What is Dropshipping?
A retail fulfilment method where online stores market products but don’t own or maintain an inventory is called Dropshipping. In this process, customers purchase items from the retailers but the manufacturers handle the shipping.
When it comes to making money online, nothing can beat Ecommerce if it is based on the process of Dropshipping business model. It is without any kind of huge investment and effort, many dropshipping businesses are managing to sell more.
Everything from basic concepts to detailed information is required to understand more about Dropshipping in-depth. So let’s dive right into it.
What do you understand by dropshipping and how does it work?
When you don’t have to stock products in your warehouse and you can sell your products online, which is exactly what is called dropshipping.
In this case, you need to partner with the suppliers, who display their products on your online store. Once you receive an order for a particular product, you immediately inform the respective supplier. The supplier is then sure that the order has been shipped and delivered to the customer within a committed time frame. After your profit is deducted, you pay the supplier for the sale.
Why Is Dropshipping a Preferred Method of Order Fulfillment?
According to the statistics of global dropshipping, dropshipping for eCommerce business models can be the most lucrative option. Moreover, it doesn’t require investing in storing inventory, managing warehouses, or shipping costs. All that is required is a very basic computer with good internet connectivity that helps you to operate the dropshipping business.
But besides that, dropshipping has some very essential benefits that prove its preference over traditional order fulfilment methods.
Some of the basic benefits of Dropshipping
A) Dropshipping helps you to sell more: Dropshipping allows you to list the products on the online store without storing them. This comes with the advantage or the benefit of listing a maximum number of products for sale. No separate investments are required for paying the suppliers before the products are sold.
B) Dropshipping saves time, money, and effort: If your online store has a decent customer base, then dropshipping helps to save a lot of time and money, and efforts in listing branded products for the marketing campaigns. This also lets you focus on increasing the visibility of your eCommerce website on search engines and social media platforms to maximize sales and profits.
C) Dropshipping provides flexibility: We all look forward to having flexibility while working. And a dropshipping business allows the exact flexibility that we require for carrying out a business. It provides the flexibility of partnering with an unlimited number of manufacturers, suppliers as well as wholesalers.
What about the challenges of dropshipping and how can we overcome them?
The process of drop shipping may seem like easy money. Selling the products of the third-party merchants, while your business earns profits without spending and shipping. But this too has some major challenges pertaining to the dropshipping business.
- Establishing a reliable network of suppliers: One of the critical challenges of dropshipping is establishing a reliable network of suppliers. Many suppliers deliver late or deliver managed / wrong products. Hence there is a lot of risk of losing the customers for the future order and spoiling the business reputation. The solution to overcoming this problem is, considering some of the factors while selecting the suppliers would be industry knowledge, support staff, experience, response time, and availability of data feeds. Taking small orders while dealing with suppliers to ensure that they are able to fulfill what your business needs can turn out to be extremely beneficial.
- Managing the inventory and the item price: While fulfilling your orders through dropshipping, one does not have any control over the price of the product as well as the inventory The entire dependence is on the suppliers in this case! The solution to this would be integrating a system that can be integrated with your supplier’s information on a real-time basis. The details like the availability of the product and their prices should be accurately displayed on the store, to run the dropshipping business accurately.
- Handling product returns: The product returns becomes very complex when the third party involves due to each third party having a different return policy. Sometimes it may so happen that suppliers don’t even offer a return policy for some of the products. This leads to customers complaining as they are in direct touch with you and nit the customers. This problem can be overcome by specifying the product return policy on the website. It should be kept in mind that your return policy should align with your supplier’s return policy. Also intimate your suppliers with your return policy, instructing them to let you know, if at all they decide on working on their supplier policy.
The challenges that have been mentioned above have no fixed solutions, but the given solutions to a certain extent do help in overcoming these problems when they occur.
Some of the known pros and cons of dropshipping:
Pros/ Advantages of dropshipping:
- Minimum Business investment
- Hassle-free order fulfillment
- Accurate inventory management
- Risk-free online Shipping
Cons or Disadvantages of dropshipping:
- Reliance on suppliers inventory level
- No control over order fulfillment
- Low-Profit Margin
- Difficult to maintain quality customer service
Tips To Make Your Dropshipping Business Successful
Winding up by sharing some of the essential tips in making dropshipping a success:
1.Selecting the right or the correct niche: Selecting a laser-focused niche and the one you are interested in makes it easier to market a product range. You have to be equally passionate about the niche you select otherwise there’s always a high chance that for you to become discouraged, as it takes a lot of work to successfully scale a dropshipping business.
2. Performing competition research: In any industry, it is important that you understand the type of competition you can face from the other side of the river. There are many reasons why a product might not have a lot of competition, including high shipping costs, supplier and manufacturing issues, or poor profit margins. Look for products that have competition, as it’s a sign that there is a high demand and the business model is sustainable.
3.Secure a supplier: Having the wrong supplier as a partner does not lead to having a bad business, but it also leads to losses. Mostly the good suppliers are based overseas, hence that makes it difficult to have a proper communication method, both in terms of response as well as the ability to understand each other. Hence, through research, choose the correct partner for your business to tie up with.
4.Have your own eCommerce website: Lastly have your own eCommerce website. Even if you have a sizable budget that would allow you to hire a web design and development company to create a custom solution, it’s a much wiser move to use one of the plug-and-play options, especially in the beginning. Once you are established and the revenue is coming in, then you can explore additional website customization.
As far as the basics are concerned, this is everything that will help to know about dropshipping.
As it is a very vast subject, the concept around dropshipping can be divided into multiple chapters which in turn, helps to have a vivid idea on dropshipping.