Dropshipping – Part II

In this article, we will talk about the actual process of beginning and setting up your business. To get it running from zero and the very basic things you have to get it done after deciding what product to sell and which platform to sell on.

Starting Out: First you have to be thick-skinned. It is sometimes embarrassing to let people know you are doing business. Sometimes you may even be afraid that others will think that you are trying to sell them something. That kind of thing spoils friendship sometimes. But that is the quickest way to start. Remember you are letting them know you are doing this business. You are not using them to push a sale. Talking about it does not mean you are trying to get them to buy from you. True you can get by with just the cold market (people whom you do not know), but your starting will be awfully slow. Note that we are talking about low capital low cost way to start a business, not coming out with a million to throw into advertising and making it big. The warm market (people you know) is a good resource because people who know you may trust in your reputation and credibility. This first step of adjusting your mentality is very important. If you are not thick-skinned enough, you will miss out a lot of good opportunities.

Finding A Supplier: As we are starting a low cost business, we do not have the capacity to bulk buy products and store them at the warehouse. We can only take small volume orders at the start, often a single order at a time. You will have to find a supplier who is willing to sell you in small volumes. Small volumes usually do not have good prices, but depending on the types of goods you are selling, different margins are applicable. Do not think that just because you are a customer to the supplier, you will have an easy time buying. While there may be 1000 other people selling what you are trying to buy, they may entertain different starting volumes and set different pricing for their goods. What you have to do is to keep sourcing for a supplier that is able to match your small volume and pricing. A good before and after sales service is important too. You would not want to have a supplier who delivers slow, have bad quality products and seldom respond when you talk to him. This is especially important because the goods he supply will reach your customers, and your customers will find you if there is anything wrong. When that happens you will still have to go back to the supplier for an exchange or refund.

Settling Your Logistics: Some suppliers send only within their countries. Some will send it overseas for you at a higher price. You will have to see where are you selling to, and where are you getting your supplies from. If they are from different countries, then logistics may be an issue you need to settle. For example, I help customers buy from Taobao (the Amazon or eBay of China) and ship worldwide. Most of the Taobao sellers ship only within China. Sure there is the official Taobao logistics company which provide shipping worldwide, but they are slow and very restrictive on the types of goods you can send. Hence I will need to find a shipping company that can do the job. Same thing as finding a supplier, you will need to find one that has good service, does its job well at a reasonable price. Remember, as a customer, after you place an order you will be waiting eagerly for what you buy to reach you. Same for other customers. Although they may not expect Amazon Prime level of speed, an extended waiting time will wear out their patience and give them a bad impression. Sometimes you may wish to let the customers know beforehand how long should they expect the product to reach them, factoring in some buffer time. Then make sure that they get what they ordered as soon as possible.

While there is no need to show your customers this diagram, you should remember it so that you can use it to explain to your customers. Explain to them that their wait will be worth it. As you just started out on dropshipping, chances are you will go for the cheap and slow option. But feel free to tweak it according to your situation.

Directing Your Traffic: Use cheap products to direct customers to your store. Cheap items do not earn well. In fact selling these cheap items are not time and energy efficient if measured purely in terms of profit margin. For example, if I am a store selling furniture, I will also put some very cheap items inside, such as some cheap plastic stool that cost only a few dollars.

There are a few reasons to this. Firstly, people looking for cheap items will be lured into your shop. That is the first thing you need people to do. If nobody goes into your shop, naturally nobody will buy anything from you. Once they entered your shop, there is a good chance they will look around to see what you have to offer. Perhaps you have some other products which appeal to them, and they will also buy those items with higher profit-margin. That will be a win for you. Even if they do not do that and buy only the cheap items, you would have gained a customer and clocked sales. If the customer is satisfied, he may come back again, or may leave a good review for you. Every sales clocked increased your shop’s reputation, every review left by a satisfied customer increased your shop’s credibility. This in turn will push your shop to another level.

You may think this is useless. You want a targeted market and not resort to all these cheap tricks. Only people who wants my products comes to me. Unfortunately, things does not work that way. Every bit counts. There are so many thousands of people selling the same thing as you. There must be something that sets you apart. Do a little different here, do something different there, bit by bit, accumulate your differences and widen the gap between others and you.

