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What are the best ways to identify retail arbitrage opportunities for dropship ecommerce businesses?
Hello! Thanks for your question about the best ways to identify retail arbitrage opportunities for drop ship e-commerce businesses. The short version is that there I was able to both find several comprehensive lists of drop-shipping opportunities, as well as determine some of the best methods decide on a market for an e-commerce drop shipping business, which include selecting a niche and using Google and online search trends to determine demand for certain products and markets.
Additionally, I found some guidelines for the best types of products to sell using a drop-shipping model to increase your likelihood of success as well as include some resources for selecting an e-commerce platform. Below you will find a deep dive of my findings.
SELECTING A NICHE
Nearly every resource I found on successfully launching a retail arbitrage/drop shipping business note that the first step is to hone in on a niche. One successful e-commerce seller suggests entrepreneurs focus on products or markets that they have a passion for, as they will spend a lot of time researching these markets in the process of building their store.
Its also noted that in choosing a niche market, one should consider fifteen criteria for whether a product will be profitable: potential to add value, potential market size, trend, competition, local availability, markup and selling price, potential for repeat sales, size, weight, and durability, seasonality, turnover, perishability, barrier to entry suppliers, well-defined target market, potential for growth/expansion.
Additionally, in order to find products that sell for a profit, it is generally a good idea to focus on a niche or product set that does these three things: appeals to upper middle class consumers, sells for a high price (suggested over $100), has little or no brand loyalty.
DROP SHIPPING SUPPLIERS
After selecting a niche, one will want to find companies that drop-ship those products. I was able to find several lists compiled of companies that drop-ship products directly to consumers. E-commerce platforms offers a list of what they consider the best drop shipping suppliers, and Channel Ape offers a more comprehensive list of 150 drop shipping suppliers arranged by product category.
An alternative option is to source ones own inventory, which can be done at trade shows or via purchasing inventory from some other source and having that inventory fulfilled via a 3rd party shipping company. Some options for that are listed here.
SUCCESSFUL E-COMMERCE SITE LISTS
In my research, I discovered that generally drop-shipping entrepreneurs are cautious to list their site, mostly because of the possibility of creating competition via the ease at which a niche market site can be successfully duplicated.
For example, lets say an entrepreneur creates a successful niche drop shipping site by listing yoga supplies items from various drop shipping companies, and his store required no inventory investment, and generated $10,000/month in revenue. If he shares his success with others hoping to break into drop-shipping, it would be easy for others to simply create their own website and list the same inventory.
Thus creating lists of successful e-commerce sites that use drop-shipping is generally discouraged. I was able to find no lists or databases of successful e-commerce sites that use retail arbitrage or drop-shipping. On the other hand, I did find other ways you can determine what items are selling well online, which I outline next.
ALTERNATIVE METHODS TO DECIDE PRODUCT MARKET
While there are generally few listings of successful drop-shipping e-commerce sites, another route to seeing which products are selling well online is to use a combination of Google Keyword Planner & Google trends. These tools will allow you to search for a product, via a phrase or an exact keyword, and find out how many people have searched for that product recently which will give you an idea of the popularity of certain items and markets.
You will also want to use Google to ID the location of those product searches depending on where you plan on shipping to. For example, if you only plan on shipping to the US, a keyword search can reveal if search terms were used in the US. You can also search for keyword variations, and if there are quite a few, you can note that the market for the product is probably strong.
Likewise, one e-commerce blogger suggests using past E-bay results to determine whether a market is doing well. If you search for a product on Ebay, you can change your results to 'completed' and use that to determine what percent listed of this item sold and didn't sell when each auction or listing ended. Items that sell high percentages on Ebay are likely to do well on an independent drop-ship website as well.
OTHER RELEVANT INFORMATION
In order to automate your process most effectively, you'll likely also want to choose an e-commerce platform. There are quite a reviews available on these options from existing drop-shippers and drop shipping blogs, and I noted in my research that nearly all of them rank Shopify as the easiest to use and best for value e-commerce platform. Other contenders include Woocommerce, BigCommerce, SquareSpace and Volusion.
So in summary, in order to launch a successful drop ship company, you'll want to decide what niche market to sell in, on which I've included several resources that should help you narrow this down. I have also supplied you with resources to find drop-shipping companies, e-commerce platforms, as well as some strategies in which you can determine what product categories are currently in demand. Thanks for using Wonder! Please let us know if we can help with anything else!