Need advice on setting up an e-commerce/dropshipping business

[Jack G]

Hi guys,

I’m looking to set up a side e-commerce or drop shipping business alongside my full-time job. My target is to increase my income by £500 per month.

Therefore, I am looking to get some advice on the following:

• How can I determine what products to sell?
• Where would be best to sell Amazon, Ebay or my own webstore?
• Do I need a limited company to start trading, or can I do it as a sole trader?
• Do I need to brand my products, if I opt to resell cheap goods from Alibaba etc?

Thank you!

 

[MBE2017]

Hi guys,

I’m looking to set up a side e-commerce or drop shipping business alongside my full-time job. My target is to increase my income by £500 per month.

Therefore, I am looking to get some advice on the following

• How can I determine what products to sell?
• Where would be best to sell Amazon, Ebay or my own webstore?
• Do I need a limited company to start trading, or can I do it as a sole trader?
• Do I need to brand my products, if I opt to resell cheap goods from Alibaba

Thank you!

You need to decide what products, no one is going to tell you.
Best place to sell? Hard to say without knowing your products.
You can trade as a ltd co or sole trader.
You can rebrand if you wish.

Can I just say, you need to research a lot more before starting.

 

[Jack G]

You need to decide what products, no one is going to tell you.
Best place to sell? Hard to say without knowing your products.
You can trade as a ltd co or sole trader.
You can rebrand if you wish.

Can I just say, you need to research a lot more before starting.

Yes certainly, I will do market research before I put any cash in it. I just wanted a flavour of how people go about deciding what and where to sell.

 

[fisicx]

There are no rules. You find a product or niche, you find a dropshipper, build a website and you then spend all you free time marketing. Eventually you will sell things.

 

[Jack G]

There are no rules. You find a product or niche, you find a dropshipper, build a website and you then spend all you free time marketing. Eventually you will sell things.

Sounds good to me!

Do you know the range of margins people make dropshipping? Is it feasible to make £500 per month without doing huge revenues. Or will it take a substantial marketing investment to get to that?

 

[Alan]

If you hold the stock yourself, depending on product you normally would be at around 40-50% except electrical tech good that could be very low for some things like 5%

I'm not sure about drop shipping % but I would guess at the 5 - 10% range maybe some as high as 20% so a turnover of some £10,000 - £2,000 per month

Lets assume a mid level £5,000 per month, then it depends on the product what the average order value is, lets say £50 so 100 orders per month.

A typical (but nothing is typical ) conversion rate from visitor to purchaser is 0.5% to 3%

So you will need to attract some 10-20,000 vistors a month.

This is no easy task, and as @fisix says you will need to devote a lot of effort to marketing.

It certainly is not the case of 'build it and they will come'.

 

[Jack G]

If you hold the stock yourself, depending on product you normally would be at around 40-50% except electrical tech good that could be very low for some things like 5%

I'm not sure about drop shipping % but I would guess at the 5 - 10% range maybe some as high as 20% so a turnover of some £10,000 - £2,000 per month

Lets assume a mid level £5,000 per month, then it depends on the product what the average order value is, lets say £50 so 100 orders per month.

A typical (but nothing is typical ) conversion rate from visitor to purchaser is 0.5% to 3%

So you will need to attract some 10-20,000 vistors a month.

This is no easy task, and as @fisix says you will need to devote a lot of effort to marketing.

It certainly is not the case of 'build it and they will come'.

Ah right, thanks for this.

I think I’ll start out super small and try to grow it slowly.

 

[Mr D]

Hi guys,

I’m looking to set up a side e-commerce or drop shipping business alongside my full-time job. My target is to increase my income by £500 per month.

Therefore, I am looking to get some advice on the following:

• How can I determine what products to sell?
• Where would be best to sell Amazon, Ebay or my own webstore?
• Do I need a limited company to start trading, or can I do it as a sole trader?
• Do I need to brand my products, if I opt to resell cheap goods from Alibaba etc?

Thank you!

If someone suggest products to you they are either trying to steer you away from what they do or else scupper your chances of making money.

A good method is look at your own life. What do you like, what are you into, what do you do in your spare time for enjoyment? Start with that - you know some of the needs already, you know how at least one of the customers for that thinks (you that is).
If you are into fishing then start with looking at fishing.

