How To Start a Dropshipping Business in 2021 Feature Image

How To Start a Dropshipping Business in 2021

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You’re here because you want to know how to start a dropshipping business. And you want to do it in the cheapest and fastest way possible. I hear you.

As you’re going through the contents in this article, you will realize I have categorized it in several key areas. You can click on any sub-topic below to jump straight into the sections if you feel you’ve already covered the basics.

Basics of Dropshipping

Dropshipping is simply one of the easiest and least costly method of doing an eCommerce online business. You as a business owner do not need to buy and keep products or stock inventory. I think this is one of the biggest cost saving factor for any especially if you sell products.

Keeping an inventory of products can be risky; what if the product becomes obsolete by the time you start promoting it into the market?

That is why many small business owners find it a ‘blessing’ to run a dropshipping business as they are not required to keep stock or even do the packing or shipping. All of this is handled by the supplier or wholesaler.

The image below explains this process.

How to start a dropshipping business model

  1. The buyer goes online in search for a particular product.
  2. The buyer finds your online store and makes an order from you.
  3. He/she pays for the product using a debit or credit card.
  4. You make a profit from the purchase and send the order out to your supplier.
  5. The supplier packs the product and ships it out to the customer’s address.

The process may sound simple but there is a lot that goes into a successful dropshipping business.

For further reading: Dropshipping Explained in Layman’s Term

The Most Common Dropshipping Model

Even within the context of dropshipping, there are many different models that operate but the most common dropshipping model would be the business to consumer model (B2C).

In a B2C model, small business owners sell their products or services directly to consumers either via their own custom branded online stores, Facebook, WeChat, WhatsApp OR from marketplaces like Lazada, Shopee, etc.

DID YOU KNOW? There are many business owners operating a dropshipping business but using marketplaces like Lazada and Shopee to reach out to potential customers too.

Well, there are pros and cons of doing dropshipping in this way but generally speaking, it is possible.

I know many small business owners who are doing it and are seeing great results. In a future article, I will reveal the steps on how this is done.

For further reading: Why Selling Products on Lazada or Shopee Is Not Good Enough

Top 3 Dropshipping Companies in Asia

In order for you to start your dropshipping business, you can either contact the product suppliers directly (on your own) or go through dropshipping companies.

Of course, contacting the suppliers directly on your own can be risky as you’re not sure how reliable or trustworthy they are or even if their products are of high quality.

That is why we highly encourage small business owners to link themselves with dropshipping companies instead. These companies are usually already in touch with reliable and trustworthy suppliers and therefore, as a dropshipper, you will have less to worry when dealing with them.

Let’s take a look at some of the popular dropship companies out there.

#1: AliExpress

AliExpress is probably one of the most popular dropshipping companies in the world.

AliExpress Website 2020

AliExpress is an online platform connecting international buyers from all over the world to small businesses in China. A wholly owned company of AliBaba, this platform is sometimes placed side-by-side with Amazon.

But here is the funny thing about AliExpress. They restrict and do not allow buyers from mainland China to use its platform. They also do not allow businesses or individuals who are non-Chinese to sell on their platform. Weird right?!

The other thing you have to note is, some of the stores in their platform have not put up sufficient product info and therefore, dropshippers often need to rely on their platforms rating system and reviews.

One of the top advantages of using AliExpress is they offer buyer protection. But this protection is conditional. Refunds are only given when shipped products are not received or if the product received is different from advertised in the case of high-ticket items like jewelry and electronics. No returns, no exchanges, no warranties.

In summary:

  • Product range: 100 million+ products; categories include clothing and accessories, cellphones, laptops, consumer electronics, jewelry, home and garden, luggage and bags, shoes, maternity and baby essentials, health and beauty, sports and hobbies, and many more
  • Payment: Accepts Visa and MasterCard, as well as other payment methods, but does not accept PayPal; has buyer protection
  • Required sales volume: None, but VIP membership available in three tiers for members having accumulated purchases greater than $999 within a 90-day period
  • Customer service: Customer help center with 24/7 live chat option; no email, no phone number, no US address
  • Return/refund policy: No return policy; limited refund policy
  • International reach: Ships to 237 countries and territories; some suppliers offer free shipping
  • Others: Well-established in the industry, and thus plenty of articles and resources are available online

TIP: We at eComYoda work closely with AliExpress. We are currently connected with 30,000 suppliers dealing with various products and niches. We have vetted these companies closely in the last 2-years. When you sign up for any of our business-in-a-box packages, we will do the research and find the ‘right’ supplier for you. This way, you can be rest assured to have a hassle-free dealing and your customers will receive high quality products from them.

#2: Oberlo

Oberlo Website 2020

Founded in 2015, Oberlo is another dropshipping company that has been getting rave reviews from small business owners all over. There is a saying in the eCommerce world,

“If you haven’t heard of Oberlo, you don’t know dropshipping!”

Well, I think that is a bit exaggerated. When I started dropshipping I never heard of Oberlo, probably because they weren’t as famous back then.

Oberlo’s parent company is Shopify. Probably that’s why it makes sense why they are always seen promoting Shopify as their preferred front-end online store developer.

