Want to get out of your 9-to-5 loop and step into the world of e-commerce? If “yes!” then you’ve come to the right article.
With the recent advancements in the internet, the e-commerce landscape has changed. Dropshipping is the new talk of the town! Its popularity is touching new feats of glory. This article will discuss the fundamentals of dropshipping. So, let’s begin!
What is Dropshipping?
Dropshipping is a fulfillment method in which the store doesn’t keep any inventory. Rather, when it receives the order, it purchases the product from the supplier, which itself delivers it to the customer.
So, as a dropshipping business owner, you’re not required to have a warehouse or any stocked items. You won’t have to manage the product nor fulfill or deliver it! The supplier will do it for you.
This eCommerce model offers less-hassle and less-worries. And it can be started with low capital investment, which makes it perfect for beginners. You’ll be selling someone else’s products by keeping your profit margin. Sounds interesting, right?
How Does Dropshipping work?
The dropshipping model works in a three steps-flow.
- The customer places the order in your store. Let’s say Evan orders ten mugs from your store and pays $100 for the price.
- You forward that order to your supplier, pay them the wholesale price of $60 and keep your $40 profit.
- The supplier then delivers the order to the customer.
So, a dropshipping model can function properly only when both you and the supplier work parallel.
Advantages & Disadvantages of Dropshipping:
Just like any other eCommerce business, dropshipping also has its pros & cons. So, let’s discuss both of them.
- Less Capital Required:
You don’t get this leverage in other businesses. As dropshipping doesn’t require you to maintain a warehouse with inventory stocks, the launch budget won’t be in thousands of dollars. With very little capital, you can kickstart your business.
- Easy to Start:
Compared to other eCommerce models, dropshipping is relatively easy to start. As you don’t need to:
- Handle the order fulfillment
- Track inventory and stocks
- Put your hours in shipping orders and handling returns
- Manage inbound & outbound orders
- No Location Restrictions:
Unlike other online businesses, dropshipping doesn’t need to be an office-based business. Neither it requires any warehouse. So, it offers total location independence. All you need is a laptop and an internet connection.
- Easy to Scale:
As you grow with time and start getting more orders and sales, things won’t get tiresome for you. As the supplier manages the shipping and inventory, you’re left with more customer support tasks. So, dropshipping is easier to scale up as compared with Amazon or eBay stores.
- Low-Profit Margins:
As a beginner, you should never expect high-profit revenue because the competitive niches are very much saturated. So, while working on some niches, the profit margin will be less.
Although this can be countered by working on less-competition niches, they don’t offer sales stability which means sales may go down at some point. That’s the reason dropshipping businesses are backed by high-quality marketing.
- Complicated Order Process:
As the supplier itself fulfills the order directly, they’ve their own shipping and billing methods. And this can cause trouble for both you and your customer in case of shipping multiple products & similar cases.
- Lack of Inventory Control:
As a dropship business owner, you don’t have your own inventory. Although it may sound like an advantage (and it is!) the supplier sells to multiple retailers from the same inventory. So, the available stock can fluctuate a lot.
Ecommerce is an ever-evolving field. It involves a high level of capital investment and time consumption. Fortunately, Dropshipping isn’t the same. It requires less startup cost, and the model is easy to understand and implement. Happy Dropshipping!