What is Dropshipping?
So what is dropshipping? Dropshipping is an order fulfillment method where a store isn’t required to stock the products they’re selling.
Instead, it buys the products from a third-party supplier, then ships the order to the customer. Thus the seller isn’t responsible for handling the stocks and products.
The most significant dissimilarity between the standard retail model and the dropshipping method is that the seller doesn’t own any inventory or stock.
The seller directly purchases the items or the inventory from a third-party seller, most likely a manufacturer or wholesaler, and fulfills the order delivery.
But is Dropshipping a quick-rich scheme as it is widely believed?
It is not!
However, dropshipping is gaining traction because of a business model where you’re getting a cut for selling other products. But below the curtain, a lot goes down in streamlining the process, from handling the obstacles to day-to-day management.
Coming to our primary question:
If running an eCommerce business is possible through Dropshipping?
Certainly yes, given you are well aware of all the things that can go wrong and right before you stump into making a successful dropshipping business model.
Here’s everything you’d need to know before starting your dropshipping business model.
Benefits of Dropshipping eCommerce Business
1. No Inventory Costs
One primary benefit of starting with dropshipping is that it starts with zero upfront inventory charges which are huge for the eCommerce business.
The eminent fact for not having items in stock is not to buy and pay for them in the very first place. Thus, you don’t have to pay a huge chunk when you plan to launch your online business, reducing the overall risk.
This makes drop shipping a lucrative option to start within a dynamic front, particularly for risk-abiding retailers.
To begin with their eCommerce business, sellers with low backup costs can collaborate with suppliers who are assured of handling stock and fulfilling the purchase orders.
2. Dropshipping is flexible on location.
Sellers can run dropshipping businesses from absolutely anywhere with only an Internet Connection by your side. Thus it’s one of the many benefits of not having to start and manage an inventory.
Sellers are only required to maintain direct and streamlined communication with suppliers to promptly act on business orders and shipments.
Anyone can start with a dropshipping eCommerce business with frequent accessibility to suppliers.
3. Easier to scale
If you acquire three times the number of orders with a standard retail business, you’ll usually need to do three times as much work.
By having the dropshipping suppliers handle the primary inventory part, you can scale on growing other parts of the business.
- The substantial benefit is the capability to record and potentially sell products before dedicating to purchasing a large inventory.
- The suppliers will do most of the work to process extra orders, allowing you to grow with fewer growing pains and less cumulative results.
Hard Truths about Dropshipping
1. Low margins
Though gaining a cut for selling someone else’s product might look lucrative, the harsh reality directs towards very low margins. It’s the biggest drawback of fighting in a competitive dropshipping vertical.
Since it’s very easy to begin with dropshipping, the competitive markets place their overhead prices are as low as rock-bottom prices to grow their revenue.
Though you put less money in, you also get less money out. Therefore sellers have to do a lot of business to acquire a significant profit, given a major chunk of the money goes to the supplier directly.
After buying from wholesalers or manufacturers, your discount can be lesser than 20%.
Given the fierce competition with the big brands and emerging marketplaces, you might have to cut down on your profit margins to keep the numbers competitive enough.
You’ll also have to fight for significant traffic and client base.
2. Difficult to build a brand when you’re not handling your shopping experience entirely-
As the one handling dropshipping for your business, you’re directly involved with marketing and selling your products, directly influencing your brand name.
If a supplier fails a delivery in the scheduled timeline, it wouldn’t be his reputation and brand name at stake.
Thus, you’re accountable for everything that goes under your brand name despite not handling them by yourself.
Despite having no control over how your product is made or delivered, you’ll have to understand your customer’s shopping experience to curate your marketing style.
This can be a massive risk if you’re not particular adequately while picking suppliers to work with.
3. A highly competitive market
The competition is dynamic, with more new sellers gravitating towards dropshipping. Promising entrepreneurs find this “low-overhead” segment more lucrative to ignore this market’s highly competitive nature entirely.
A lot of fierce competition comes up with little capital investment to start a dropshipping business. Thus this low barrier heavily impacts the famous markets, resulting in end-to-end competition.
The more enormous the company, the more they consolidate their markups to provide the lowest prices. Thus making the other small fishes fight for and with significantly fewer numbers.
Is it Possible to run an eCommerce business with dropshipping? Your call!
The rising numbers of dropshipping sellers are a testament to this increasing business economy.
We’ve mentioned already how it’s possible to do your dropshipping business, given you’ve done your homework first.
- Do your market research first upfront without compromising on it.
- Strategize your shipment systems for problematic locations and non-profitable regions.
- Protect yourself from overselling.
- Categorize your high-maintenance products.
- Maintain your business objectives, quality objectives, and maintenance objectives clearly to your manufacturers.
Launching a dropshipping eCommerce business is exciting, as are the challenges you’re getting in. But if you’ve done your research well, it’s worth getting in with your full potential.
It has its benefits, and so are the drawbacks, but careful planning and consideration will resolve most of your problems.