If you had to choose one business model of the 21st century that divides more minds than any other, it would probably be dropshipping. The e-commerce concept has been on everyone's lips for years, is the subject of controversial debate and is touted as the Holy Grail by many people.

It is not uncommon for dropshipping to be portrayed in the wrong light. Unrealistic promises and rip-offs through coaching offers tarnish the business model, which is actually so promising and can offer young entrepreneurs in particular an easy entry into the business world.

In this article, we take a look at how proper dropshipping works, what is involved and which "red flags" to watch out for in the dropshipping scene.

What is dropshipping anyway?

Dropshipping is an e-commerce business model in which online retailers sell goods that they do not have in stock themselves. After you as a customer have purchased the goods in the online store, the retailer (dropshipper) orders them from the wholesaler or manufacturer, who then ships the goods directly to you.

Dropshippers therefore have no physical contact with the product and do not maintain a warehouse. In principle, dropshipping is a logistics service provided by wholesalers or manufacturers who, in the best case scenario, do not appear at all because the logo and sender address of the online store set up by the dropshipper appear on the delivered goods.

Customers therefore have the impression that the goods were sent by the online store itself. As a result, they return the goods directly to the dropshipper if they have a complaint. In German-speaking countries, dropshipping is also referred to as drop shipping, in which manufacturers, wholesalers and resellers or retailers are involved.

Manufacturers send the goods directly to retailers, bypassing wholesalers. Wholesalers only have a commercial function in that they are responsible for the ordering, invoicing and payment channels. 

The dropshipping model therefore has many advantages, especially for entrepreneurs who are just starting out in e-commerce. They do not need their own warehouse or shipping and logistics infrastructure.

How dropshipping works

1. dropshipping product

Whether dropshipping or not, the most important part of any store is the product you are selling. That's why the first step in the dropshipping adventure is to find a suitable product.

A popular model is to look for products that are currently enjoying great popularity on Amazon, eBay or in social networks. The disadvantage of such trendy items is, of course, that the hype disappears relatively quickly and the store that has been set up no longer generates much revenue. With this model, you jump from trend to trend.

Alternatively, you can also choose a timeless product for your store that will always be relevant and build a brand around it.

Once you have found a product, the next step is to find a supplier, i.e. a wholesaler from whom you can purchase the product. In the past, the preferred choice here was China. Products were bought at extremely low unit prices via platforms such as AliExpress or Alibaba and then sold in your own store.

This practice is much more difficult today. More and more regulations on the purchase and import of products from the Asian market, customs regulations and more are making "China dropshipping" much harder, at least for beginners.

Instead, for reasons of simplicity and less bureaucracy, we now work much more often with European or, in the best case, German wholesalers. Incidentally, this is not only simpler, but also considerably more sustainable and cheaper than the Chinese option thanks to shorter transportation routes and the elimination of customs duties.

But how do you find a good supplier? In the dropshipping scene, expensive supplier lists and memberships in "networks" are often sold. Basically, you can also - as stupid as it may sound - fire up Google and research suppliers in the relevant industry.

Many companies often state on their website that they offer a "reseller" or "white label" program. This means that you are allowed to sell their products under your own label.

2. dropshipping store system

Once you have found the right product and arranged a suitable cooperation with the wholesaler, you can start creating your online store. Nowadays, stores are generally no longer individually "coded". Instead, there are now ready-made store systems such as Shopify, Squarespace or Wix, which are particularly suitable for less tech-savvy users. 

Of course, great stores can also be built with WordPress - thanks to the freeWooCommerceplugin. The big advantage of WooCommerce is that you have complete design freedom and flexibility in the implementation of your store. You also decide where your data is stored, as you can host your WooCommerce store with a provider of your choice - for example, with a specialized WordPress host with data centers in Germany. 

Basically, all e-commerce building blocks have different advantages and disadvantages and it depends entirely on the use case which system is the right choice for you. Shopify, for example, impresses with a modern user interface, a simple backend and the convenience of an "all-in-one solution". There are many free and paid templates - so-called "themes" - for the implementation of a Shopify store. They all have a different look and offer an individual range of functions.

