouble. You have to consider not only the price of the product but other charges such as handling and delivery fees.
Most wholesalers will give discounts or other incentives for volume orders, so find out what your wholesaler can offer to shave a little more off your cost per item. Make sure you have everything in black and white before you commit to anything.
A final note
Choosing wholesale product for dropshipping is difficult because there are so many factors to consider. Finding a product with a good potential for profit is only half the battle. You also have to find a good, if not great, wholesale company to handle the actual fulfillment.
When you buy wholesale products for your customers, you will not be able to check what the dropshipping companies are shipping off because they go directly to the customers. It can ruin your reputation if your supplier turns out to be a shoddy operator, and it's hard to undo a bad rating, no matter if you're selling in an online marketplace or on your own website. In effect, you are placing your business in the hands of people you will probably never meet face to face.
While it is possible to find good suppliers of wholesale products online on your own, the chance of getting shafted is still pretty high. It's not so bad if you are merely a one-time buyer, but if it is your business on the line, it's not something you can just shrug off.
SaleHoo can do a lot to make the supply side of the equation much easier to manage by giving you access to a list of reliable suppliers, who've all undergone a thorough vetting process. You may want to invest a little more in establishing your supply chain at the start to save a ton later on.
What has been your experience with picking wholesale products for dropshipping? Drop us a line below.