If one had to choose a business model of the 21st century that divides so many minds like no other, it would probably be dropshipping. The e-commerce concept has been the talk of the town for years, is the subject of controversial discussions and is also touted by many people as the Holy Grail.

It is not uncommon for dropshipping to be presented in a false light. Unrealistic promises and rip-offs by means of coaching offers tarnish the business model, which is actually so promising and can offer young entrepreneurs in particular an easy entry into the business world.

In this article we'll take a look at how proper dropshipping works, what is involved and which "red flags" to look out for in the dropshipping scene.

What is dropshipping anyway?

Dropshipping is an e-commerce business model in which online retailers sell goods that they do not have in stock themselves. After you as a customer have bought the goods in the online shop, the retailer (dropshipper) orders them from the wholesaler or manufacturer, who then ships the goods directly to you.

Dropshippers therefore have no physical contact with the product and do not maintain a warehouse. Dropshipping is basically a logistics service provided by wholesalers or manufacturers, but in the best case scenario they do not appear at all because the logo and return address of the online shop set up by the dropshipper appear on the delivered goods.

Customers therefore have the impression that the goods were sent by the online shop itself. As a result, they send the goods back directly to the dropshipper in case of complaints. In German-speaking countries, dropshipping is also referred to as "distance-business", in which manufacturers, wholesalers and resellers or retailers are involved.

Manufacturers ship the goods directly to retailers, bypassing the wholesalers. Wholesalers only have a commercial function in that they are responsible for the ordering, invoicing and payment channels. 

The dropshipping model has many advantages, especially for entrepreneurs who are just starting out in e-commerce. An own warehouse and a shipping and logistics infrastructure are not necessary.

How dropshipping works

1. Dropshipping product

Whether dropshipping or not, the most important part of any shop is the product you sell. Therefore, the first step of the dropshipping adventure is to find a suitable product.

A popular model is to look for products that are currently very popular on Amazon, eBay or in the social networks. The disadvantage of such trend articles is, of course, that the hype fades away relatively quickly and the shop that has been set up no longer brings in much revenue. With this model, you jump from trend to trend.

Alternatively, you can choose a timeless product for your shop that will always be relevant and build a brand around it.

Once you have found a product, the next step is to find a supplier, i.e. a wholesaler from whom you can obtain the product. In the past, the preferred choice was China. Products were bought at extremely low unit prices via platforms like AliExpress or Alibaba and then sold in their own shops.

This practice is much more difficult today. More and more regulations on the purchase and import of products from the Asian market, customs regulations and more make "China dropshipping" much harder, at least for beginners.

Instead, for reasons of simplicity and less bureaucracy, European or German wholesalers are now used much more often. Incidentally, this is not only easier, but thanks to shorter transport routes and the elimination of customs duties, it is also considerably more sustainable and cheaper than the China variant.

But how do you find a good supplier? In the dropshipping scene, expensive supplier lists and entries into "networks" are often sold. Basically, however, you can also - as stupid as it may sound - fire up Google and research suppliers in the relevant industry.

Many companies often state on their website that they offer a "reseller" or "white label" programme. This means that you can sell their products under your own label.

2. Dropshipping shop system

Once the suitable product has been found and a fitting cooperation with the wholesaler has been arranged, you can start creating your online shop. Nowadays, shops are usually no longer individually "coded". Instead, there are now ready-made shop systems such as Shopify, Squarespace or Wix, which are particularly suitable for less technically experienced users. 

Of course, WordPress can also be used to build great shops - thanks to the free plugin "WooCommerce" plugin - great shops can also be built. The big advantage of WooCommerce is that you have complete freedom of design and flexibility in the implementation of your shop. In addition, you decide where your data is located, as you can host your WooCommerce shop with a provider of your choice - for example, with a specialised WordPress host with data centres in Germany. 

Basically, all e-commerce kits have different advantages and disadvantages and it depends on the use case which system is the right choice for you. Shopify, for example, convinces with a modern user interface, a simple backend and the convenience of an "all-in-one solution". For the implementation of a Shopify shop, there are many free and paid templates, so-called "themes". They all have a different look and offer an individual range of functions.

