Are you looking for lucrative additional income without much effort and ideally from home? Then dropshipping might be something for you. This is an exciting business model that has become increasingly relevant in recent years.
You can find out exactly what it's about and what you need here.
What is dropshipping?
With dropshipping, also known as dropshipping or direct trading, you generally trade goods. However, these are not in your possession.
You're basically just the middleman. Although you offer the goods, you do not have to purchase them in advance from the wholesaler in order to be able to sell them. As a rule, a customer order is passed on directly to the wholesaler, who packs the goods and sends them directly to the end customer.
Means: You market the products; However, the wholesaler you work with will take care of storage and shipping.
The purchasing costs only arise when the customer has already paid for the goods. This means that you initially only have a low risk because you need little equity.
Example: If you have a shop in which you display the products, you need a room in which you store them and in which you present them to customers. This means you have to purchase the products from the wholesaler in advance. You are then dependent on selling the products, otherwise you will make losses.
Of course, the same applies if you only offer your products in an online shop but act as a direct retailer. Then you don't need a sales room, but you do need a way to store the products and you have to purchase them in advance from the wholesaler.
But can anyone really start dropshipping and what are the disadvantages of the model in the end?
Dropshipping: Important requirements before you start
To start dropshipping, you must first meet a few requirements. As a dropshipping retailer, you are a sole proprietor. This means that you can also be held liable if you cause damage. However, if there is damage to the product, liability passes to the producer, unless the products are not approved for the European market.
To be on the safe side, you should make sure that the products you sell have the CE logo. You should also take out commercial liability insurance.
Since processing returns often proves to be complicated, you should choose a product category that does not have a high return rate. You should keep running costs low and invest your time primarily in marketing and advertising.
Tipp:A clear shop page that clearly shows what it's about is the be-all and end-all here.
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Dropshipping: What fees apply?
Even if the costs for you as a dropshipping retailer are limited, there are a few fees that you will incur. This includes:
- The purchase price of the goods
- Shipping costs
- Possible customs fees
- Administrative costs
- Marketing costs
Step-by-step instructions to start dropshipping
Step 1:First you have to think of a business idea. Of course, you need a product field that you want to offer to end customers. This could be, for example, office supplies, decorative items or cosmetic items. Find out well in advance about your competitors and what challenges you may face in the respective product category.
Step 2:In order to be able to trade products in Germany, you must register a business. This means you will automatically be reported to the Chamber of Commerce and the tax office.
Step 3:The next step is one of the most important and takes some time. You now have to find a supplier. Which wholesaler you choose should be carefully thought out. In the end, the success of your trading largely depends on this.
The general conditions are also important here. If you want to source products from other countries, something from China, you have to deal with the country's legal regulations.
Step 4:Now you have to choose your shop system. There are various options here. However, the easiest way is to use a shop system that already includes dropshipping functions.
Step 5:In the next step, you have to select suitable products from your chosen product category and place them in your shop.
Step 6:Marketing and customer support are among your biggest and most important tasks as a dropshipping retailer. Of course, this also includes the constant development and optimization of your shop. Ultimately, you have to develop a brand and convince the end customer to buy the product from you.
Dropshipping: These are the advantages
- No costs for storing goods
- You hardly need any equity
- The logistics, i.e. shipping and storage, are taken care of
- Costs only arise when the end customer has already paid -> therefore low risk
Dropshipping: These are the disadvantages
- As a sole proprietor, you can be held liable for damages you cause
- Since you only buy individual products, the conditions you negotiate with the wholesaler are often worse. This has a negative impact on profits.
- You haven't seen the product and you have no control over the quality, shipping speed or inventory
- Returns can be problematic
Conclusion on dropshipping
All in all, dropshipping is definitely a lucrative way to make money on the side. You can largely determine how much time you spend yourself, but you have to invest a lot of time, especially at the beginning, to find a useful product and the right wholesaler and to set up a shop. At the same time, you hardly need any capital.
If you have a good idea, for example because you have found a niche product that you are sure will be of interest to customers, dropshipping can definitely work well.
However, you should be aware that it will be difficult to achieve a high margin as many of the tried and tested retailer tools such as cross-selling or discount promotions are not possible.
Sources:
European Consumer Center Germany
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