Dropshipping is a business model where you sell products without actually creating, manufacturing or keeping products in warehouses. Lets elaborate, let’s say you have been thinking about opening your own online business but you don’t know where to start. You don’t know what you should sell, you don’t have any money to invest in products and finally not even any space for inventory. Well, that’s where drop shipping comes in. To further explain, with drop shipping you can sell products with them never being in your hand. All you need is a computer, an online store and a basic understanding of how to market and sell online.
Here is how it works
First, you find what you want to sell from a supplier and enlist that product on your website at a price you set which is higher than the suppliers’ price as it also includes your profit margin. Next, when someone places an order for that product, your customer pays you the price that you had set which leads to you making a profit. Then, you will place the order with your supplier at the wholesale price and have it shipped directly to your customer.
For instance, let’s say you found a pair of shoes on a supplier’s website for $100. You would then list it on your own website for $150. Afterwards, when the order comes through your website, you would then place your order with your suppliers providing them with your customer’s information. Hence a $50 profit for you, after the product is shipped directly to your customer. Surprising as it sounds that’s about it.
Answering a few questions about dropshipping
I know what you are thinking. Why wouldn’t just somebody order the watch directly from the supplier’s website? Well, there is a couple of reasons why. First, the internet’s community is very big and the customers might not know the supplier so they can’t buy from them directly. Second, when people buy things, they are not just buying the product. They are buying the marketing, positioning, trust, brand and lifestyle that it showcases. With drop shipping, you can focus on marketing your products which is the thing that matters the most in this case. Saying the right things at the right time, telling the pros and cons of the products so to be sincere and to develop trust is the main focus, as you will not be dealing with an inventory of any sort.
Another question is why do people get into dropshipping? Well, first off, its really fast and easy to start and you can dropship with incredibly low investment costs. You also don’t need to have a business entity when you start. You don’t have to worry about managing inventory, packing and tracking. This means you can focus exclusively on marketing, promotion and merchandising. You will have access to millions of products instantly that suppliers are constantly researching to determine what’s trendy. You are the one who sets the retail price so you control the margins. Moreover, dropshipping is really easy to scale because you can hire virtual assistants as your order volume increases.
Of course, like everything else dropshipping also has some drawbacks. First off, there is a high potential for competition. That’s why you will find a lot of advisers out there that will recommend you to start off by finding a niche audience so you can operate with less competition. Next, there are supplier errors, though uncommon it is inevitable that a supplier will make a mistake. For example, mistakenly shipping the wrong product to your customer. If this happens, don’t take it personally and handle the return like a professional as your trust would be on the line.
Moreover, as the barriers to entry are low, many people get started, which means a lot of competition. So, many drop shippers out there offer a very low price in hopes of increasing revenues.
Suppliers, as you know, are a very essential part of a dropshipping business. Not all suppliers will be willing to let you market your product. They can be selective, the same way you are while selecting a product to market. Moreover, a good relationship with the supplier could mean you can ask for refunds or any other problem that the customer might face easily. This will create goodwill of your business in the buyers’ mind. This could also lead to “word of mouth” marketing for your business.
Another problem that many drop shippers face is as you don’t own the stock in the dropshipping business, you dint know about the inventory and the availability condition of the stock. This might lead to you selling the products that are not actually available. This would mean refunding the money as well as setting a very bad image in your customer’s mind. So coordination and a good relationship with your customers is a necessity in the dropshipping business.
Well, like everything else branding is an important part of dropshipping as well. It is one of the best ways to make your dropshipping business a success. So what is it? It is basically selling only a specific product and specializing in its varieties. This basically means targetting a niche which will build customers’ interest while buying that product. This will not only separate you from the many drop shippers out there but can really help you add value. And eventually, when your brand is well established and trusted you can charge high charges. Which will lead to higher revenue and ultimately higher profits? According to many e-commerce analysts, this is the best way to make sustainable profits in the dropshipping business.
In summary, dropshipping is still a lucrative business but you do need to stay consistent, target a set market and stay in good contact with the suppliers. So do in-depth research before actually entering into this business like any other business and best of luck!!