Ben: Dropshipping Shopify stores are one of those mysterious businesses that you often hear people making money from, but they tend to be only gurus on YouTube or Instagram. I really wanted to get an inside view on stores that work, and why, so I reached out to Matt Smith, see you at merch mixer on how to start a Shopify dropshipping business.
Before starting MerchMixer, Matt has a really solid entrepreneurial history. He originally got his start building his own business out of university which sold to Facebook and then moved on to work with AppSumo, one of the coolest companies in the space. After AppSumo he set out to build a business in the E-commerce space which led him to create MerchMixer, an app that allows you to drop ship name brand products from the US.
With this background, I thought Matt would be a perfect person to talk to about drop shipping and find out what really works. I reached out to Matt on IndieHackers and he graciously provided answers to some of my burning questions. Here are the insider tips from him below.
How should you pick your niche?
Dropshippers need to think a lot about the supply side of their business. You can’t really pick any niche because you need to be able to source them reliably. So start there, find a good source of products and then evaluate whether it is something you know and are passionate about. Also consider whether or not you can build a brand around that particular set of products.
How much time does it take to build a real dropshipping business?
No question, it takes a long time to start a Shopify dropshipping business. Almost anybody can download the app, start for a few days and then give up. But you will need to give some serious time investment to this type of business.
My suggestion is to consider that you may need to spend at least $2500 to get your store going and around six months to see some traction. If you want to invest less money then it will take longer, because you will need to learn and do all the setup things required yourself such as developing a logo etc.
I can’t stress this enough, the number one reason people fail at drop shipping is that they don’t give it enough time.
Should you build, or buy your first store?
I wouldn’t really suggest buying your first store however it could be potentially a good idea to get someone else to design and build your store if that’s not your skill set. But generally speaking, Shopify stores are really just a bunch of applications.
If you need help with design, consider just working with the theme or hiring a designer to make your store look professional.
What is the first milestone to aim for?
OK, so if your goal is to replace your income, then you’ll need a profit goal. A really strong goal to aim for in the medium to long term is to make at least $1000 a month profit. Obviously, this is not the same as revenue, so you’re going to need to break it down.
You can take this goal and break it down into increments of 10. Start by aiming to make a $100 a month profit, and then move up to $200 a month, and so on.
At the end of the day, if you make a $1000 a month profit, that’s a good achievement because it may represent about $10,000 a month in revenue in some cases.
How do you research products?
To work out what products to sell you’re going to need popularity and sales data. Research and learn your way around different apps, like Camelcamelcamel, that can give you prices and data to help how different products sell.
They are also a range of Chrome extensions that you can use but they’re always changing so you’ll need to do your own research here.
If you’re building a brand around a single product, or a few products, then you should order samples, test them, and do your own photography.
Should you invest in custom photos for your products?
If you’re doing a small collection of products, then you need to invest in photography for these. Small in this case means 5, 10, 20.
You should also do long editorial supporting copy, video reviews etc.
If you have 500 or 1000 plus products, then you should focus on your feature deals to invest in getting great copy, images, videos etc.
Focus on your star brands, not your AliExpress stuff.
How do you build trust with your buyers?
One strategy to try here is to piggyback off other trustworthy entities. For example, at MerchMixer we’re working with strong brands which in turn promotes our own credibility.
You can apply the same strategy to your own store. Also, make sure you have a well-designed store it has all the professional polishes in place. For example, make sure you have the favicon, terms and conditions set up and feature the credit card company logos for your payments.
How can drop shippers increase their shipping speeds?
As a drop shipper, you really are at the mercy of your suppliers. If you source all your products from China, you will be hard pressed to get far shipping times. So the best idea here is to work with a local supplier.
For example, if you are focusing on US customers you should use a local supplier such as MerchMixer. If you are in Europe, then you will want to use a European specializing supplier,etc.
One final thing you can do is to try to offset the shipping times by having your own stock locally. You can also try and monitor the shipping times on all your orders and proactively reach out to any orders that have a long pending time to try and make sure the order is delivered quickly.
What are the main marketing channels people should focus on?
Online marketing is very hard. My suggestion is you should focus on fewer channels. It is easy to spread yourself thin and end up too little in one channel.
You should really focus on about two channels, the ones that work.
An interesting area where we see success is in marketplaces. If you see your Shopify store as the API connection point between platforms, you can sell on Amazon and other marketplaces where the traffic already is.
Note this strategy currently works, and it may not be working forever, and you have to be quick on the delivery speed and customer service.
One way to expand this strategy is to look at other places, like Facebook or Craigslist. Look for where the traffic already is rather than trying to get traffic to your own site.
How can sellers improve the profitability of their stores?
Increasing profitability is definitely a challenge for E-commerce. There are two main ways to do this.
First, you can improve your profitability by changing your mix of products and suppliers. For example, if you have some key products from the US, and some from China, you may find that you can leverage the interest in products from the US, but sell the customer the higher margin product from China.
This is the classic up-sell, or down-sell strategy. You may find that customers are interested in a certain brand of headphones but when they see the price, they prefer a cheaper alternative that also looks good.
You can also find ways to drive traffic to your own site for a lower cost, for example through SCO or other marketing efforts. If you’re not spending money on Facebook ads for example then you will likely have much higher margins.
What plugins should you use?
Honestly there is a tonne of stuff out there. Having worked at AppSumo I can tell you there are lots of cool E-commerce apps coming out every day. I think what you should do is just dedicate at hour each week to have a look through old applications on the Shopify plugin store and try a different tool each week. Look for things that will improve your performance and use the free trials.
Ben: I hope you found these answers from Matt helpful in understanding how to get started with drop shipping for your own store. It’s always interesting to talk to people who have a lot of their own experience, especially from an aggregate level where they can see how individuals do and what makes them successful.
If you want to connect with Matt, reach out to him on Twitter at @merchmixer.