With Shopify, Oberlo has made it easy for business owners to setup dropshipping to connect with suppliers from China and even from US and Europe.

But with any platform, there are obvious pros and cons. Let’s take a look at what they are for Oberlo:-

Pros:

  • Beautiful, modern user interface.
  • Tight integration with Shopify.
  • Easy one-click import of AliExpress products.
  • Free account to give you a taste of Oberlo.

Cons:

  • Works only with Shopify stores.
  • No shipment tracking, fulfillment monitoring or multiple users with free accounts.
  • Only supports AliExpress, for now.

Costs and Pricing:

Oberlo offers a free account but you’re limited to only 500 products and 50 orders per month. Paid plans jump to $29.90/month and $79.90/month, allowing you to scale with your sales performance.

#3: Kumoten

Kumoten Website 2020

Kumoten is a Malaysian ecommerce dropshipping company.

With Kumoten, business owners are able to get wholesale prices for various niche products on their platform. You can even dropship in Lazada or Shopee using their integration tool.

Unfortunately, Kumoten seems to have a below average rating of just 1.9 with Trustpilot.com.

Kumoten Review in Google Screenshot

Kumoten also claims to have 21,000 Lazada and Shopee sellers in their network which in my opinion seems remarkable, given their not so fantastic client reviews in Trustpilot.

Their customer support also seems on the fringe. We know this first hand. We tried getting in touch with one of their support personnel a few weeks ago but, to date we have yet to receive any response.

Here are some of Kumoten’s pros and cons:-

Pros:

  • Seems straight forward and easy to work with.
  • If you’re planning to dropship on Lazada/ Shopee Malaysia, then this service is a must have.
  • Product shipments are generally quick as they handle all shipments directly.

Cons:

  • Their tool is not so easy to use especially for beginners. You will need some technical know-how.
  • They have a free account but it is very limited. Proper features are in their paid account. (Rm199 p/year)
  • Need to place a security deposit of Rm200.
  • Have to manually submit invoicing for payment, for the products you have sold. No auto invoicing system.
  • Seem to be having some delays and issues with shipping.
  • Their customer reviews aren’t that great.

How Much Money Do You Need To Start a Dropshipping Business?

Ok. I’m sure you’ve got this question on your mind. The answer is, “depending on which tool and platform you’re planning to use and also which target market you want to sell to.”  

There are really 2-possibilities here:-

  1. You plan to dropship products to Malaysians.
  2. You plan to dropship products to other countries in Asia.

NOTE: Assuming you do not have any technical knowledge or skills to setup it all up by yourself and will need assistance from a professional company or someone who is technically sound.

Possibility #1: You plan to dropship products in Malaysia.

Assuming you’re planning to dropship products to the local Malaysian crowd, you will probably do it via Lazada or Shopee. For the dropshipping tool you can use Kumoten.

Here is the cost breakdown:-

Account opening in Lazada/ Shopee: Free
Kumoten tool: Rm199 p/year

Of course with just targeting the local Malaysian crowd, you will need to depend on the customer reach of these 2 platforms (Lazada and Shopee).

The other thing you will be faced with is having to pay high commission fees. Lazada takes a percentage of your sale for products you sell using their platform.

Because the Malaysian online shoppers market is still relatively low compared to our neighboring countries, you will also be competing with many local and foreign companies selling the same products at extremely low prices on these marketplaces.

Customers are always going to go for whomever is cheaper with the fastest delivery times.

For further reading: Why Selling Products on Lazada or Shopee Is Not Good Enough

Possibility #2: You plan to dropship products to other countries in Asia.

With this possibility, you plan to dropship to other countries in Asia. There are many Asian countries such as Indonesia, Thailand and Vietnam where there is an increase of middle income earners and online spending in the last decade.

Also, with the increase in mobile phone penetration among millennials and Z-gen, you can be rest assured the demand and purchasing power in these neighboring countries will be worth all the effort. Last year 2019 alone, there were about two billion mobile internet users in the Asia Pacific region.

Mobile Phone Penetration in Asia 2020

If you’re planning to go with this choice, you will need to have your own online store.

Why? Because if you plan to have a store in Lazada and Shopee, you will be required to register a business entity in each of these countries.

Of course, if you plan to use marketplaces as your core business strategy, then you might as well register a business in these countries and get separate accounts opened with Lazada or Shopee, else they may not allow you to dropship and sell products to consumers living in these countries.

Not so practical if you ask me.

So, what would I suggest?

A: Get your own custom-made, mobile-friendly online store and connect it with AliExpress.

Because, as a small business owner, you want to be able to sell to as many consumers as possible but at the same time maintain a certain level of quality and branding. The way this is done is, you will need to signup with AliExpress.

Then you will need to get in-touch with suppliers who carry your desired niche products. When you get in touch with them, they will prefer if you have your own online store or plan to have one. It just shows you are serious and they usually will give you a better wholesale pricing.

With your own custom online store, you can go ahead and add as many products you want together with the product titles, descriptions, images etc.

The rest of the steps on what else you will need to start your dropshipping business, I’ve explained below.