3rd party sites like ebay, amazon etc (there are dozens more) can be useful but those two do have time delays on payment. Ebay you get paid into your bank a few days after the sale, amazon its around 3 to 4 weeks after the sale. So have enough money to pay to send the goods.

Your own site can be set up fairly cheaply. However the problem is getting noticed. May be a million new sites set up that month and the hundreds of millions / billions already in existance selling stuff.... so rather than being on page 467 of a google search you have to work to get noticed.

You can brand products. However again the problem is getting noticed. People know of Adidas trainers, they don't know Jack G trainers.
Plus the fun of making sure your products are legal to sell here. There's stuff you can buy there that as it is you cannot sell here. With alterations (labelling, testing etc ) then maybe.

Learn bit by bit. Baby steps. Learn to sell before learning how to import before learning how to do own brand stuff.
Nothing wrong with selling on ebay, amazon and your own website. All at the same time. Start with one, add another .... baby steps.

 

[Mr D]

Sounds good to me!

Do you know the range of margins people make dropshipping? Is it feasible to make £500 per month without doing huge revenues. Or will it take a substantial marketing investment to get to that?

There are people doing dropshipping who have tens of thousands of listings to get a few dozen sales a day to get a couple of quid profit per sale.
Dropshipped goods tend to be higher price to you than wholesale price, if you sell for the same as a retailer who holds stock then your margin will be smaller. However your costs are limited and time spent dealing with the sale minimal.

Just be aware than a single return by a customer can wipe out a chunk of your profits. You get to refund the buyer in full, including postage despite the fact you have paid that out.

 

[Jack G]

There are people doing dropshipping who have tens of thousands of listings to get a few dozen sales a day to get a couple of quid profit per sale.
Dropshipped goods tend to be higher price to you than wholesale price, if you sell for the same as a retailer who holds stock then your margin will be smaller. However your costs are limited and time spent dealing with the sale minimal.

Just be aware than a single return by a customer can wipe out a chunk of your profits. You get to refund the buyer in full, including postage despite the fact you have paid that out.

Thanks for the great advice Mr D, much appreciated.

 

[antropy]

Yes certainly, I will do market research before I put any cash in it. I just wanted a flavour of how people go about deciding what and where to sell.

Look on eBay and other platforms at what things are selling well, and then see if you can buy them at a price that would make it profitable for you once you've considered all overheads.

Paul.

 

[Ozzy]

I have a friend who runs a business that has some technology that finds things on sites like Amazon and automates selling them on eBay, or something like that.
I don't pretend to understand exactly how it works, and to be honest I rib him all the time saying he's running a pyramid scheme, but jokes aside he actually makes good money and never has to touch the product. I'll try and find out what this sort of stuff is actually called and post it later if you're interested.

Not something that interests me personally, I like the feel of a tangible business with a product or service you can influence and get into, to differentiate yourself.

 

[mattk]

I have a friend who runs a business that has some technology that finds things on sites like Amazon and automates selling them on eBay, or something like that.
I don't pretend to understand exactly how it works, and to be honest I rib him all the time saying he's running a pyramid scheme, but jokes aside he actually makes good money and never has to touch the product. I'll try and find out what this sort of stuff is actually called and post it later if you're interested.

Not something that interests me personally, I like the feel of a tangible business with a product or service you can influence and get into, to differentiate yourself.

It is called amazon to eBay arbitrage. The problem is, as you say, it can be automated, so is ferociously competitive. Most people make more money selling arbitrage bots or training courses than actually doing it themselves.

 

[Ozzy]

Most people make more money selling arbitrage bots or training courses than actually doing it themselves.

Just checked. He sells the course on how to do it

 

[WebshopMechanic]

Hi Jack,

I'm a bit late to the party but thought I'd throw my twopenn'orth in.

OK, your questions.

How can I determine what products to sell?

Mr D made a good point. Think about your own life. If you're passionate about something then it's much each to have it as a business because you won't be so stressed.

Other Thoughts:

Think about problems. A product that solves a problem is much each to sell than I nice-to-have. People need products that solve problems and take a pain away

Steer clear of:

• Tech - Too much to go wrong. High returns rate.
• Watches - May look sexy but it's so competitive and limited purchase opportunities further down the line.
• Fashion - Sizing is a headache and returns are high.
• Food - Sell by dates can lose you money.
• Printed T-shirts - Flooded market, hard to be seen.
• Teeth Whitening - If you're going to drop ship from China then please don't touch anything like teeth whitening or cosmetic. People are shilling this all over Instagram and Facebook and the stuff hasn't even been tested or approved. It's a lawsuit waiting to happen, not to mention some poor bugger's health. Steer clear!

