What Is Dropshipping? Understanding How Drop Shipping Works.
Understanding Everything About DropShipping
Dropshipping is a business model which allows you to sell and deliver products to your customer directly from your supply source. You as the online store owner or merchant never handles the goods or product. In essence, you are a sales agent for other companies products, every time you make a sale, you keep a small profit and the supplier fulfills the order.
The idea of a dropshipping business is attractive since it doesn’t require handling or storing of any inventory. Once a sale is made, you reach out to your supplier, who packages and ships it to the buyer.
Some would have you believe it’s just a matter of opening a store, picking products and you are ready to make thousands of dollars in a dropshipping business. Regardless of who you follow or listen to, there are pro’s and con’s when it comes down to launching a dropshipping business model.
Just like any other business, you need to work, build, promote and ensure your customers are well-taken care off.
Understanding DropShipping (infographic)?
- Buyers visit your online store and make purchases
- Once you receive the order, you place the same order request to your supplier, wholesaler etc. Providing them with payment, product info and customer delivery information
- Your supplier fulfills the order by shipping it to your customer.
Advantages of Dropshipping
- No Inventory – Although you are selling physical products, you are not pre-buying them or storing any inventory of the products on your eCommerce site. You are merely a store display for your dropshipper, who will fulfill the order once a sale has been initiated.
- Easy To Start – Find products from suppliers that will dropship. Select an eCommerce platform such as Shopify, BigCommerce, WooCommerce, Magento etc. Add products to your store. Start selling. You can have this all done in hours.
- No Shipping Worries – Since your manufacturers, wholesalers will be taking care of the shipping, you have no shipping vendors or shipping supplies to deal with. Depending upon the nature of your dropshipping business, you may need to supply product labels or promo material to your wholesaler which has to affixed on the product or be included with the shipment.
- Start Anywhere – You can start, conduct and grow this business from anywhere, there are no geographical restrictions. Hey you can even share videos (like those ads) claiming the millions you are making dropshipping products whilst snorkeling.
- Suppliers From Anywhere – Part of understanding dropshipping methodologies, is having the ability to deal with suppliers globally. Which frees you up to connect and buy products from anyone. As long as they can commit to dropshipping and you are comfortable dealing with them.
- Low Cost – Besides being easy to start this business, it has a very low cost attached to it. As a matter of fact, you can get it launched at almost $0 upfront cost. Ask me how.
- Wide Range of Products – You are not restricted to any particular product and can choose from as wide a range of products and suppliers as you wish. Although, I would advise you to stay focused and selective. Stay within a specific niche and choose very reliable dropshippers. Once you understand the dropshipping business, it will make selecting niches, products, wholesalers much easier.
- Easy To Sell Fad Products – With fad products, demands can escalate in the beginning and drop off at the tail end of the fad cycle. With the dropshipping model, it is easy to get in and out of these cycles.
- Easy to Grow – This is a very scalable business model. Once you see traction with your products, it is only a matter of introducing new ones that fit your niche.
- Switch Product Lines – Should you find that your current business is not generating the volume or sales you anticipated or if you wish to change your market focus (niche), it’s easy to switch your product line. But my advice is to conduct a little more detailed research at the onset of launching your business.
- Low Manpower – Managing staff is always a challenge and a dropshipping business (depending on the size) allows one to get away with fewer employees, reducing your workload and responsibility. During peak or busy season just hire part-time help.
- Focus On Sales and Marketing – The trick to succeeding in any business is sales and marketing. You may have the best looking store but without sales it is meaningless. Dropshipping allows you to focus more on the sales and marketing part of the business and not have to worry about things like inventory, production, shipping etc.
- Easy to Test the Market – With the low-cost entry point for this business model, it’s a great way to test the market with your ideas and products. If it doesn’t pan out, just switch to new ideas. Remember, never give up.
DisAdvantages of Dropshipping
- No Control On Inventory – With not having any inventory in stock, it makes it challenging to fulfill orders when your supplier has sold out on products. Most times you will not find out until you place your order. This leads to disappointments, refunds, and upset customers.
- Finding Reliable Suppliers – If you don’t have reliable and dependable dropshippers, your business will suffer. Many businesses are challenged with finding good dropshippers. Many times it’s not the products they sell, it’s their processes such as shipping, returns and other policies that can have a direct impact on your business.
- Increased Competition – You will find a much higher level of competition in the dropshipping space, since it has a low investment entry point. You work around this by finding a good niche with the right products to sell.
- Shipping Issues – With dropshippers responsible for all the shipping, you have no control on when and how they may ship the product. You need to understand this and follow up as products are shipped out. Ensure you get the tracking numbers and provide them to your customers asap. Establish shipping protocols right up-front and know the number of days it takes to ship to various countries.
- Products Arrive at Different Times – You have multiple products which are fulfilled through multiple dropship vendors. These may not all arrive at the same time to your client. Make sure your clients are aware of this upfront.
- Supplier Errors – Mistakes are easily made and from time to time, wrong products or quantities will be shipped by dropshippers. You will have no control over these errors, except try to get it rectified asap.
- Supplier Promotes Directly – Be wary of unethical dropshippers who may include their own promotional material with the original shipment to entice your customers to deal with them directly.
- Product Return Issues – You have to deal with damaged or returned goods based on your refund policy. At times, depending on the cost of the product it may not be feasible to send it back to your dropshipper and have to swallow the loss.
- Lower Profit Margins – In reselling products via dropshipping, your profit margins may not as high as you would like.
- Dealing With Multiple Dropshippers – Selling multiple products from multiple dropshipper’s, can be a cumbersome task to keep track. Imagine selling 5-10 products a day from 3 different suppliers and having to keep track of ordering, track shipping, lost shipments, returns, low inventory, communicating with customers etc. All add’s up to a heavy workload.
Is Dropshipping For You?
If you have always wanted to try and dabble in eCommerce or start an online store, this is one of the quickest, easy and cheap manners to get involved. Yes, there is work and it takes effort but there are also rewards to enjoy if done correctly.
In mere hours you can have an online store launched. Just visit one of the best dropship eCommerce platforms; Shopify to learn more.
Dropshipping is one of many online business avenues to generate an income. There are several advantages to this model but there are also drawbacks. Overall, though, the ease, low investment, and quick launch time are factors that make this a very viable proposition.
What challenges or feedbacks did you face with your dropshipping business?
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