Most people look forward to their online business in some way or another. And the options to start one are abundant in today’s time. Whether you would like to focus solely on an online business or keep it as a side hustle, there is no denying the fact that people are seeking ways to make a profit through various means.
Among the many online business ideas present, there is one that has been making its way into everyone’s list – Drop Shipping. If you would like to start your business on a safer side, drop shipping is the most recommended.
Those familiar with the drop shipping model understand that you need to establish a relationship with a good supplier. You don’t even have to invest your money in products that may or may not sell. Instead, when you buy a product from the supplier, you sell it at a higher price.
Sounds easy, right? In fact, many people believe this model is the best method of becoming rich and making money easily. Then why aren’t most people in Canada not successful despite using this model?
The answer lies in the true reality about the drop shipping model as well as the myths surrounding it. When people get entangled with the ‘easy money-making’ myth of drop shipping, it prevents them from building a realistic and successful drop shipping business.
This article, therefore, covers everything you need to know about Drop Shipping. From the pros and cons of this business to the best websites available for the model in Canada, you will become aware of Drop Shipping thoroughly.
After getting a better understanding of this model, you will also get a clearer vision for your plan to start your drop shipping business instead of relying on anyone else.
What Is Drop Shipping?
A Drop Shipping business is a product fulfilment process in which an individual runs their own store without holding any inventory. Your main role as a drop shipper is to provide customer service and market your products.
Once you’ve made a sale or a customer places an order on your website, your supplier will ship the order or products from their warehouse. This will go straight to your customer’s doorstep. You don’t need to worry about packaging, or shipping the products yourself as is the case with other e-commerce websites.
Drop shipping requires setting up a personal website and marketing your products through Facebook and Instagram ads as well as making use of SEO.
For a more detailed and easier comprehension of the model, let us look at it step by step:
- You set up an online website and a customer orders a product from your e-store.
- Once you receive the order, you then proceed to place an order to your drop ship supplier.
- You provide the supplier with the customer’s address instead of your own so that the supplier can ship the order directly to the customer.
- Once the shipping is complete, the supplier will not include details about their own company and it may look like you are the one sending products to the customer.
A drop shipping graphic model by Oberlo
How Does The Drop Shipping Model Work?
To understand the drop shipping business model, we need to take a look at the key players and their particular roles in Drop Shipping:
- Manufacturers or Suppliers – Manufacturers are responsible for creating, manufacturing, and shipping out the products. They also look after defective products, restocking the products, and replacing them for the customers on retailers’ behalf. Manufacturers sell the products to retailers at a wholesale price.
- Retailer- Retailers (you) have the responsibility to sell the manufacturer’s products under your own brand. Retailers get to choose and market the products that fit according to their website. They also decide the shipping costs and set prices that will make a profit.
- Customer – Lastly, the customer purchases the product directly from you, the retailer, from your website. If they have questions regarding the product, they contact the retailer they brought their products from.
Canadians And Drop Shipping
The rise of e-commerce and online shopping in Canada is helping pave way for the business of drop shipping in the country. Many Canadians believe that the drop shipping model isn’t as clumsy as it was before. This is because getting in contact with good suppliers has become an easy task in today’s day and age.
With demand for a variety of products, starting a drop shipping business in Canada has become an easier venture. According to CanadaPost, in the year 2016, 80 percent of Canadians shopped online. According to this research conducted by Maru/ Matchbox in regards to small businesses in Canada, 95 percent believe in supporting small businesses to keep the economy running.
This and similar other factors encourage Canadians to start their own drop ship business online. However, another question arises – why start drop shipping business in Canada?
The answers lie with the Canadian customers. Considering the strong desire for Canadians to buy from a local or Canadian retailer, one sees a rise in potential for starting a drop shipping business. Individuals also prefer local or Canadian manufactured products and buy from local e-retailers.
If we take a look at customers’ diversity during shopping in Canada, Canadians buy a wide variety of products, from apparel, music CDS to even essential groceries.
After looking at all of these statistics, one can’t deny that Canada does provide enormous opportunities for those looking to start a Drop Shipping business in the country.
Pros Of Drop Shipping
Drop Shipping is one of the most simple yet effective business models to start one’s career. It can be handled with ease and may also grow over time quickly. Drop Shipping is one of the least risk-taking business models.
