Dropshipping is actually purchasing something from website and sell it for a higher price on another website. Dropshipping is essentially a service in which the dropshipper connects bridges the gap between the consumer and the manufacturer/wholesaler. It’s a form of e-commerce internet marketing where the vendor “buys” the product through their discount supplier or direct from the factory after you have bought the product from the vendour at a storefront price.
It saves your money as it cuts out many layer of men, when buying from these vendors or dropshippers. As you may already have heard about Amazon, eBay, Zappo etc these all big names started out with dropshipping and today these are making an amazing amount of income on sites. This type of e-commerce has become very lucrative.
Today, all the main markets is doing dropshipping. Some popular examples include:
• Dropshopping from eBay to eBay
• Dropshipping from Amazon to eBay
• Dropshipping to Aliexpress to eBay
How does Dropshipping work?
It’s a supplier chain management: suppliers, dropshippers, customer. Customer place order to dropshippers, then dropshippers purchase goods and send to customer information to their supplier worldwide and supplier send the item to the customers is formal deal.
Parties that are involved in dropshipping:
• Manufacturers create the products. They usually don’t sell to the public; they sell in bulk to wholesalers and retailers instead.
• Wholesalers buy products from manufacturers, and then mark them up before selling them to retailers. Wholesalers usually stock products from a variety of manufacturers.
• Retailers sell products directly to the public, at a markup.
And following are the part and parcel of the dropshipping
1- A customer visits your online store, orders a product, and gives you the money, the retailer.
2- The retailer automatically or manually forwards the order and customer details to the dropship supplier.
3- The dropshipping partner charges you, the retailer, for the service, and you charge the customer.
¤ You keep the difference between the sales price and the wholesale price of your item.
Some other important factors include:
Supplier – you need to begin searching for the right wholesaler/supplier to supply your business. The supplier will be responsible for your order fulfillment with physical inventory.One of the most popular sources for suppliers is AliExpress or Alibaba including more independent suppliers as well
Your store – This is the actual e-commerce store where you just need to upload the product catalog, including clean images, item details, and a unique description. There are different e-commerce platforms that work well, with WooCommerce and Shopify being the two most popular options.
Customer – After an order is placed, you will get a notification, and you can direct it to your supplier. You only need to pay your supplier when a converted visitor makes the payment.
It saves space/no inventory cost – One of the good thing you’ll find in this is that there’s no need of warehouse and pile up the inventories.This means you, as a retailer, can sell a variety of products without ever having to stock any inventory whatsoever. This makes drop shipping very appealing for new, small, home-based online businesses.
Reduces risk – Dropshipping decreases the dangers required with beginning up a business or venturing into another market, as though things do not work out, you are not left with a huge number of items in your distribution centre which later you need to offer cheap price.
Managing imbalance demand – since retailers cannot predict demand with assurance, they should hold inventory to cover the unpredictability in demand. Retailers with smaller request must keep in substantial amounts and have higher conveying costs.
As client demands fluctuates at the retailer level, It turns out to be further beneficial for retailers with minor requests not to hold physical items. It is expected that the decrease in retailer stock expenses brought by drop shipping will make up for the higher expenses at the provider level.
Increased product diversity – There is no limitation of space or overhead cost. As a retailer, you’re free to offer your customers something they love: abundance of choices. It provides you vast and ever-changing inventory that makes sale more profitable.
Flexible Location – Without the physical barriers of a warehouse, your business can follow and grow with you wherever you go.
Less control- When you hand over the shipping process to a third party, you have to let go of some control. For some of us, that can be an excellent exercise in character development, but it also comes with a hefty dose of risk. If the dropshipper makes an error and leaves your customer displeased, that reflects on your business. This is why it’s absolutely vital that you work with a safe, verified dropshipper.
High competition -The same low barrier to entry that makes dropshipping attractive creates heavy competition. Other stores aren’t selling similar products — they’re selling the same products from the same third-party manufacturers. You’ll have to find other ways to stand out in order to compete.
Tip: to beat up your competitors you have to be innovative.
Margins Are Lower- Not having to invest upfront in inventory and continue paying for storage and replenishment is a huge plus, but the trade-off is that your margins are much lower. The potential to profit from customer purchases is much more limited.
Shipping complexities- A notable downside of dropshipping is that a single purchaser order may contain items from various suppliers and thus will be disjointed. If organizations work with different suppliers, which mainly all e-retailors do, the items on company website will be traced over a number of various drop shippers. This confuses and increases shipping expenses.
If companies can handle these disadvantages, they will have high competitive advantages among competitors. None of any model is perfect, it is question of how organizations accept these threats and change them to opportunities.
Common Query: Is Dropshipping legal?
Assume, you create a webstore, research the offers of providers to fill your stores with the best possible goods to attract customer and provide them your goods. After finishing their orders, your customers get the bundles with the purchased items and you get your money.
Your profit here’s the distinction between the original price and the fixed price by the product supplier also increased price you have set on your store.
There’s something wrong or illegal with this strategy? It’s totally legal. This is the reason there are plenty of websites on web linked at dropshipping and nobody blocks them.
Is Dropshipping profitable?
Increasing rate of e-commerce activities shows that the dropshipping is profitable.Ecommerce and dropshipping profits have reached over $4 billion, which is a 7 percent year on year increase for the last 10 years.
Moreover, small retailers are seeing an almost 30% increase in conversion rates through smartphones.
In this fastest era of e-commerce, dropshipping is one of the simple and safe option to start a business with less capital.
It’s time to take action and start searching your suppliers. Once you start doing it there’s no need to look backwards until and unless you won’t succeed in dropshipping.
Enlighten me with your thoughts too!