What is DropShipping – Open a DropShipping in India in 2020
India has more than 500 million internet users and it is the second largest online market in the world and it is expected to cross 600 million by end of next year as per projections. You can understand how big this market is and if you are looking for a dropshipping in india, this is one of the exciting times.
With more and more internet penetration due to data being cheap and available on mobile, people shopping online has improved a lot. Dropshipping business is one of the types of E-Commerce business and you can try this out this year to make good money.
And the trend of mobile usage is not going to slow down as more and more users are coming on to mobile phone and data being available internet access is cheap, people are going to use internet for shopping and logistics companies making sure that India’s remotest places get the delivery, Dropshipping in India is definitely a growth area.
So What is a DropShipping business?
Before we look at how to open a Dropshipping business in India let us first look at what is a dropshipping business.
You would have heard of Amazon, FlipKart, Snapdeal etc. And in most probability you would have used it. These are pure play ecommerce websites. Dropshipping business also comes in e-commerce space, but the modus of operation is a bit different and hence it needs to be understood clearly.
It might seems easy if you know the term dropshipping, but I think you should understand this in totality and should read this article in full.
First let me introduce a term DropShipper .. a dropshipper is one who owns this business.
Key features of a DropShipping Business
But the key feature of this business is that the dropshipper does not own any physical inventory. So you as a dropshipping business
- You Contact the supplier and agree on a price of the product you want to sell : This is the most important part of your dropshipping business. You need to be very clear on what you are selling and you need to very sure about the supplier you are contacting. Because supplier will hold the key to the quality of product and delivery which is very important from an customer experience perspective.
- You List the product on your online shop : Today there are many websites where you can open an online shop. One of the examples is Shopify which is quite popular one. Make sure that you choose the best ones which offers all the needed features like online payments etc
- One you get the order, you forward the order to supplier: Here you need to agree with supplier before hand on what SLA’s to be followed. For example if you get the order today when he will be ship it to your customer. This is very important as any delay will impact your customers experience in a very adverse way.
- Supplier ships the order to the customer : You need a way to track if the order has reached the customer and remember, you might need to track all this manually. Call the customer and check if he/she has received the order.
- You pay the agreed amount to the supplier and keep the difference to yourselves: How you will pay to supplier is the method agreed between you and the supplier. So make sure that you have detailed out all this when you tie up with him.
- The difference amount which you have kept is your profit.
Let us try to understand DropShipping with an example.
You have searched websites like indiamart.com or any other whole sale website and found a supplier which can supply “rocking chair”. You tell him about your drop shipping business and he agrees that he will ship this to your customers directly. You agree with him that you will pay Rs 15000/- per chair including the shipping charges.
Now you list this “rocking chair” on your website for Rs 20,000 / chair. once you get the order, you request the supplier to ship it to your customer. You pay the supplier Rs 15000 and keep remaining 5000 as profit.
How to start a DropShipping in India
To start a Dropshipping business in India, there are certain legal formalities which needs to be completed before making a drop shipping business up and running. Below are the steps you can take. My suggestion is to hire and agency to get this done
Step1 : Do your homework
Yes, you need to do you homework first. What I mean by this is that, you need to decide on lot of things before you plan your dropshipping business.
- What products you need to be in for the drop shipping business. Choose a product about which you have an idea. You have to consider many parameters when you are looking at this. For example you do you want to low margin high volume product or do you want a high margin but low volume product. You are not shipping so you need to make sure that the products which are being shipped will maintain its quality once it reaches there. I mean many things. So zero in on a product very carefully.
- Search for suppliers who can do the shipping for you. You can use various whole sale websites like indiamart.com and get their phone numbers. Talk to them and agree with them on the terms and conditions. You would need to sign an NDA with them.
- Research on the online shopping platforms which you can use. Yes you need to do your research on this as well. The payment gateway they offer. All the terms and conditions etc
Step2 : Register your business entity
This is one of the most important steps for starting a Dropshipping business in India. This is important as this gives your business a legal name. A business registration is also needed if in future you want to secure funds / loans to expand your business. You can do it yourselves if you are knowledgeable in this area or you can hire some one who can do this for you. There are many startups today who are working in this space and help you setting up this business. One such company is Vakilsearch. You can check out the prices on their website.