Creating a store with Shopify is therefore extremely simple. Pages can be created and designed in the "Theme Customizer". Products including quantities, product images and prices are entered in the backend. Developers with programming skills are only required if you want to add an individual element to your store that is not covered by your theme.

In principle, modern store systems already offer so much functionality in their basic versions that you can create an appealing store.

Marketing in the dropshipping business

You've found the right product and created your store - perfect. But no matter how beautiful your website is and how good your products are: If nobody lands on your store, you won't make any sales.

So now is the time to start advertising. Depending on your budget, you can bring people into your store in different ways.

Free traffic

The free options include social media and SEO. The former should be obvious. No matter what products your store offers, it's always worth being active on social networks. So create company profiles for your store on Instagram, Facebook, TikTok, Pinterest and co.

Especially at the beginning, it is worth focusing on the few platforms where you see the greatest potential. Create appealing content that offers added value for your target group. Avoid only promoting your products, because then you will be labeled as an advertising site and deter users.

It's all about a good mix: You can showcase your products, but your main focus should always be on creating high-quality content that really helps the community. For example, if you sell sports accessories in your store, you can post training tips on your social media channels.

Another marketing channel for which you don't need a budget at the beginning is SEO, i.e. search engine optimization. By strategically incorporating the keywords for which you want to be found via Google search into your store in meta texts, product descriptions etc., you make it easier for Google to find your store and can improve your position in the SERPs (search engine results).

Another key element in your SEO concept can be your own blog. If you equip your store with a blog, you have plenty of space to publish quality content. If you provide this with the right keywords, you can get potential buyers into your store via your blog.

Here, too, it is important not to advertise too much. To stick with the example from above: If you sell sports accessories, you should write blog posts that really benefit readers, i.e. about training theory, nutrition, fitness, etc. You then still have the option of discreetly integrating your products in appropriate places. However, the focus should always be on the added value for readers. This is the only way to bind people to your brand and provide a positive user experience.

My team and I have successfully applied this principle in one of my own store projects, for example: At Teslabs, we offer Tesla accessories and accessories. In a blog section, we write articles about tips and tricks for Tesla drivers. If they apply the tips and benefit from them, they have a permanent link to the store and the brand. This will also lead to sales in the long term as soon as the readers have a need for the products.

In order to achieve sustainable organic traffic, you also need to generate backlinks. These are simply links from other websites to your store. The more of them you have, the more trust your store has with Google. And the more Google Trust you have, the better your rankings will be and your traffic will increase as a result. You can generate backlinks by interacting with other stores, influencers and bloggers from your industry and building relationships.

Social media and SEO are good methods for increasing the number of visitors to your store without having to make any upfront financial investment. Of course, these methods are not completely free, as you have to invest a lot of time to be successful.

Paid Advertisement

How you set up paid dropshipping advertising depends entirely on the resources you have available. Fortunately, you can achieve a lot with dropshipping advertising, even if you only have a little.

There are three things you need to keep in mind on every platform:

1. your target audience

For almost every advertising platform, it is important to know who you want to advertise for. Think about who that might be. If you're dropshipping and selling sports pants, it won't do you much good to advertise to people looking for business shirts. The more target groups you can identify, the better.

2. your campaign goals

What do you want to achieve with your campaign? More sales? Brand awareness? Traffic? Based on these factors, advertising platforms can recognize how and for whom they should advertise. They analyze the users who frequently click on ads compared to those who actually buy something. If you're looking for sales, the platform will serve your dropshipping ads to people who are more likely to buy.

3. your keywords

As with SEO, keywords are expressions that people enter into search engines to find something. For example, if you sell sports pants for soccer players, "sports pants soccer" or another variation of the term could be a relevant keyword that your target group is searching for. It's your job to identify these search terms and target your campaigns accordingly.

Once you have a clear idea of your campaign, how do you get it across to people? You can find out which platforms and which advertising model are suitable for your campaigns here.