Good products to sell:

• Pet products - People love their pets and will spend money on them.
• Weddings - Spend is driven by emotion. People will pay for quality or products that fit their theme.
• Basic Kids Toys (Puzzles) - People spend a lot on kids and they have relatives and friends who are always buying gifts. Huge market and opportunity but stay clear of anything with batteries.
• Basic Kitchen Products - Simple, low-cost to source and can easily be bundled. Look at Joseph & Joseph. They charge a bloody fortune for pretty, posh design.
• Funeral Products - Sounds grim but the 'death industry' is highly profitable.
• Outdoor Products - Camping, fishing, etc are all good opportunities because products often provide utility.

Ultimately, you need to good niche and look at products that aren't 'sexy' but more functional. Sexy products have high competition and are usually a one-way ticket to 'a world of pain'. Believe me. Been there, got the t-shirt. Basic products or very niche products with problem to solve, not so much.

To help you find market trends you could use Google Trends or an SEO tool that shows monthly search demand. SEMRush is an awesome tool and has a free trial. This will give you an idea of what keywords and phrases people are searching for around a subject.

You can also look at online stores within the industry to see what they are pushing. Check their best-sellers lists.

'Golden Nugget' suggestion:

Check out the negative reviews of products to find what customers dislike about it. This will give you a wealth of information that you can use to source/make products that solve the problem.



Product Sizing

Think about what is easy to ship. The rule of thumb for Amazon FBA is to only sell products that fit into a shoe box. This means they are easy and cheap to store and simple to ship.


Underlying advice

Think about the bigger picture. Think about building a brand with a selection of products that you can sell to people.

You must also think about customer loyalty and how you can get them to purchase again and again.

Your real profit will be made on the later purchases.

Where would be best to sell Amazon, Ebay or my own webstore?

Amazon has the traffic but profit margins will get squeezed. It's good to get up and running but your own online store is where you want to try to migrate people to. If you start both then you have the best of both worlds. I don't bother with Ebay but that's not to say it's no good.

At the end of the day, you are building something on rented ground with Amazon and Ebay. They can pull the plug at any time. Yes, it has its benefits but just be aware what can happen.

Do I need a limited company to start trading, or can I do it as a sole trader?

Sole trader should be fine until you start to gain some traction, then you can change status later.

Do I need to brand my products, if I opt to resell cheap goods from Alibaba etc?

Branded products always look more professional. If you can find a supplier who can do that from the start with branded packaging. If you are testing the market then I wouldn't bother. Get the products out there, promote them and go from there.

Hope that helps.

Matt

 

[UKSBD]

Almost as important as the product is the supplier.

When drop shipping a reliable, trustworthy supplier who you can build a relationship with and have good terms with is key.

If you tell someone their item is being delivered on Wednesday you want to know for sure your supplier will be delivering it on Wednesday.

Also be aware if someone rejects an item form you for any reason you have to accept that, your supplier doesn't have to accept it though unless they have agreed to it. Even if they do take it back you may find yourself having to pay 2 lots of delivery charges and a re-stocking fee.

You also need a supplier who when they see you marking up a product by 40% doesn't start thinking, if they can mark it up that much, why don't we just cut him out and sell direct.

 

[OEChris]

Lots of good advice here, especially from Matt. Personally I suggest starting with Amazon FBA. You can start as small as you want, but you get access to the biggest marketplace in the world, so you can scale as much as you want as well. A lot of sellers have good success with buying stuff on Alibaba and reselling it on Amazon. The Helium 10 Serious Sellers podcast has very useful advice on how to get started on that. In fact, I honestly recommend buying a subscription to the Helium 10 software, because its tools are super useful for everything from finding products to creating listings. Start lean and have Amazon take care of a lot of the detail work. You'll have to pay some manual processing fees, but as long as you pick a product with comfortable margin, you can afford that in the beginning. Later, as you achieve larger scale, you can hire help, subscribe to some services like 2D Transit, and start labeling and polybagging product yourself.