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What is dropshipping and how can you get started?

For those of us who are excited at the prospect of entering the world of ecommerce, dropshipping holds a lot of appeal. The reason is that there are relatively low barriers to entry in starting a dropshipping business; all you really need is a unique product idea, a website to sell it on, an internet connection and marketing know-how. The low-risk business model is so popular that you may know a guy who has hit it big with his idea or, most likely, someone else who has many ideas but can’t seem to see one of them through to fruition when it’ll start making a profit. So, what can you do to get it right?

Whether you have a winning idea and are ready to get started with dropshipping, or are at the early stages of doing your market research, we’re here to help you. In this article, we’ll provide an overview of how dropshipping works, some of the pros and cons of starting and running a dropshipping business, and what you’ll need to do to start using PayFast to accept payments on your online store.

What is dropshipping? 

The basic concept of dropshipping is pretty simple: it’s a fulfilment model that allows you to sell items on your online store without actually owning or storing any inventory. When an item is purchased on your ecommerce website, you let the supplier or manufacturer you have an agreement with know so they can package the product and send it directly to your customer wherever in the world they may be.

With dropshipping, you essentially act as the middleman connecting buyers with suppliers; you’re solely in charge of listing the products on your website, marketing your website to attract visitors and offering good customer service to make sure customers are happy with the online shopping experience and products they receive.

How easy is it to start a dropshipping business? 

It’s very easy to start a dropshipping business because unlike more traditional ecommerce business ventures you don’t need to create, buy or stock products in warehouses, your office or your home. You also don’t have to worry about packaging and sending parcels out for delivery. Through the dropshipping model, when an online shopper makes a purchase on your website, you’re only responsible for notifying the supplier and paying them a wholesale price for the product so they can then package and ship it directly to your customer.

How do you start a dropshipping business? 

When starting a dropshipping business, it’s important to first do your market research to see what kind of product would be in high demand for a certain demographic. For example, there’s no point selling something that 100s of other online stores are selling as there will be lower demand for the product and direct competition, which will affect your profit margins. Rather, consider selling a unique product that caters to a specific clientele. For example, products associated with a certain hobby, like arts and crafts, photography or extreme sports often do well.

Google is a great resource to do your research, use the platform to search for specific keywords and look at what your competitors and platforms like Takealot and Amazon are selling. You must have a clear idea of who your target market is, including age, gender, likes and dislikes, and how your product can solve their problem.

How do you find a dropshipping supplier? 

Once you have a solid business idea, you can easily find reliable supplier directories online, for example, World Wide Brands that you can pay a one-time fee to access. Or you can use ecommerce platforms like Shopify that have made starting a dropshipping venture extremely easy. Through their platform, not only can you create your perfect website with their easy-to-use functionality, but also integrate the DSers app into your store, which transforms your ecommerce website into a semi-automated AliExpress dropshipping store.

No matter which supplier you choose, it’s important to find out the following from them:
  • Can they customise packages to add your logo? 
  • What are their fees? 
  • What’s their refund policy for damaged goods? 
  • How long does it take to ship? 
  • Can they send you a sample of the product? 
If you’re happy with their answers, then they’ll be a good supplier to partner with for your dropshipping business.

How do you market your dropshipping store? 

Other than offering great customer service, the most important thing you need to do to ensure a profitable dropshipping business is to market your online store. You need to get your brand out there and attract online shoppers to your website. It’s important to stay focused and patient, don’t expect your online store to be successful overnight, as it can take months to optimise SEO (search engine optimisation) on your website to attract visitors organically.

As part of your marketing efforts, it’s highly recommended to create social media accounts on platforms that are popular with your target market, whether it be Instagram, Facebook or TikTok, to attract followers and share content with your audience. There are also paid marketing avenues you can take like creating targeted Facebook ads and teaming up with an influencer to promote your brand to their following.

Marketing your dropshipping store will be an ongoing process that requires commitment and a sizable investment. Also never underestimate the power of a happy customer, as they are highly likely to recommend your online store to their network. For other tips on how to market your online store, check out the dedicated marketing chapter in our PayFast Guide to Going Online.

What are the benefits of dropshipping? 

As we’ve touched upon above, it’s very easy to start a dropshipping business. Whether you are a new or experienced entrepreneur, as long as you have a great product idea, the tools needed to run the business and marketing knowledge, you can literally run your dropshipping business from anywhere.

Other benefits of dropshipping include:
  • You don’t need a lot of money to invest in the business as you don’t need to purchase any products upfront. 
  • You don’t need to worry about tracking and managing inventory or paying for a warehouse to store stock. 
  • It’s easy to test the market with different product ideas because you don’t need to buy stock in bulk. 
  • When the time comes, it’s easy to scale your business to sell more products to a wider customer base. 
What are the cons of dropshipping? 

As with any business venture, there are some risks involved with starting and managing a dropshipping business. Because the barriers of entry are so low, there’s always the possibility that another online store will launch with a similar or even better business idea than you. So, you need to stay on top of the competition. Continually keep an eye on what other businesses are selling and what their prices are. You can’t always offer a cheaper price as that will cut into your profit margins, but as long as your online store is well maintained, looks professional and offers great personalised customer service, your customers shouldn’t mind forking out a little bit more for a better shopping experience.

Another thing to bear in mind is issues with suppliers, such as defective products or long delivery times. If such issues arise, it’s vital that you take responsibility and communicate with your customers about any delays and offer refunds or returns if necessary. This relates to the previous points of partnering with a supplier that can send you demos of the products and who is reliable with sending packages on time. Don’t forget though that if you are dealing with international customers, their countries may have different time frames for keeping a package in customs. So realistically, dropshipping packages can take on average 19-35 days to arrive. On your website clearly state delivery times to avoid disappointment and your customers demanding a refund.

Can you sign up and use PayFast if you do dropshipping? 

If you have a South African bank account and meet a few other requirements, then yes you can use PayFast as your payment gateway if you run a dropshipping business. When you sign up for a PayFast Business or Individual account your business will need to be verified before you can start accepting payments online. You can find out more about this in our Knowledge Base.

For dropshipping businesses, we also require the following:
  • A signed contract between you and the dropshipping supplier 
  • The URL of your live website for us to review, which must include clear delivery timelines (including times from your supplier) and your refund and exchange policy. 
  • If you’ve been in business before registering with PayFast, we may also require invoices and proof of deliveries from the past three months. 
With the required documentation in place, you’ll be able to start running and accepting payments on your website in no time.

We hope we’ve been able to answer some of your questions about dropshipping and how to get started. Just remember it’s always important to do your research before starting any business venture so that you can be prepared for anything and everything that may happen. No one likes surprises. For other advice on how to get your business online, check out the PayFast Guide to Going Online.

Useful resources:
Payfast
Payfast is a payments processing service that enables South African merchants to receive payments from local and international buyers.
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