There are various type of business entities which you can register today in India and you can discuss with them on options. There are business types
- Proprietorship firm- the simplest of all.
- One Person Company
- Limited Liability Partnership
- Private Limited Company
So you need to check and decide. So talk to these guys and get the business registered first. They will explain you what kind of business you can register. The simplest of all is a Proprietorship firm.
You can look at below video to understand how you can open a proprietorship firm, the simplest of all.
#Step 3: Open a Current Account
Once you have your business registration done, open a current account on your business name. This is needed because all your transactions which happen via this account. This account will also be needed as you need to apply for GST number where you need to provide the account number.
Current account is better than savings account. Also better is that talk to the bank to see what best account options they have for small businesses and startups.
#Step 4 : Get GST number
GST number is very important if you are going to an e-commerce business so again talk to guys like Vakilsearch and they will help you in getting the GST number. Now it is very important that you have a CA or guys like Vakilsearch because not only GST number you also need to file your monthly and quarterly GST returns and yearly taxes and these guys help you with that.
So get the GST number first. You need to provide to them the address of the office from where your business will operate so have all those documents ready like address proof and your PAN card etc.
#Step 5: Complete all the formalities with your supplier.
You have done the homework on this already. So contact the supplier again and get all the formalities completed. Make sure that you have the agreements with them clearly documented.
#Setp 6: Register on the online shopping platforms.
Again you have done your homework on this. Remember I am not talking about the online ecommerce websites like FlipKart or Amazon. But I am talking about opening your own shop directly. You have some one develop a website for you which will be a shopping website or you can use any of the platforms like shopify, woocommerce etc.
You can check this video on how to setup a store on shopify. But this is only to give you the idea on how to setup a store. you can probably check the same thing on other platforms.
#step 7 : Get the domain name for your business
You have now enabled your business on let’s say Shopify. The next step is to establish yourself as a brand in the virtual world. The best way to do this is get a domain name. It is very easy to get a domain name today. And just don’t take any domain name. The domain name you choose should signify the business you are operating in. Should tell people what you are selling.
Getting a domain name is quite easy friends. Today you get domain names in as less as Rs 199/- on websites like bigrock.in, godaddy.in or znet.in.
What I am saying is that check on all the websites and pick the one which is less costly. Actually setting up this complete website should not cost byond Rs 10K which includes initial setting up costs on websites like shopify.
I keep on saying shopify because it is one of the most popular ones, but that does not means that you cannot choose any other platform. I found it to be good. You can try others as well.
#step 8 : Advertise your drop shipping business
Yes, anything with out advertisement takes time to pick up. First let people in your network know about your this business. So advertise with in your friend circle, on your facebook network, on your twitter network, on your instragram and pintrest network. Let your whatsapp group know about this business of yours. Basically use the social media to your fullest.
Today, social media is one the best modes of advertisements.
Then if you have money you can also go for paid advertisements. You can try facebook ads and google ads. They are actually very helpful. Only thing is that they cost a lot. But if you are not short on money may be it is a good option to try out. Go for a paid advertisement on these platforms.
I am very much sure that you will drive traffic to website. But my recommendation is only to do this if you have some extra money. Else you should try to use your own personal network to get this advertisement done. right?
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If you have a dream of becoming an Entrepreneur , i.e if you have a dream of owning your own business, then Dropshipping in India can be definitely a good option. Things might look easy when you read or watch video but a Entrepreneur journey is not that easy.Also when it comes to drop shipping, you need to consider a lot of parameters as we have discussed above.
Parameters like what products you sell, What platform you use to sell the product. How you make sure that quality is maintained. How you make sure how the logistics is taken care of. All this impact a lot on your customers satisfaction and your business.
Also remember, it is a online business which has lot of competition around and hence you compete with not only people in your area and product category but you also compete with people across world. Any one and every one who can do this on internet. Now this is some times beneficial as well because sitting at home you are able to connect to people not only in country but across the world. So friends, all the best. Many people are doing this and I am sure you can do this as well if you decide on this.
So guys you can definitely open dropshipping in India. If you have any comments do write back to us at email@example.com or post your comments in comment box below. Good luck!
You friend, sanjeev