1. Spend Less Money On Stocks
Drop Shipping drastically reduces your costs of starting a business as won’t need to invest money in a warehouse or products upfront. With zero inventory, you can immediately start your business. This also eliminates the risk of going into debt.
2. Low-Cost Inventory
When you invest in a business, you also need to invest in products or inventory. Many a time, you end with a large stock that does not sell or has little to no inventory leading to lost revenue and stockouts.
Drop Shipping avoids these problems as inventory is not the retailers’ responsibility. Drop Ship instead lets you focus on building your brand and expand the customer base.
3. Low Order Fulfillment Cost
Order fulfillment requires one to check the warehouse, organize, label, track, pack, and ship the products or stock which requires a lot of money.
In the drop shipping business, the shipper (third-party) takes care of all this. A retailer’s only responsibility is to give the order details and address of the customers to the suppliers.
4. Test Out Products
As there are no limitations to space or other extra costs, retailers get more options to sell different types of products. They can test hundreds to thousands of a variety of products and choose the right ones for their brand.
They have the option of having a vast and ever-changing inventory that will result in more sales.
Cons Of Drop Shipping
Drop Shipping can be seen as a one-stop for money-making. Don’t let it trick you into thinking you will always receive large profits from this model. Just like every other business, Drop Shipping has its own cons that must be kept in mind.
1. Inventory Not Under Your Control
While you don’t have the full responsibility for your products, it might emerge as a disadvantage. For example – since the supplier has full control of the inventory, they may discontinue a product without letting you know. This may result in a decrease in sales when you have nothing to provide to a customer.
If a product becomes popular overnight and a retailer has their eyes on them, they might still not receive it as the supplier was unable to buy the stock in a limited period of time. All of this may leave you with a dissatisfied customer base which will, in turn, affect your website’s reputation.
2. Similar Business Model
Many people are in the business of Drop Shipping. This means there is an end number of chances your brand or website will be copied by many and may also sell the exact same products you sell.
3. Error While Shipping
Similar to the inventory, the process of shipping is under the control of the supplier, not the retailer. When a customer gets dissatisfied with the shipment, ends up with a damaged product, or the order wasn’t appropriately packed, this will reflect on your website.
This is why it is recommended to work with a safe and responsible supplier in the business of Drop Shipping.
How To Make Money As A Drop Shipper In Canada
Before we get into this section, you will need to research the products you sell in Canada. This should be done to verify if the products you offer can be legally sold in Canada. Visit the Canada Border Service Agency to ensure that you are following all the rules and restrictions regarding the drop shipping business.
Drop shipping is like any other business where you make money by profiting from the difference between cost and revenue.
For example – You are a drop shipper for shoes. Your supplier sells you the shoes for $20. You put the shoes for sale on your website for $30 and market the same product for $5 per product.
This will bring you a profit of $15 per product, which is profitable than many other businesses out there. As you (retailer) are not responsible for the costs of shipping and manufacturing, profits can be reaped quickly.
Myths Surrounding Drop Shipping
As the drop shipping model business is easy and risk-free from other ventures, it makes it vulnerable to several myths making it unrealistic. These are some of the common myths surrounding drop shipping:
1. Helps In Passive Income
Passive income requires little to no effort which brings more money in an individual’s life. This is largely equated with drop shipping as many believe that suppliers do all the work while retailers only sell the products.
This myth is the most common in the drop shipping model and many fall prey to it. In drop shipping, patience and hard work are required to build your brand and attract customers. You also need to compete with various other drop shippers, pick the right product and choose a reliable supplier.
Quick money can be achieved through drop shipping but it will take time, an estimated 5 to even 10 years. You as a retailer need to work hard in optimizing your business and win the trust of customers,
2. No Investment Of Money
While it is true that you don’t need to invest in warehouses and inventory, that does not mean you don’t need to invest money in drop shipping at all.
You will require to invest some amount of money in the drop shipping business. For starters, you will have to spend money on your website and even take courses if you aren’t familiar with marketing. These requirements are not free of any cost.
Further, you will have to invest money in marketing the products in various ways. Once you have a bigger business, you will also have to hire staff and pay their salary accordingly.
3. No Customization For Drop Shipped Products
The supplier you work with may also be working with other drop shipping retailers. This may result in your products looking similar or uniform. However, it does not mean that there is no customization of products available from the supplier’s side.
