Nowadays, more and more people are getting involved with dropshipping businesses.
These businesses are highly appealing, as you do not have the hassle of managing inventory, shipping or packaging, but you can still make profits and run a successful business.
Dropshipping is a term that is becoming increasingly popular, but you may not be fully aware of what it means and what it entails.
To help you find out if a dropshipping business is right for you, we have created this guide to explain, and let you know what the benefits of dropshipping really are! So, what exactly is dropshipping?
What Is Dropshipping?
Dropshipping is a type of fulfillment method, where a store or business does not have or keep the products it sells in stock. This means that they don’t have to worry about keeping track of inventory, and packing and shipping the items themselves.
When a product is purchased by a customer, instead the store will then purchase the product from a third party supplier, who will ship it directly to the customer. The dropshipper or seller therefore never handles the product directly.
Different from other stores, the dropshipper never touches or has the product. When an order is placed, the dropshipper orders it from the supplier, who packages it and sends it to the customer.
The seller does not stock or own inventory, and purchases inventory as and when it is needed from a manufacturer or wholesaler to fulfill the orders.
Dropshipping businesses are therefore, a type of product curators. These businesses select the best dropshipping products to market to their customers.
However, it is not that simple, it can take a lot of time, energy and money selecting and finding the right products, evaluating their worth and finding potential customers that would be interested in the product.
As a business, you would also be responsible for providing customer service and support if there is a shipping or product issue, and you would have to organize returns, exchanges or refunds if there are any problems.
With all of these things to consider, dropshipping businesses often mark up the cost of the original products to cover distribution, which is why many suppliers like to have dropshippers market and sell the products for them, as this brings in additional sales that they would have missed out on without the dropshipper.
What Is The Benefit Of Dropshipping?
There are actually many benefits of dropshipping. One of the biggest advantages of dropshipping is that it cuts out the problem of having to receive orders, store products, sort inventory and package and send them out.
This saves time and money on postage, stock control, storage space and the workforce needed to process and send out orders.
In addition to this, one of the biggest appeals of opening a dropshipping business is that you can launch an ecommerce store and business yourself, without having to invest thousands in inventory before you have even started, that you have to push and sell as soon as possible, just to stay afloat.
Most traditional retailers have to spend a lot of capital purchasing inventory just to get started as a business. Instead, with dropshipping, you do not actually have to purchase any inventory or products until a sale is made by a customer.
Then, you order the item straight and direct from the manufacturer or a third party, and they will fulfil the order and ship it out to the customer.
What this means is that with dropshipping, you can start sourcing products and starting a successful business without spending a lot of money, so there is less risk involved.
Therefore, it is very easy to get started with a dropshipping business, which is another important benefit.
For instance, you don’t have to worry about packing or shipping the orders, or hiring someone to do so.
You also do not have to manage or pay for a warehouse to store the inventory, and you do not have to track inventory for accounts.
Another advantage is that you do not have the stress of constantly ordering products and managing your stock levels, and trying to sell off old inventory.
Instead, you can quickly source and import trending products, offering them to your customers, and fulfilling orders as they come in, instead of buying them and hoping they sell well.
This also means that your overhead expenses are also very low, and you can even run a dropshipping business from home with the help of a laptop and that’s it! You don’t have to hire a store front or space to sell your products.
As long as you have an internet connection, you can make money and sell wherever you are and manage your business from a laptop.
A great benefit of dropshipping is that it is easier to scale, and to test new products or product lines.
By offering various new products, you can see how your customers react to them before committing to buying a large amount of inventory. There’s very little risk and a lot of reward!
You can also offer a wide range of products, bringing you more sales and more profits, as long as your suppliers stock it, you can sell it. This offers you endless opportunities to make sales.
What Is The Downside Of Dropshipping?
Unfortunately, everything has its downsides, and dropshipping is no different. The main disadvantage of dropshipping is that because it is so easy to get started, there is a lot of competition.
More and more people are opening dropshipping businesses, which means that there are low margins. The competition is fierce!
The other disadvantage is that you are not in control of your inventory, so you cannot keep track of what is available.
This means that there can be mistakes, for instance, someone can order a product that your supplier does not have anymore, and you cannot fulfill it.
To mitigate this, you will need to have automatic updates to remove a product from your site or ecommerce platform when the quantity is not available from your suppliers.
There can also be issues with shipping, as customers can make orders with items from different suppliers, which will incur separate shipping charges.
You need to make sense of this and calculate shipping costs that include the whole order, without you losing out on profits.
You also have no control over the products themselves, as you do not have them in stock yourself. This opens the door for mistakes, product changes or damages that you have to cover.
The thing is, there are good sides and bad sides to everything. For the most part, if you manage things well, you can be really successful with a dropshipping business.