The creation of a store is therefore extremely simple with Shopify. Pages can be created and designed in the "theme Customizer". In the backend, products including quantity, product images and prices are entered. developers with programming skills are only necessary if you want to add an individual element to your store that is not covered by your theme.

In principle, modern shop systems already offer so much functionality in their basic versions that you can create an attractive shop.

Marketing in the dropshipping business

You've found the right product and created your shop - perfect. But no matter how beautiful your website is and how good your products are: If no one visits your shop page, you won't make any sales.

So now it's time to start advertising. Depending on your budget, you can attract people to your shop in different ways.

Free traffic

Free opportunities include social media and SEO. The former should be obvious. No matter what products your shop offers, it is always worthwhile to be active on social networks. So create company profiles for your shop on Instagram, Facebook, TikTok, Pinterest and the like.

Especially in the beginning, it is worthwhile to focus on the few platforms where you see the greatest potential. Create engaging content that adds value for your target audience. Avoid promoting only your products, because then you will be labeled as an advertising site and discourage users.

It's all about a good mix. You can put your products in the spotlight, but you should always focus on creating high-quality content that really helps the community. For example, if you sell sports equipment in your shop, you can post training tips on your social media channels.

Another marketing channel for which you don't need a budget at the beginning is SEO, i.e. search engine optimization. By strategically and cleverly incorporating the keywords you want to be found for in Google searches into your shop's meta texts, product descriptions, etc., you make it easier for Google to find your shop and can improve your position in the SERPs (search engine results).

Another key element in your SEO concept can be your own blog. If you equip your shop with a blog, you have plenty of space to publish quality content. If you provide it with the right keywords, you can get potential buyers into your shop via your blog.

Here, too, it is important not to advertise too much. To stay with the example from above - If you sell sports equipment, you should write blog posts that really benefit readers, i.e. about training theory, nutrition, fitness, etc. You still have the option of integrating your products discreetly in appropriate places. However, the added value for readers should always be in the foreground. This is the only way you can bind people to your brand and provide a positive user experience.

In one of my own shopping projects, for example, my team and I have successfully applied this principle. At Teslabs, we offer Tesla accessories. In a blog section posts we write about tips and tricks for Tesla drivers. If they apply the tips and gain an advantage from them, they will forever have a link to the shop and the brand. In the long term, this will also lead to sales as soon as the readers have a need for the products.

To achieve sustainable organic traffic, you also need to generateBacklinks . These are simply links from other websites to your store. The more you have, the more trust your store has with Google. And the more Google Trust you have, the better your rankings will be and your traffic will increase as a result. You can generate backlinks by interacting and building relationships with other stores, influencers and bloggers from your industry.

Social media and SEO are good methods to increase the number of visitors to your shop without having to make an upfront financial investment. Of course, these methods are not completely free, after all, you have to invest a lot of time to be successful.

Paid advertisement

How you set up paid dropshipping advertising depends entirely on the resources you have available. Fortunately, you can achieve a lot with dropshipping advertising even if you only have a little.

There are three things you need to keep in mind on each platform:

1. Your target audience

For almost any advertising platform, it is important to know who you want to promote. Think about who that might be. If you are dropshipping and selling sports shorts, it won't do you much good to advertise to people looking for business shirts. The more target groups you can identify, the better.

2. Your campaign goals

What do you want to achieve with your campaign? More sales? Brand awareness? Traffic? These factors help advertising platforms identify how and for whom to advertise. They analyze the users who click on ads frequently compared to those who actually buy something. If you are looking for sales, the platform will display your dropshipping ads to people who are more likely to buy.

3. Your keywords

As with SEO, keywords are phrases that people type into search engines to find something. For example, if you sell sports pants for soccer players, "sports pants soccer" or another variation of the term could be a relevant keyword that your target audience is searching for. It's up to you to find out what those keywords are and target your campaigns accordingly.

Once you have a clear idea of your campaign, how do you get it out there? Find out here which platforms and which advertising model are suitable for your campaigns.

