What is dropshipping? Dropshipping is a hands-off form of order fulfillment where the seller forwards customer orders to a manufacturer who handles fulfillment. It can be the basis of your ecommerce business or can be used in conjunction with multi-warehouse selling to supplement your other forms of fulfillment, such as Amazon FBA.
Dropshipping is an attractive option for sellers. We talked a few weeks ago about what makes dropshipping so great for online retailers looking for the best way to fulfill orders. Because the seller doesn’t stock the inventory, and won’t be charged until a sale is made, the initial investment to start a dropshipping business is much lower than more traditional models. It also allows for a more diverse range of products, since the seller can work with manufacturers from across niches.
But that’s just an overview. To get a little deeper in dropshipping strategy, let’s take a by-the-numbers look at the best products to dropship.
$50 – The max suggested price of a dropshipped item
In order to make dropshipping as profitable as possible, you need to move a large amount of product. There’s a lot of competition in dropshipping. Retailers are always trying to undercut each other, collectively driving down prices and lowering profit margins. Some items, like phone chargers, have a profit margin of less than one cent per sale.
That’s why the best products to dropship are items that can be sold for less than $50. You don’t want to price yourself out of any sales, and $50 is low enough to fit into most people’s budgets. If you go too low, you risk overhead costs and collective repricing eating all your profits.
100% – The ideal markup
You will not be the only seller your manufacturer works with when you’re dropshipping. Since the supplier makes money on every sale and takes no risk when allowing retailers to list their catalog, it is in their best interest to partner with as many sellers as possible. In order to prevent their sellers from cutting prices so low it damages the brand, suppliers often impose a minimum advertised price (MAP) policy. This guarantees a certain minimum markup.
The ideal markup you want to look for with a supplier imposing a MAP is 100%. It ensures that you can make the most out of each of your sales without pricing yourself entirely out of customers. Combined with the first rule, we’re suggesting the best products to dropship should be around $25 wholesale and $50 MAP. It’s one of our favorite pricing strategies and is the best way to make great money dropshipping.
1 Pound – The max weight for a dropshipped item
Running your dropshipping business as efficiently as possible keeps your costs low and your profits high. One of the biggest negatives to dropshipping is that the hands-off fulfillment leaves you liable for shipping mistakes that you had nothing to do with. If something breaks during delivery, you become a middleman between your customer and the supplier.
If you keep your items below 1 pound in weight, you take a two-fold approach to protecting yourself from this. Firstly, shipping lighter items is a lot easier and carries less costs. Secondly, the product is less likely to be damaged or broken during shipping. In this case, the best offense against shipping errors is a good defense.
Top 5,000 – The Amazon best seller rank for similar items
The next two numbers involve making sure the products you choose to dropship have enough interest to generate year-round sales. Seasonal items can be great revolving products to supplement your sales, but your bread and butter should be something that you can sell all year long.
Amazon is the most popular ecommerce site on the internet, and one of the best marketplaces for sellers. Its sales data should be used as a resource for determining which items are popular. That’s why you’re going to want to aim for a product with similar items in Amazon’s top 5,000 best seller rank. The best seller rank is divided into categories. When you find an item you’re thinking about dropshipping, check to make sure you can find something similar already selling well on Amazon.
Over 100,000 – Monthly combined searches for top three keywords
The next way to evaluate the potential popularity of your product is through search volume. Amazon is the big fish, but it’s not the only game in town. Using the volume of Google searches and other search engines allows you to get an even broader picture of how many people are interested in buying a product.
Use Google Adwords to search for some of the keywords for your product. The magic number you want to find is 100,000. Any less and you’re looking at an item without enough interest to generate significant profits. Any more and you’ll find yourself in a niche with too much competition. Here are some other niche characteristics to avoid when finding the best products to dropship:
- Niches dominated by brand names
- Niches in which the health of the participant could be in danger
- Niches that require a great deal of technical knowledge
20 – The number of dropshippers you should contact
The most difficult part of dropshipping for many people is finding a great supplier to work with. Many of the manufacturers are based in China or other countries. Communication can be slow. They are liable to drop out of the conversation at any point with no explanation, and then you’re stuck having to play email tag.
As you’re making your initial contacts for your dropshipping business, you should send feelers to at least 20 different suppliers. You can find these suppliers on Alibaba, which also gives you their contact information to connect with them. From there, many will eliminate themselves by having poor communication and shoddy terms. Here’s what to avoid:
- Subscription fees
- Slow communication
- A mix of wholesale and retail
- Bulk orders in advance
Top Product Categories in Dropshipping
Now that you understand the strategy to starting and running a successful dropshipping business, we have compiled a list of top product categories for you:
- Health and Beauty Supplies: Such as makeup, shower products, and skincare. These products are renewable, meaning you will be able to develop a strong customer base that consistently repurchases products. Also, health and beauty supplies can be purchased at a low wholesale price and the weight of these products is often very low.
- Computer Accessories: Such as USB drives, laptop batteries, and laptop cases. These products can also be purchased at wholesale prices when bought in bulk, allowing you to have a bit more room to make a profit. For this category of products, the main benefit is the potential sell multiple items in various bundles.
- Clothing: Clothing is a universally attractive commodity to customers and is in demand year round. There is the potential to create loyal customers who will continue to buy from you. Focus on providing good customer service and quality product to build repeat customers.
- Cell Phones and Accessories: Selling cell phones and their related accessories can be advantageous because they are lightweight, high in demand, and you can stock multiple different brands. When you sell a phone, you have the potential to make another sale by offering related accessories.
- Party Supplies: With the new era of social media, parties are becoming more extravagant and happening more often. Capitalize on this trend by selling party supplies. These items are usually cheap, lightweight, and easy to sell in bundles.
The numbers don’t lie. Dropshipping is a great way to enter the ecommerce field. Ecomdash + Dropshipping = The simplest way to run a business, especially when you’ve got the best products to dropship. Hopefully these tips add up to a great strategy to find the best products.
Editor’s Note: This blog post was updated in June 2017 to reflect more accurate and relevant information.