Are you wondering what is dropshipping actually? And why is dropshipping business becoming more and more popular? In this article, we will help you answer these questions by giving you basic knowledge of dropshipping. If you are seeking an online business opportunity, don’t hesitate to scroll down below:
What is Dropshipping?
Before stepping into the business, you will need to know what is dropshipping.
Dropshipping is an online retail model where store owners receive orders, then transfer to the third-party suppliers who will then ship directly to the customers. Dropshipping is a good idea for entrepreneurs as it does not require huge capital or excellent management and staffing skills like a brick and mortar store does.
Your job is mainly to find your customers and process the orders. However, you will gain profit through this buy marking up the products you are selling. Though it is quite a simple business, it can be truly rewarding.
Like many other business models, dropshipping has both pros and cons. Now you already understand what is dropshipping. But before getting started, you should look at some advantages and disadvantages of this model as we are going to mention in the next part.
Advantages of Dropshipping
We have explained what is dropshipping earlier. Now it is the time to point out some benefits that dropshipping could bring to you.
First, it is simple to start a dropshipping business. You don’t need to be an expert in the field to build your dropshipping store. Of course, you will need to skim through some basic knowledge as well as some useful tips and tools if you want to be successful in gaining great profits. However, in general, it requires very little from you. No inventory required. No physical store nor location required. No prior experiences required. It means that you can start today without any delay.
Second, it is easy to grow your business. Unlike traditional stores, scaling up a dropshipping business doesn’t cost you much more. You will need to spend more money and effort on marketing campaigns and sales activities for sure. But you don’t have to get more stress on expanding your brand with more physical stores, more warehouses to stock your products, more cost on staffing to run those stores.
Next, you don’t need a huge investment in a dropshipping business. As in dropshipping, you will act as middle man, you manage the fulfillment process without spending a big amount of money on buying the products and keep them in stock, in addition to thousands of other expenses. You just need a laptop and an internet connection to work. That’s why so many people are stocking into it.
The next advantage of dropshipping is flexibility. This is one of its biggest benefits. You will be your own boss running your own store. You can work in a style that is suitable for you. You can work at your house, in a coffee shop, and anywhere else. You can as well be flexible in working time.
And finally, dropshipping is easy to manage. As it requires very little from you, it does not require you much to manage either. Once you have trustworthy suppliers and arranged everything, you only care for your online storefront.
Disadvantages of Dropshipping
From the first 2 parts: “What is dropshippng” and “Advantages of Dropshipping”, you will see that this business model is so attractive. However, beside some advantages, this retail model does have several disadvantages that you need to consider before stepping into the business.
First all of, it has slim margins. Though dropshipping model is surely profitable, you should expect it produces low margins initially, especially in a highly competitive niche. Otherwise, if you can choose the right niche with lower competition, the probability is that you have better margins. At the end of the day, if you want to make as much profit as you want, you need to make a big amount of sales.
Next, order fulfillment process can be difficult. For the most part, it is simple and straight forward. However, it will be a problem if you have many different suppliers who each use their own shipping solution. This can increase the cost and cause some troubles if you have to ship multiple products from different suppliers to your customers.
In addition to the above, you don’t have complete control over your dropshipping processing like stocking products, order fulfillment, and shipping. You count largely on your suppliers who will be in charge of most of the process.
And finally, one of the problems of dropshipping is customer service. Since you are just the storefront and don’t have control over the entire process, handling customer support will be a challenge to you. You are still the one to be blamed for though your suppliers have issues.
The Dropshipping Process
You already have your answers to 2 big questions:
– What is dropshipping?
– What are the advantages and disadvantages of dropshipping?
Now we will take a step deeper to understand how it works actually. So let’s take a look at the step by step process of dropshipping as below:
Dropshipping is one part of the Supply Chain
To better understand how dropshiping works, you should have an overview of how it serves as a part of a bigger process, how a product moves from manufacturers to you – retailers – and finally to your customers.
You, the dropshipper, will have to count on many different parties to run your business. As such, it requires much coordination of those parties and yourself: manufacturers, suppliers, and retailers.
In general, the process will be as following:
Step 1: The manufacturer produces the products and sells them in large quantities to suppliers and wholesalers.
Step 2: Suppliers and wholesalers then sell the products to retailers.
Step 3: Retailers sell products to their consumers.
Dropshipping process
If you already understand what is dropshipping, you will see that the process is simple.
Customers order products from the online dropshipping store, check out, and make payment to the store. The dropshipping store receives the order as well as payment, then send a request to buy the product from the supplier. They will get the profit from the difference between the retail price and selling price to their customers.
Next, the supplier packs up the product and ships it to the customer according to the shipping information that the dropshipping store has provided. Then, the dropshipper informs their customer of the shipping process and finally, the customer receives the package and enjoys it.
Conclusion
As given above, you have understand what is dropshipping, what is its pros and cons, and how exactly it works. Dropshipper will manage the process without even touching a single product. Basic knowledge as provided may guild you the first steps to start, though you will need to make research on more information like finding a good niche, drawing out a good marketing campaign to attract your customers.
Our job here is to help you get the general idea of what is dropshipping, to show that dropshipping is a simple but profitable model and promising to develop in the near future. Now it’s your turn to grab the chance and make your business stand out on the market.
Private Agent for Dropshipping Success