What is Dropshipping? The Biggest Advantage to Dropshipping
Recently, I discovered a new business model called dropshipping. This method means that you don’t need to have any inventory of your own. Instead, you will partner with a supplier who will ship your products. What is dropshipping and what are its advantages over other e-commerce models?
What is Dropshipping?
Dropshipping is a great way to avoid having to carry and store products on site. When an order is placed, the store orders the products from a supplier, who then ships the product directly to the customer.
What is dropshipping and how is it different from other online businesses? The biggest difference between dropshipping and other types of business models is that the merchant does not own the merchandise. Instead, they act as a middleman between the customer and the manufacturer.
This system requires very little upfront investment, making it perfect for testing out new product ideas before committing to carrying any physical inventory.
How Does Dropshipping Work?
There are two ways to dropship on Shopify: you can either find a North American or international drop shipping partner through an online database, or you can use an app that connects to hundreds of dropshippers.
For the former, we suggest using an app like Sellbrite, which helps small businesses manage inventory and orders.
DSers is a Shopify app that helps independent business owners find products to sell. You can browse AliExpress and import the products you’re interested in directly to DSers with just a click of a button. Once a customer buys a product, you’ll be able to fulfill their order in the DSers app. Fortunately, DSers automates this process, making it easy for you to manage your orders.
Just make sure your order is correct, and then hit the button to order. AliExpress will ship the product to the customer regardless of where they are located in the world.
Dropshipping can be a great way to make money online, but it requires hard work and dedication. If you treat your dropshippers well, they can be great business partners that help you get your products to your customers quickly.
What are the Benefits of Dropshipping?
The dropshipping model is great for testing out new business ideas and strategies because you can easily switch out products and suppliers.
Dropshipping is a great way to start a business with minimal risk. You can test out different business ideas and learn a lot about choosing and marketing popular items. You don’t have to carry any stock or ship any packages yourself, which makes it a very attractive option for many people.
Dropshipping is a business model that is becoming increasingly popular because it is very easy to set up and does not require a lot of capital.
1. No Need to Buy Inventory
With a traditional retail business, you have to buy your inventory upfront, but with dropshippers, you don’t have to. Instead, you can partner with suppliers who will fulfill your customer’s orders and ship them to you.
With the dropshipping model, you don’t actually buy the product until you’ve sold it and been paid for it.
When you run your online store through dropshipping, you never have to worry about getting stuck with products that people aren’t buying. This lets you start your eCommerce business without as much financial risk as opening a physical store.
2. Say Goodbye to Shipping Hassles
Dropshipping is a great way to avoid the hassle of managing inventory and shipping physical products.
When you run an eCommerce store, you can say goodbye to most of the hassles that come with running a traditional store. This is because you don’t have to worry about shipping or handling inventory!
3. No Warehousing Costs
One of the best things about running a dropshipped business is that you don’t have to carry any stock or manage any warehouses. This can help to keep your costs down.
Starting a drop shipping business is an appealing option for entrepreneurs who are looking to start their own business with little upfront investment. This type of business can be operated from home, making it a convenient option for many people.
As you grow your business, your costs will increase but will remain lower than traditional brick and mortar companies.
4. Remote Operations
A dropshipping business can be run from anywhere in the world as long as you have access to the internet. The key to running a successful online business is maintaining communication with both your suppliers and customers. With proper communication and management, you can run a highly successful online retail business from virtually anywhere.
5. Unlimited Product Options
You are free to sell whatever you want in your store, as you don’t have to purchase items beforehand. This enables you to offer popular products to your customers without having to pay extra for inventory. If suppliers have the product in stock, you can add it to your store.
6. Easier to Test New Items
Dropshipping is a great way to list and sell products without having to commit to buying large amounts of inventory. This is the main benefit of dropshipping. Test new products without having to buy any inventory upfront.
7. Dropshipping is a Money Multiplier
With traditional retail businesses, if you received triple the amount of sales, you’d probably need to hire more staff.
When you use dropshipping suppliers, they will handle most of the extra work that comes with increased orders. This lets your business expand without as many issues and less extra work.
Expanding your operations requires a lot of work but using dropshippers allows you to avoid most of the heavy lifting. This is because most of the work of fulfilling more orders from your supplier is handled by them, allowing you to grow without as much pain.
Are There Drawbacks to Dropshipping?
According to Google Trends, the dropshipping model has seen a significant increase in awareness and interest over the past few years. In January 2020, interest was nearly nine times higher than in January 2016. This is a growing global trend that shows no signs of slowing down.
The coronavirus outbreak has forced people to shift their shopping habits from physical stores to online.
The rise of eCommerce has led to a more decentralized marketplace, with consumers spreading their budgets across many different sellers instead of just a few retail locations. This shift provides opportunities for businesses of all sizes to compete in the market and reach new customers.
While the benefits of dropshipping are aplenty, there are quite a few disadvantages to this model.
1. Lack of unique selling proposition
Dropshipping allows for limited customization options, but the degree of this is limited.
One of the main cons of dropshipping is that it can be difficult to stand out from the competition. This is because anyone can set up a dropshipping business, which means many businesses are selling similar products. If a supplier dropships for you, they will also drop ship for anyone else, so it can be hard to make your business stand out.
If your product doesn’t generate enough revenue for the supplier, your product will be very similar to the supplier’s other customers who also drop ship.