Exactly What You Need To Setup Your Dropshipping Business in 2021

  1. Which niche products to sell?

    Firstly, you will need to decide which niche products you want to dropship. Remember, not all products are money-makers. Some products have tiny profit-margins compared to others which means you will need to sell in bulk if you’re going to see any profit at all.
    Cost:
    US$50 (MYR200) per report. Comes with complete details of money-making niches, stats and which countries and cities to target your promotions to generate sales.

  2. Register the ‘right’ domain name (.com is always better)

    You’ll need to register a domain name for your online store. Since you’ll be targetting consumers from different countries, its best to purchase a .com domain. The domain name you choose for your online store is important as it should incorporate your store’s branding too. Make sure your domain resonates with your brand.
    Cost:
    US$15 (MYR60) per domain, per year.

  3. Dedicated eCommerce Hosting

    There are many different type of web hosting you can select but most web hosting companies that sell their hosting services on the cheap are able to do it because their clients websites are on Shared Hosting. If you want to give your customers an exceptional experience when they’re visiting your online store, I highly recommend you to go for Dedicated Hosting instead. The speed and performance of your store including the prvacy and security are they key factors why many established online stores choose dedicated hosting.
    Cost:
    US$4.25 per month billed annually – A2Hosting 
    NOTE: We highly recommend A2Hosting as our TOP choice hosting provider simply because we receive superior support from them and all our clients online stores are hosted with them. Not to mention their prices are also pretty reasonable. 

  4. Online Store Development

    There are several ways you can build your online store. Depending on your skill level and budget of course. Assuming you have zero knowledge in web design and programming, you will be better off hiring a web developer to do this part for you. You can easily hire one from gig companies like Upwork or Freelancer.
    Cost: 
    US$300 (MYR1,200) one-time.

  5. AD Plugin License

    In order to integrate the suppliers products, titles, images etc from AliExpress into your custom online store, you will need a special plugin called AD plugin. With this plugin you don’t have to manually insert products, reviews etc. Everything is done at a click of a button, automatically. The plugin also comes with product tracking.
    Cost:
    US$89 (MYR360) one-time.

  6. Payment Gateway Account

    In order for you to start accepting debit/credit card payments including online bank transfers, you will need register for a payment gateway account and integrate the API into your online store. You can use PayPal but I do not recommend it as PayPal’s high transaction fee will eat into your profits. Assuming you signup with iPay88 or eGHL (most popular local payment gateways).
    Cost:
    One-time setup fee: US$120 (MYR488)
    Yearly maintenance fee: US$123 (MYR500) per year.

  7. Social Media Brand Pages

    These days, every business needs to have a professional and functional social media strategy. It starts with having well-designed social media pages. The least you need to have is a Facebook and Instagram business page.
    Cost: 
    US$80 (MYR324) one-time design and setup for each brand page.

  8. Social Media Marketing (Product Advertising & Promotions)

    Social media has become the place to reach out to target customers searching for products you are selling. We prefer to use Facebook Ads and Google Ads due to the sheer numbers the ad reaches out to. We can also streamline and zoom in with precise profile targeting, meaning, we can reach out to buyers based on their interest, age group, professions, demographic, etc.
    Cost:
    US$80 (MYR324) – Facebook Ad setup
    US$80 (MYR324) – Google Ad setup

So, there you have it. If you’re planning to do everything on your own, that will be awesome. You will not only have to deal with the technical aspects of setting up your dropshipping business on your own but you will also need an upfront capital amount of approximately :

US$50 – Niche products report
US$15 – Domain name
US$51 – eCommerce hosting
US$300 – Online store development
US$89 – AD plugin license (to connect with your suppliers)
US$120 – Payment gateway account (iPay88)
US$80 – Social media brand page (Facebook only)
US$80 – Social media marketing & advertising (Facebook Ads)
======
US$785 – Total you will need if you’re doing it all by yourself.
======

In Conclusion

There are various methods and approaches you can take to start your dropshipping business. It really depends on you as an individual, your skill-sets and your budget. If you’re really tech savvy and feel you can handle everything on your own, then by all means go for it.

But if you’re like me, a simple guy who just wants to profit from eCommerce and dropshipping but do not wish to get your hands dirty in the technical aspects of setting up etc, you’d be better of selecting a dropshipping company to work with.

In fact, just for your info, we at eComYoda offer all the services mentioned above and we also provide a turnkey ecommerce solution to our customers at a much affordable rate. How affordable? 

Amethyst, our starter pack is priced at only US$349 (one-time)

Ultimately, running an online eCommerce business is truly a satisfying endeavor. You setup your own work schedule, timing etc, in which case, you’ll only need to spend 1-2 hours a day.

Like any business, there are risks, but with a dropshipping business model, you lower your risks tremendously simply because you do NOT need to carry product stock, inventory, retail outlets, employees etc. Dropshipping is truly one of the lowest entry level businesses compared to many business models, if you ask me.

Last but not least, I’d like to wish you Happy New Year 2021. May next year be more merciful to all. Spend more time with your loved ones this holidays and till our next blog post, take care and see ya.

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Amarjit S

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