Google Ads: Pay-per-click (PPC)

As a giant of online advertising, it comes as no surprise that Google has its own advertising system - the so-called "pay-per-click" or PPC model. Under this advertising model, companies pay a small fee each time someone clicks on their ad. The most popular form of PPC is sponsored search results. You know when you google something and the first 3 results are sponsored companies? That's nothing more than PPC - and you can use it too.

For this type of dropshipping ad, you don't need pictures or videos, just a good text and a budget.

PPC works by targeting keywords. A keyword like "sports pants soccer" might be perfect for your store, but it's also quite specific, so not many people are likely to search for it. Keywords like "sports pants" or "soccer clothing" might have a higher search volume. The motto here is "research and test"!

Social media ads

Apart from PPC, social media is the most effective advertising tool for dropshipping ads. Facebook is still known as one of the most effective advertising platforms because it has a wide reach and a large number of users.

Even if you don't use Facebook personally, it's an important advertising tool for your business. All dropshipping ads on Facebook fall into two categories: Photo or Video. So you need great pictures or a snappy video to run successful ads on Facebook. The important thing is that they stand out from the crowd and perfectly represent the added value of your product for your target group.

Once you have created an account, the Facebook Ads Manager is your central point of contact for all your Facebook campaigns. There you can set up, run and monitor ads and create new ads.

In addition to Facebook, you can also run campaigns on TikTok or Pinterest. The ad managers there are usually structured similarly to the pioneer Facebook. TikTok in particular is currently used by many, as the prices are sometimes better than on Facebook.

The dark side of dropshipping

You now know what dropshipping is, how to find a product, create a store and market it. But as mentioned at the beginning, there is also a dark side to the dropshipping scene. We will now shed some light on this.

Distorted image

A distorted image of the business model has emerged over time, particularly through social networks in which young people present their supposed wealth achieved through dropshipping. Young people in particular are often caught up in this and approach it with unrealistic expectations.

At this point, I would like to make it clear that in 99 percent of the cases in which a dropshipping store makes a profit, it was not an "overnight success". I would even go so far as to say that there is no such thing as overnight success. Sometimes you might have a bit of luck and good timing and achieve good figures in a relatively short time without having to test too much.

Nevertheless, building a profitable e-commerce business (which is exactly the goal of dropshipping!) is always associated with extremely hard work. Especially in the beginning, when you don't yet have a large budget or a team. Product management, marketing, accounting, product procurement - you are responsible for it all.

The market is also huge. The fact that it is easy to create a store today is therefore both a blessing and a curse. Because it is easy for everyone, the competition is correspondingly high. Standing out from a crowded market is difficult.

This is not to say that it is not possible to be successful with dropshipping. It's just meant to give a realistic picture. Everyday dropshipping requires patience, perseverance and a willingness to learn.

Brazen rip-off scams

"Five-figure monthly revenue in one month". We've all seen YouTube ads like this before, haven't we? And while you may (rightly) laugh at them, there are unfortunately many people who fall for such exaggerated, unrealistic advertising ploys and buy overpriced coaching.

They usually don't offer any more know-how than you can get from YouTube videos, Udemy courses and Google.

Unfortunately, the dubious coaching scene is now as much a part of the dropshipping scene as Shopify. It is therefore highly advisable to be on your guard and stay away from dubious coaching. Self-study via free sources such as Facebook groups is usually the way to go to get good information and testimonials from other dropshippers.

Dropshipping Conclusion

Dropshipping is a fairly simple business model that can offer anyone an easy introduction to entrepreneurship. It is suitable for both small and large budgets and, thanks to modern store systems, is easy for anyone to implement.

When marketing your store, a good balance of paid and free channels is easy to achieve, depending on the resources available to you.

It is important that you know your target group and their needs and know how they behave - especially online. This is also important for paid ads, where keywords play a special role.

Of course, dropshipping has pros and cons that we don't want to ignore. On the flip side of the dropshipping coin are unrealistic ideas and brazen scams that play on people's wishes in order to take money out of their pockets without providing any real value in return.

The right mindset for a dropshipping project is therefore essential: if you are willing to keep learning, invest a lot of time, apply patience and energy on a daily basis and can demonstrate resistance to coaching ads, dropshipping may be of interest to you.