Instead, it is possible that a good supplier offers customization according to your preferences that will also suit the customer.
Common Mistakes Made In The Drop Shipping Business
If you want a successful drop shipping business, you as a retailer need to avoid these common mistakes:
1. Not Taking The Business Seriously
If you think drop shipping only means selecting a product and shipping to your customer, this isn’t the case. In order to make the business run successfully, you need to dedicate time, energy, and money.
You also need to improve your operations, accounts and handle the customer services in the initial stage of the drop shipping business. If you fail to treat drop shipping like a real business, chances are, you will never succeed.
2. Not Informed About Digital Marketing
To start the drop shipping business, a retailer needs to be informed about the whole model accurately. Only by learning online digital marketing can you let your website or brand stand out in the competitive online space.
You can’t expect to read certain guidelines or tricks, start a website and expect money to come pouring in. In fact, you need time to understand and develop the correct skills needed for marketing your products. The more sales you generate, you will attract a larger customer base.
The most recommended way to hone your digital marketing skills is to get familiar with SEO as it plays a huge role in advertising your website online.
3. Goofing Up The Customer Service
When the customer experiences a problem, be it ordering by mistake or asking for a refund, it is the retailer’s responsibility is to make sure they provide them with an easy and quick solution. If you don’t satisfy a customer’s needs and end up adding fuel to the fire, the already dissatisfied customer may leave a negative impact on your brand.
Thus, it is necessary to be efficient while solving customer-related issues with orders or returns.
4. Generic Marketing Strategy
You want to display a product in a way that appeals to the customer and does not look similar to your competitors. However, if you are using the same generic photos of a product used by other drop shippers, it may not attract many customers.
In fact, they might think that your product is priced higher than that of the competitor and buy their stock instead.
Display unique photos of the products that may catch the attention of the customers instead of being very monotonous.
5. Picking The Wrong supplier.
If you pick the wrong supplier, this will affect your business immensely and might even fail shortly. Although they work behind the scenes, you as a retailer are the face of the brand. So when they end up delivering the wrong product or delay shipment, fingers will be pointed at you.
Pick a supplier who is trustworthy and knowledgeable in the business of drop shipping.
Process To Start A Drop Shipping Business In Canada
Just like any other country, setting up a drop shipping business is quite simple in Canada. Below are the basic steps that will guide you in opening your drop shipping business:
- Start by pinpointing a niche of interest and decide the products you want to sell. You should research well on topics such as the ‘best products to sell online in Canada’.
- You will need to register a domain for your online E-Store or website. Some of the good websites to purchase a domain in Canada include GoDaddy, NameCheap, Web.com, Hover, and 1&1.
- Decide on the products you wish to choose and your target audience. For example- to quickly find out what’s trending in women’s clothing, go to AliExpress or any other e-commerce site. Browse through the clothing section and you will find various categories such as ‘Popular sweaters’ and ‘Hot Categories. You can also filter the results and check which styles are ordered the most.
- Next is to find a supplier for your website. This is quite a task that requires research to find an authentic supplier. But Canada has plentiful if you look in the right places.
- Paid services like Oberlo, Shopify, and Salehoo provide direct suppliers to retailers.
- The Canadian Importers Database provides a list of companies that import goods or products in Canada.
- You can also try well-known sites such as Wholesale 2B and WorldWideBrands.
- After selecting the supplier, choose an E-Commerce Platform to design and launch your website or E-Store. This can be done through websites namely Shopify, WooCommerce, Volusion, and BigCommerce.
- Import all your products to your website or e-store with the help of Oberlo, dropfied, etc.
- Market your brand and E-Store by email marketing, Facebook marketing, SEO, Instagram marketing to name a few.
- Some more options for Wholesale Distributors in Canada according to different products:
- Hudson Bay co. – This company is the oldest Drop shipper in Canada and sells almost everything at wholesale prices.
- The Shopping Channel – Another wholesale offering a wide range of products.
- BuildDirect Technologies – Offering high-quality home building products and accessories.
- Indigo Books & Music Co. – Perfect wholesaler for books as well as electronic accessories.
- Reitan’s – Provides high-quality women’s clothing and offers good wholesale rates for vendors.
- Cymax Stores Inc. – Offering best furniture suiting home and office decor.
