By: Dr. Washington Sanchez
Co-founder of OB1; core-developer for OpenBazaar
Since the early days of OpenBazaar, I’ve been interested in the potential for it to be used for dropshipping. But first, a quick intro:
Dropshipping is the process of selling goods to customers by placing orders on their behalf to suppliers, who ship the good directly to the customer.
Dropshipping has several advantages for individuals who want to start their own side-business:
- Straightforward. I won’t say it’s easy, but it is certainly far less complex and cheaper than importing and housing stock, let alone packaging and shipping to customers. Dropshipping enables you to focus that energy on sales and marketing.
- Flexible. You can sell a handful of products, or you can sell hundreds or thousands. It’s up to you. Running an online ecommerce store, dropshipping goods all around the world, can be done at home or in a cafe. As a side business, it doesn’t occupy too much of your time. If the business starts to scale up quickly, you can find yourself quitting your job and becoming your own boss sooner than you think!
- Low entry costs. This really can’t be emphasized enough. The costs of setting up a dropshipping operation can be done with very little capital up front. Also purchasing stock is only triggered when a customer has made a purchase: positive cash flow!
Even though the barriers to entry in running a dropshipping ecommerce store are low, make no mistake that it’s hard work to make it both great and scalable.
Now, what’s to stop the customer approaching the supplier directly and purchasing these goods? Well, nothing. This is why some dropshippers go to great lengths to hide their suppliers from potential customers.
A far better approach is to offer unique value in one way or another:
- Niche. Focus on a niche class of goods or services so that your store becomes a lens for customers to find what they want. Individuals are more than willing to pay a small premium to avoid the inconvenience of purchasing multiple goods off different platforms.
- Don’t suck. Form a positive relationship with your customers, and you will be rewarded. Be polite and go above and beyond for your customers.
- Brand. This kinda reverses everything I’ve said about dropshipping so far, but if you can get your hands on the product before it reaches the customer (i.e. it’s a local sale, time isn’t a big factor, or it’s a popular product you can stock a little of), then add a unique brand or feature to an otherwise generic product. This immediately differentiates your products from everything else; you may even be shocked how a $2 modification can add to the retail value.
Dropshipping is both an art and a science, and there are plenty of resources you can draw from to become really great at it. Shopify has a great guide available for free that you can use for existing stores as well as OpenBazaar!
Dropshipping with Bitcoin and OpenBazaar
As you can imagine, dropshipping is a low margin business, but profitable under the right circumstances. It is particularly attractive to the Bitcoin ecosystem for 2 reasons:
- Arbitrage. Dropshippers can take advantage of the rising value of Bitcoin, which is expected to be an upward secular trend for the true believers! As a result, they can order the good from the supplier with fiat and sell the good to the customer for Bitcoin. The price can be at a significant discount if the Vendor expects that the price of Bitcoin will rise to exceed the initial losses they experience on the transaction (i.e. it’s a time-preference thing). The price volatility of Bitcoin is a two-edged sword, so tread carefully if you apply these discounts.
- Supply. Bitcoin is money, but it doesn’t have the chance to become the dominant international currency unless it can be used to buy anything (at least off the Internet). Bitcoin-powered dropshippers can make a meaningful impact to the ecosystem by offering a greater supply of goods and services that can be purchased with Bitcoin.
My definition of success for Bitcoin
Dropshipping on OpenBazaar is straightforward. Personally, I run several stores selling a variety of goods that I dropship predominantly from Aliexpress. Since April of this year, I’ve made ~40 sales, which isn’t too bad when you consider that I run these stores after-hours.
Here’s how I do it:
- Create your OpenBazaar node. For now, you’ll probably need to run your node on a VPS so that it is accessible 24/7, unless you have a desktop computer that’s always on. (Note: Later this month we will be sharing a very easy method for setting this up and will post again when it is live!) If you’re running a blog or web-facing ecommerce store on an existing VPS, you can easily install and run OpenBazaar side-by-side. There’s a great YouTube playlist with step-by-step instructions. Alternatively you can opt for hosted solutions that will set it up on your behalf.
- Setup your store. Create an eye-catching avatar/logo and header. Fill out your About page to pitch your store; a gif or two always helps. Add your email address or social media accounts, which can help foster trust. Register a Blockchain ID, and add your OpenBazaar GUID to your new decentralized identity as well as your other accounts.
- Choose your niche. I recommend tailoring your store according to a specific niche or product category. This helps you narrow down on a group of suppliers, helps you build a brand, and increases your chances of repeat business.
- Choose your suppliers. Suppliers can be another ecommerce store or an entire platform. Personally, I love to use AliExpress because it has a huge range of products of different categories, free shipping, and cheap prices. Moreover, AliExpress let’s you sort listings in a category/subcategory according to the number of orders (i.e. sort by popularity). This allows you to select items that have a proven track-record of market demand. You can also target popular and reputable suppliers on AliExpress to dropship.
- Optimize your listing. Product information is your friend; the more data you add to your listing description about the product, the better! I generally only set 1 image per listing to minimize the contract download time for the Buyer. In the Description section, I include as many html tags as I need for additional product images.
- Follow everyone and be friendly. A good way to get attention is to follow other nodes on OpenBazaar and send them a short ‘hello’. Buy some items off their stores and make friends.
- Social media. Use social media to advertise what you’re selling on OpenBazaar. Product listings from https://duosear.ch include the listing image when shared on social media sites!
As we previously announced, OpenBazaar 2.0 will be a paradigm shift for the protocol and the project. It more closely aligns with the functionality we envisioned in the early days of the project, as well as fixing a number of limitations we’ve been longing to address:
- Distributed content. Store and listing data will be hosted in a distributed manner between peers on the network. What this means is that a Vendor won’t need to run their node off a desktop computer or VPS 24/7. Individuals can contribute to the health of the network by running a Gateway node, hosting store content on behalf of other users (which may serve as the foundation of affiliate marketing rewards with Bitcoin).
- Web accessibility. Stores and their listings will be accessible to the web via Gateways, making it that much easier to discover and purchase anything from the OpenBazaar network.
- Easier installation. We expect significantly less technical issues with the installation of OpenBazaar 2.0 across all the major operating systems.
- Flexibility. Vendors will have greater control to create product options and shipping rules for physical listings. Digital content can also be automatically download after purchasing.
This is only a snapshot of the many changes we’re bringing to OpenBazaar, which will make it that much easier to start-up a dropshipping enterprise on the network for free, with zero restrictions!