A Guide to Dropshipping Business for Beginners
With eCommerce growing by around 17% every year, it is forecasted that the demand of dropshipping as a fulfillment model will continue to grow as well.
So, if you are an entrepreneur looking to enter the eCommerce space but lack resources to manage supply chains, manufacturing, and fulfilment—dropshipping could be one of the best options for you.
In this article, we will walk you through the concept of dropshipping, how it is beneficial, and how you can make it a success for your business.
What is dropshipping?
Dropshipping is a method in supply chain management where a store does not keep the products that it sells, in stock. Rather, when a store sells a product using the dropshipping model, it buys the item from a third-party and has it shipped directly to the customer. In simple words, you only have to pay for what you sell.
What’s more, starting a dropshipping website is really simple. Especially with solutions such as Shopify, it only takes a day or two to create a website, source products, and finally start selling.
The major difference between dropshipping and a standard retail model is that the selling merchant does not own or stock any inventory. The seller purchases the inventory as required from a third-party, usually a wholesaler or manufacturer, in order to complete the orders.
How is dropshipping beneficial?
Dropshipping is a low-risk business model that permits you to sell products to your consumers without incurring very huge costs. Since it requires less investment, it is easier to earn more profit as compared to other business models.
Here is how it is beneficial –
Easy to start
Running an eCommerce business is easier when you do not have to deal with inventory management. With dropshipping there is no need to be worried about –
- Packing and shipping your orders
- Managing or paying a warehouse
- Ordering products or managing stock level
- Tracking inventory
- Handling inbound shipments and returns
Requires less capital
While retailers have had to invest in huge amounts of capital in purchasing inventory traditionally, it is the opposite when it comes to dropshipping.
With no inventory investment required, you can easily start sourcing products and launch a successful dropshipping business. Moreover, since you are not committed to selling through any inventory purchased, like in a retail business, there’s very less risk involved in starting a dropshipping store.
Not bound to any location
A dropshipping business can be started from anywhere with a stable internet connection. As long as you are able to interact with customers and suppliers, you can manage and run your business seamlessly and effortlessly.
Wide variety of products to sell
Since there is no need to pre-purchase the items you sell, you have the choice to offer an array of products to your potential customers. If your suppliers stock an item, you can simply list it for sale on your online store at no additional cost.
Easier to scale
In a traditional retail business, if you receive three times the number of orders, you’ll need to do three times as much work. On the other hand, with dropshipping, most of the workload is on the sellers which enables you to focus on other areas of your business.
Better scope of growth
Dropshipping allows both eCommerce channels and wholesale merchants to grow quickly as both only need to focus on their own goals. For instance, eCommerce channels just need to pay attention to the marketing part of the business while wholesale merchants can focus on the supply chain.
Different types of dropshipping
Now that we know about dropshipping as a business model, here are the different types of dropshipping
Offered by suppliers – Individually ship the products to the end customer. You can negotiate business terms with the suppliers and then list their products on your website.
Dropshipping from Amazon and other online retailers – Also known as the arbitrage dropshipping model, the seller would basically look for a price arbitrage between two online retailers and choose one.
Using Amazon FBA for Dropshipping – The seller ships the product in bulk to the Amazon’s warehouses, then stores the inventory, and ships it to the individual customers as orders come in.
Making dropshipping a success
Now that we’ve discussed the fundamentals of dropshipping in detail, let’s talk about some “must-do” actions that will make your dropshipping business a roaring success –
While this factor is important for all businesses in general, it is safe to say that it is even important in the world of dropshipping. Since you will be competing with a lot of shops selling similar products, you need to have a solid plan adding value to your business. For instance, offering quality information, a stellar customer service, or even low prices can do the trick.
There is one thing in common for all the dropshipping stores—all of them specialize in one particular product or niche. The more specialization you have, the more successful you will be and is touted as a good move to make in a dropshipping venture.
Allowing you to communicate more effectively with your customers, specialization can help you stand out from the crowd and compete against a smaller group.
Have a long term perspective
Rome wasn’t built in a day, and neither were dropshipping businesses.
When it comes to dropshipping, many people think of it as a medium for building passive income after spending just a few hours on it. However, that’s not how it works. Building a dropshipping business needs commitment and investment for it to be a success.
Offer exclusive service
The best form of marketing is to have happy customers. It is definitely easier to sell your product to a satisfied customer than convince a new prospect to buy. Therefore, if you treat your customers exceptionally well, they become your brand advocates.
Aspiring dropshipping entrepreneurs usually want to know to be sure if their niche will work out. The answer is, you can’t! While tips mentioned in this blog can help you increase your chances to make an informed decision, there’s no way to be sure if you’ll succeed in a market without diving in.
Therefore, do your research, evaluate your options, and collect as much information as possible.
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