If your product is not unique, you will have to compete on price.
Dropshipping is a great opportunity because there is a low barrier to entry. However, because of this, there will be plenty of other people selling the same products.
2. Insufficient quality control
Manufacturers have long known that there’s always a percentage of defective products that come off the assembly line, no matter how small. In the past, they would inspect products for quality, aware that the retailer would also examine them when unpacking them.
One of the dangers of retailers not directly overseeing quality assurance is that manufacturers may relax their standards. This can lead to more defective products and threaten your business as returns are likely to increase.
3. Thin margins
The main advantage of mass production is that it allows suppliers to offer discounts for high quantity orders. However, when dropshipping, the unit cost is higher, which can eat into your margins.
Be prepared to invest in things that will make your store stand out from the competition, such as excellent educational resources, strong copywriting skills, or developing a unique niche market.
4. Out of stock
When you turn over inventory management responsibilities to a supplier, you’re also trusting them to keep track of and communicate inventory levels for the goods you sell on your website. This can be a risky proposition if you don’t have faith in their ability to do so.
If a customer orders an unavailable product, it can be a frustrating experience for all concerned.
Partnership negotiations are an ideal opportunity to discuss inventory management and develop a procedure for refunds or replacements in the event of a problem.
5. Managing logistics can be a challenge
Dropshipping can be difficult to manage when your business expands because your supplier might have multiple warehouses.
If your logistical processes aren’t up to par, it could lead to a poor experience for the customer. This is because things such as tracking information, shipping times, and locations can all be wrong. Improve your logistics and you’ll improve the customer’s experience.
6. No control over how your product is packaged
For online-only stores, the first physical contact you have with a customer is when they receive their package. However, if you’re using dropshipping, you relinquish control over how your product is packaged.
This means no personalized thank you notes or gift wrapping. Most dropshipping companies nowadays allow you to customize invoices and shipping labels, though.
The challenges of dropshipping
Some business owners may find that drop shipping is not the best fit for their business model. Several drawbacks can impact a business’ bottom line, such as the inability to control inventory, higher shipping costs, and lack of customer loyalty. Additionally, some businesses may find that they are unable to compete with larger retailers who also offer drop shipping services.
There are both advantages and disadvantages to dropshipping that business owners should take into account before deciding if it is the right move for their company. Weighing the potential risks and rewards of drop shipping can help you make an informed decision about what is best for your business.
Avoid These Common Dropshipping Mistakes
Dropshipping can be a great way to start your own business, but there are some common mistakes that you need to avoid.
Expecting Your Products to Sell Themselves
Dropshipping puts your business in competition with everyone else who is doing the same thing.
It’s easy to think that you can set up a dropshipper for your store and instantly have a money-making machine.
You can’t just set up a dropshipping store and expect sales to come rolling in. You need to put time and effort into marketing and SEO to drive traffic to your store. This is especially important if you’re relying on dropshipping for your income.
As a dropshipping business, you have no control over the packaging or shipping of your products. But, you can focus on giving your customers a great customer experience with the parts of your business that you can control. By focusing on great customer service, you’ll build a loyal customer base and a strong brand.
Relying Too Much on One Supplier
If you only have one supplier, you could face issues if that supplier has a problem.
What if your suppliers raise prices to the point where you can’t afford them? Or go out of business? Or decide to stop working with you? Even if it’s not as extreme, they could run out of stock on a product and not know when they’ll get more of it.
It’s important to have a backup plan in case something goes wrong.
Whenever you begin working with a new vendor, you should place a test order with them to make sure that they can meet all of your requirements.
When you receive a sales order, be sure to examine the package, shipping time, and product quality. By making sure that everything is up to your standards, you can prevent any potential problems in the future.
Testing your fulfillment process is important. You want to make sure you don’t have any problems before you ship out your products.
Stressing Over Shipping Rates
Shipping rates are a pain, but they can be simplified if you only ship to one place.
If you sell products from different suppliers and ship to multiple addresses, it can be a real headache keeping track of everything. What if a customer orders a product from more than one warehouse? Or what if the customer orders from three different locations?
Rather than worrying about how you’re going to ship items to multiple addresses, consider the bigger picture.
What you should be striving for is a happy customer base that will result in more sales and repeat business. If you’re spending all your time and energy on getting shipping rates accurate to the penny, you’re missing out on opportunities to create a better shopping experience, grow your store, and market your products.
To avoid having to charge your customers a high shipping fee, look at your past orders and base your flat rate or tier system on those.
Will it affect your profits?
Shipping costs will fluctuate, but as long as you set a flat rate, you will eventually get all of your shipments out.
One of the main reasons that customers abandon their shopping carts is because of shipping costs. However, flat rates and free shipping have been shown to increase conversion rates. This means that, while you may stress over shipping rates on some orders, you will come out ahead on others. If you have set your flat rate properly, then shipping costs should even out over time.
A flat rate shipping charge eliminates any confusion or “surprise” charges that may appear during checkout.
What is dropshipping? If you’re thinking about starting an online business, dropshipping is a great option to consider. Dropshipping has many advantages, but the biggest one is that you don’t have to invest any money in inventory upfront. This means you can start your business with very little capital and low risk! So if you’re looking for a way to get started in e-commerce without breaking the bank, definitely check out dropshipping!