Sales Tax On Drop Shipping Products In Canada
All products or goods being sold in Canada are required to pay tax. There are three kinds of tax levied on products being sold within Canada:
- General Sales Tax (GST)
- Provincial Sales Tax (PST)
- General Sales Tax + Provincial Sales Tax (HST)
The Tax requirements in Canada differ from each province but you will pay taxes only in the region your drop shipping business is registered in. It is better to manage your taxes well with the correct software required for such ventures.
For more information, check out this official guide from CanadaBusiness which proves helpful in the drop shipping business.
Important Steps For Becoming A Successful Drop shipper
1. Only Sell What You Know
It is true that drop shippers have access to millions of products but you can’t cramp all have them into our e-store. Find the product you feel interested in, study its trends, and then sell it on your website.
2. Choose The Right Supplier
This is one of the main steps that determines whether you might succeed or not in your drop shipping business. Keep these basic things in mind while selecting a supplier:
- Pick a local supplier as they will deliver the products fast. Although overseas suppliers may sell products for a cheap price, all of that fails when they don’t deliver the products on time.
- They should also match the estimated delivery time so as to not delay the order shipment.
- Your supplier must be an expert in dealing with faulty or wrong products. They must also provide support to the retailer in case anything goes wrong with the shipment process.
3. Create A Brand
You need to design your brand in such a way that will make it stand out from your competitors. Ponder over questions such as ‘how is my brand different from others?’ and ‘What benefits can I offer to customers which other e-stores cannot’.
4. Measure Your Performance
Without measuring your performance in the Drop Shipping business, you cannot determine whether you are succeeding or failing. It can be disheartening when your numbers are small initially. It may also lead to demotivation and can be hard to measure and optimize. Yet, it is very important that you start tracking the business performance from Day 1 itself.
Create a spreadsheet and track all of the important factors such as:
- Is your monthly revenue increasing or decreasing?
- How much is your average order number or size?
- Are the customers following you on social media increasing or decreasing?
In this way, you can find out for yourself if you are making progress in the business or not. If you think your sales are decreasing, examine what are the changes that can lead to an increase in profits. After applying the changes, keep track to see if any progress is being made in the business again.
Through this, you will optimize different parts of your Drop Shipping business and keep expanding it.
Common FAQs Regarding Drop Shipping
- How much money do you need to start a drop shipping business?
You can ideally start drop shipping business for free by using free trails from various websites. However, this is not helpful in the long run and one must plan a budget.
To build your own website, you will need to buy a plan. For example – Shopify’s basic plans start from $29. Buying a domain name can cost $20 to $30. Facebook Ads may take up $5 a day for a maximum of five days.
- Where do I find a drop ship supplier?
If you are looking for a local drop ship supplier, the Canadian Interface database provides authentic suppliers.
- Why wouldn’t customer order from Amazon straight away instead of purchasing products from Drop shipper?
To answer this simply, many billion-dollar companies like Amazon and Target are professionals in what they sell and how they manage customers. However, many Canadians have voiced their opinion on helping local businesses in keeping the economy uptight. Drop shippers sell products every day because target customers are also impulsive shoppers.
- There is traffic in my store but no sales yet, is it a bad thing?
It is an optimistic factor to take in that you have traffic on your website. This means your ads and marketing strategies are working as well as people are getting to known about your brand. Look at your pricing and product description and set it according to the customer’s perspective.
- How to pick a winning product?
A winning product differs from person to person. Some may like a product but others may show no interest in it. One way to seek a winning product for a door shipping business is to look for a ‘wow’ factor. If the product catches the attention of a person, even it is just for a second, that product can be a winner.
- How to make customers wait for a week to two weeks shipping?
The best way to make the customers wait for a long shipping period is to let them know beforehand. Specify clearly on your website about the shipping and delivery times for the products so that your customers aren’t kept in the dark.
- Is drop shipping still profitable in 2021?
In the year 2021, the drop shipping business is thriving as many people are becoming more and more aware of it. By avoiding the mistakes and dedicating yourself to the business, you can earn profits through the drop shipping model.
Drop shipping in Canada is prospering more and more due to access to many suppliers, customers in need of products, and online e-commerce growing stronger. It is a good opportunity for young entrepreneurs to start their very own drop shipping business right away in Canada.