Just as a side note, my own experience and other shop owners’ experience tally. The moment we took out our cheap selling products, our sales dropped. In order to clock higher sales in other products, we have to put in these cheap selling products to lure customers in and to drive up our sales and reputation count. Do not just put 1 or 2 cheap items. Put a few more.

Setting Your Pricing: While calculating pricing may not be a difficult task, it requires precision. Cost of product, cost of logistics, your own profit, the probability of product being spoilt and the additional cost of returning to the supplier and the probability of things increasing in price. Recently due to Covid and Governments printing money, inflation is ridiculous and things keep on increasing in price, but do you want to keep increasing your price every time there is a price movement and risk pissing off your customers? Perhaps you want to factor in a buffer for that too. I do that. But every product is different, so a buffer may not apply to you.

For certain products, the old pricing tactic still works. Instead of $10, try $9.95. Instead of $100, try $99. That few cents off the psychological gap makes people feel: oh it is lesser than $10! Old but still effective trick which you may wish to consider.

What about free gifts? People like free gifts. The more free gifts there are, the more attractive it looks. Have you ever come across people selling a rice cooker for $79, and there is a free gift of a rice scoop? That rice scoop cost $1, but the free gift makes people happy. Have you seen people selling a bicycle for $499, and giving a free bicycle ring bell, a free tyre air pump, a free tail light? The freebies are cheap, but with so many free gifts thrown in, it makes the consumer happy and feels worth it. For less than $500, I get a bicycle and 3 free gifts!

Whether you are selling your products more expensively or cheaply, giving free gifts is a very good way to make the customers happy. Customer experience is a very important thing which you should take note of. If done well, the free gifts could make up for or complement the shortfalls in the areas which are lacking in the Venn diagram above.

After Sales Communication: Now that you have set everything up, you have even clocked sales. How do you ensure customers return to you? Perhaps you can drop them a message, refer them to your Telegram channel which you update frequently about. I prefer Telegram over Whatsapp because a Whatsapp group has a limit of 256 people in the group, and it is the same for their broadcasting function. There are some who encourage sellers to go for email marketing instead, saying that email is still the most effective way to reach the target audience. I do not know about that, but do not expect to write a few lines and send out an email. You have to design a proper decent newsletter, or at least have some basic layout and formatting to capture the audience’s eyeball. All of us use email ourselves. Ask yourself if you will be interested in an advertisement email with no fanciful newsletter layout and pretty pictures? Do we all not think that emails with only a few lines of words are spammy and scammy?

Personally I still use Telegram (@my_office_home) because it is far easier to do a small advertisement on it. I can also easily keep track of how many people subscribe to my channel (of course you can also do that to email marketing). For example I can just send out an advertisement like this:

This sort of advertising method allows me to type my advertisements any time, anywhere I want without the need to design fanciful newsletters and posters. It may not be the most effective way, but its convenience of use is certainly sufficient for my level. Perhaps when I do bigger and expand, at a time when I could actually afford to hire people, maybe then that would be the time I turn to email marketing as an added channel to reach the greater audience. Advertise frequently, so that people will not forget you. People these days have very short term memory. If Nike and McDonalds advertise frequently, so should you.

Namecards are not necessary at this point in time if you are doing dropshipping, since you will not see the package and the supplier will most likely not slot in your namecard for you. Unless you are holding on to certain inventory which you send out personally, if not I think you can save on namecards and thank-you cards. On this note, also do take note of dishonest suppliers. There have been multiple stories of suppliers knowing their customers dropship, and secretly inserted their own namecards into the package so that the customers will be able to contact them direct, skipping the middleman who is you in the future. While doing this on the longer term would mean that the supplier gets caught and subsequently losing a majority of their business, but you would also have already suffered the loss. So on that, be careful. You could send a test package to yourself every now and then.

The First Sale: Many dropshippers do not start out with a bang. Jack Ma, the founder of Alibaba and Taobao, said that when his platform just started out, he and his partners ‘buy’ from each other to clock sales and generate human traffic. It was some time before they made it decent. Personally, I clocked my first sale somewhere between 3 to 6 months after I started out. Sales was slow at that time, but it slowly build up as people get to know you. Sometimes you get people who referred customers to you too, having being satisfied with your service. While there are people who do well quickly, you should persist for a period of time, repeating and refining what you should do again and again, until you clock your first sale.

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