What Is Dropshipping? In a short paragraph, Dropshipping is one of the common eCommerce business revenue models method that does not require an online business to keep the products in stock. Instead, the e-store sells the product, then buy it from a third party supplier, who then ships the parcel to the customer.
In this article, we talk about the dropshipping model, its benefits, its disadvantages, the solutions and the best practices to success in this kind of business
Table of contents
The concept of dropshipping
Dropshipping is a process of product fulfillment that occurs between the customer, the seller and the supplier.
When the customer places an order in an eCommerce store, the store owner buys the purchased good from the supplier, who delivers the order directly to the customers
Benefits of Dropshipping
Dropshipping is one of the most popular eCommerce models for aspiring entrepreneurs to begin with, because it’s accessible, and you can run a dropshipping with a small budget and test products without holding stocks. Here are the main advantages of dropshipping.
Small starting investement
One of the top advantages of dropshipping is the ability to start an online business with a less capital, all what you need to do ingeneral is to open an eCommerce store, preferably with Shopify, connect with the most suitable supplier for your niche, advertise the store and pay the supplier only when a customer places an order.
Dropshipping is easy to get started and you don’t have to pay extra fees for :
- Paying for a warehouse to stock the products
- Paying employees who work on the warehouse
- Packing and shipping the orders
- Tracking inventory
- Handling returns and damaged products
You can work from home
As you don’t have to deal with a warehouse and in-house stock, you can even work from the comfort of your home, and you can manage your entire business only with a lapetop and internet.
In fact you can run your business from anywhere in the world, as long as you can communicate with suppliers and customers easily, and the fact that you can Virtual Assistance online, you can run and manage your business from everywhere in the world.
Large choice of products to sell
With a simple click, you can import your winning products into your eCommerce store, add new ones whenever you want, delete the ones you no longer need, all these possibilities are possible with the dropshipping business model, as you don’t have to pre-purchase the products to sell.
There is a wide range of suppliers in the dropshipping industry, so you can easily find the one that have your most preferred products to run your business.
Disadvantages of Dropshipping & solutions
All the advantages we mentioned above make dropshipping an easy way for anyone getting started with an online store. But as any other eCommerce business model, dropshipping has its dark-side. Here are a few of them to consider.
Fake and low quality products
With dropshipping, you can sell almost everything, yes this is true ! But it is not always the case, you are NOT ALLOWED to sell fake products, you can be sued by the brands owning the copyright, getting your payment gateway frozen or even banned form your eCommerce platform provider, so before even getting started, make sure that the supplier is legit and you are allowed to resell them.
- Solution : Try to contact a reputable supplier, ask for a sales permit/licence, be sure that the products are not FAKE and are copyright Free
Low margin profit
Since dropshipping is relatively easy to get you started, and since a supplier deals with lot of eCommerce store owners, you won’t be the only one who is selling the supplier’s products. Which results a rude competition, and making big profit percentage could be a big challenge.
- Solution 1 : Pick a supplier who is selling high quality items to attract wealthy buyers who can afford paying the price, improve your customer support, your site design by selecting a professional Shopify theme to increase the User Experience and incite the visitors to buy from you and not from your competitors
- Solution 2 : Use the POD dropshipping mode : with the Print On Demand dropshipping model, you can use your creativity to design high quality and UNIQUE styles to be printed to the products being sold, this way you will have the advantage of selling UNIQUE products with little to no competition
Out of stock products
Of of the perks of dropshipping is the ability to sell products without having its own inventory, but this has a non neglected downside, which is when a customer buy an out of stock product.
How this can happens ? Some suppliers may not have an automated process to track inventory with their multiple clients (the sellers), and when a customer buy an item, it could be already out of stock
- Solution : Try to find a supplier who offer an app or a plugin to update the stock automatically, so that when a product runs out of stock, it can’t be purchased from your store. This way you will reduce the probability that an out of stock product could be ordered by a customer
Shipping complexitites
When you deal with lot of suppliers at the same time, a customer may buy several products which will be shipped from different locations and in a different time, the customer then may receive two parcels in a different time and can even claim a refund.
- Solution : Try to opt for a niche industry so you can deal with one supplier only, and if some of the one suppiers products are stocked in different location, clearly state the product location in your product description, so you customers can be aware of that.
Excessive Shipping delay
Excessive Shipping delay is of the most common dropshipping disadvantage, where for some reasons, a supplier may delay the shipping to your customers, who will receive the orders after weeks or sometimes even months if you are mainly dropshipping from China.
- Solution : Try always to deal with a local supplier (ex: if you are in USA, try to find a supplier in USA), this way you will be ware of holidays, weather storms, … and everything that may delay the shipping. Also dealing with a local supplier will avoid dealing with international customs, taxes, and restriction that may delay the shipping
Supplier errors
You can be the most honest person and business in the world, but sometimes, because you don’t hold the inventory and you can’t see and touch the products being delivered to your customers, an errors may happen : such as : the customer received the wrong product, or the quality was not as advertised
- Solution : Get too close to your supplier, ask for samples, read the other seller reviews before dealing with a supplier to minimize to the maximum the risk of shipping mistake.And from your customer side, if this come to happen, try to refund him/her or offer an exchange or even send him a Free gift to avoid getting negative reviews
Communication with the supplier
Sometimes, communicating with a supplier, can be a huge challenge, mainly if you have gone with an international one, supplier may answer your URGENT questions very lately, or the worst case, you won’t get an answer or can’t even understand your question or issue.
- Solution : Try to deal with a local supplier, who speaks the same language as you, and before selecting your supplier, search for the reviews about the supplier to see the other merchants feedback
The best practices to success in dropshipping
We have highlighted some of the advantages and disadvantages of dropshipping, if you would like to go with this kind of eCommerce business model to run your online store, you need to :
- Get you sales permit/license and your company papers done first
- Focus on a niche market (ex: Start a lingerie store)
- Take your time to search for the best supplier who is located in the same country as you, and who is reputable for his excellent services and customer support
- Don’t sell FAKE products, and avoid following fake gurus who may misguide you
- Pick the best theme for your Shopify store to make it look professional, SEO friendly, …
- Use videos to better describe your products
- Learn how to advertise your online business
- Provide a stunning customer support, answer your customers professionally, efficiently and quickly
Do you have a question about dropshipping? drop your question in the comment below, and we will be please to answer ^^
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