Google Ads - Pay-per-click (PPC)

As the giant of online advertising, it is not surprising that Google has its own advertising system - the so-called "pay-per-click" or PPC model. In this advertising model, companies pay a small fee every time someone clicks on their ad. The most popular form of PPC is sponsored search results. You know when you Google something and the first 3 results are sponsored companies? That's nothing but PPC - and you can use it too.

For this type of dropshipping ad you don't need pictures or videos, just a good text and a budget.

PPC works by targeting keywords. A keyword like "sports pants soccer" might be perfect for your store, but it's also quite specific, so probably not many people will search for it. With keywords like "sports pants" or "soccer clothes", the search volume might be higher. Here, "research and test" is the name of the game!

Social Media Ads

Apart from PPC, social media is the most effective advertising tool for dropshipping ads. Facebook is still known as one of the most effective advertising platforms because of its wide reach and large number of users.

Even if you don't use Facebook personally, it's an important advertising tool for your business. All dropshipping ads on Facebook fall into two categories - Photo or Video. So you need great pictures or a snappy video to run successful ads on Facebook. It's important that they stand out from the crowd and perfectly represent the added value of your product to your target audience.

Once you've created an account, the Facebook Ads Manager is your one-stop shop for all your Facebook campaigns. There you can set up, run, monitor and create new ads.

In addition to Facebook, you can also run campaigns on TikTok or Pinterest. The ad managers there are usually structured similarly to the pioneer Facebook. TikTok in particular is currently used by many people because the prices are sometimes better than on Facebook.

The dark side of dropshipping

You now know what dropshipping is, how to find a product, create a shop and market it. But as mentioned at the beginning, there is also a dark side to the dropshipping scene. We now want to shed some light on this.

Distorted image

A distorted image of the business model has emerged over time, especially through social networks where young people present their supposed wealth achieved through dropshipping. Young people in particular often get caught up in this and approach the matter with unrealistic expectations.

At this point I would like to make it clear that in 99 percent of the cases where a dropshipping store makes a profit, it was not an "overnight success". I would even go so far as to say that there is no such thing as an overnight success. Sometimes you might have a bit of luck and good timing and achieve good numbers in a relatively short time without having to test too much.

Nevertheless, building a profitable e-commerce business (which is exactly the goal of dropshipping!) always involves extremely hard work. Especially in the beginning, when you don't have a big budget or a team. Product management, marketing, accounting, product procurement - you are responsible for all of that.

Moreover, the market is large. The fact that it is easy to create a shop today is both a curse and a blessing. Because it is easy for everyone, the competition is correspondingly large. It is difficult to stand out from a condensed market.

All this is not to say that it is not possible to be successful with dropshipping. It is only meant to give a realistic picture. Everyday dropshipping involves patience, perseverance and a willingness to learn.

Brazen rip-offs

"A five-figure monthly turnover in one month". We've all seen YouTube ads like that, haven't we? And while you may (rightly) laugh at them, there are unfortunately many people who fall for such exaggerated, unrealistic advertising scams and buy overpriced coaching.

There is usually no more know-how on offer than you can get from YouTube videos, Udemy courses and Google.

Unfortunately, the dubious coaching scene is now as much a part of the dropshipping scene as Shopify. It is therefore strongly advised to be on your guard and stay away from dubious coaching. Self-study via free sources such as Facebook groups is usually the way to go to get good information and experience reports from other dropshippers.

Dropshipping conclusion

Dropshipping is a fairly simple business model that can offer anyone an easy entry into entrepreneurial life. It is suitable for both small and large budgets and, thanks to modern shop systems, easy to implement for everyone.

When marketing your shop, depending on the resources you have at your disposal, a good balance of paid and free channels is well achievable.

It is important that you know your target group and their needs and know how they behave - especially on the internet. This is also important for paid ads, where keywords play a special role.

Of course, dropshipping has pros and cons that we do not want to ignore. On the flip side of the dropshipping coin are unrealistic notions and brazen rip-offs that play on people's desires to extract money from their pockets without providing any real value in return.

The right mindset for a dropshipping project is therefore indispensable. If you are willing to learn constantly, invest a lot of time, have patience and energy every day and can demonstrate resistance to coaching ads, dropshipping might be interesting for you.