Dropshipping is not a new term for anyone who has got themselves involved with ecommerce over the past few years. It has been there but not many people know and understand what it really means and how it works. There are some important questions still surrounding dropshipping as a term and as a business activity. This post answers these important questions.
What is Dropshipping?
Dropshipping is a service provided by some suppliers or some wholesalers to online retailers. This is a service whereby a retailer forwards a customer’s order to the supplier and the supplier ships the product to the customer.
The shipping of the product by the supplier to the customer is what is referred to as dropshipping. These suppliers who offer dropshipping service are known as dropship suppliers or dropshippers.
Dropshipping is really an interesting model of ecommerce business. Understand more about it by reading how it actually works.
How does Dropshipping work?
Online sellers who don’t want to spend tons of money on inventory and warehousing use this model. The online seller or retailer may be selling on eBay, Amazon or their own online store.
If you are the online seller first you would find dropship suppliers who are willing to work with you. They then allow you to use their product images which you would use on your store. You then use those images to list the products on the store. After doing everything right now you wait for customers to place their orders.
The dropshipping will then work as follows:
- A customer places an order on the seller’s store and pays for it.
- The seller forwards the customer’s order and address to the dropship supplier or wholesaler.
- This dropship supplier or wholesaler then ships the ordered product to the customer. This is now the dropshipping part of it.
In this business model the retailer doesn’t own or stock the inventory. This reduces startup cost for the retailer. In fact he/she doesn’t even handle or see the product.
Just like any other business model, dropshipping too has pros and cons. One must consider all these features before making a decision to take part in this business.
Advantages of Dropshipping
Low overhead cost. Purchasing inventory and managing a warehouse is always very expensive. They keep the overhead costs very high, but that’s not the case here. One doesn’t need any inventory or warehouse in dropshipping. This keeps the overhead cost low and easily affordable.
Little capital. Unlike in traditional retail stores, one doesn’t need thousands of dollars to launch an ecommerce store. This is because you don’t buy any inventory. You only purchase a product from the supplier after receiving an order from the customer for it.
Easy to start. You don’t need too much of computer knowledge to launch your dropshipping store. No warehouse management knowledge needed to since you you don’t need a warehouse. Most ecommerce platforms already have everything programmed and ready. You just have have to do some copy-paste.
Location flexibility. You can run and manage your store from anywhere. The only thing you are going to need is a laptop and an internet connection. You can manage your store while enjoying with your family at the beach, from your favorite restaurant or just anywhere.
The seller may decide to deal in one product or different products in one store.
Disadvantages of Dropshipping
Supplier mistakes. Sometimes suppliers make mistakes which you will have to take liability for. You will have to apologize to the customers because they only interact with your store and know nothing about the supplier. Some of these errors are delay in delivery, low quality product or even missing items. These types of errors may damage your store’s reputation.
Not all suppliers offer dropshipping. Sometimes you may find suppliers who produce the hottest product in the market. When you approach them, then maybe unfortunately they inform you that they don’t dropship.
Shipping can be complicated. Sometimes when you work with different suppliers things can get complicated during shipping. This is when a customer orders different products that come from different suppliers. Different suppliers may be in different locations. Therefore, the products will surely not reach the customer at the same time.
You will have to explain to your customers why their products don’t reach them all at once.
Time consuming. Research is a vital for someone to succeed in dropshipping business. You need to research in order to find the best product for you. There are several other things that need to be researched about. Therefore, the process takes time.
To have a thriving dropshipping business you will have to launch your store on the best ecommerce platforms. The best one out there at the moment is shopify. You get guided all the way through, and it’s free to start. You will also need to know how to choose the best products as well as certified dropship suppliers.
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