What is Dropshipping?
Dropshipping is an e-commerce business model where a seller can operate an online retail store without keeping or owning any inventory.
Yeah, that’s true! NO inventory!
So how does dropshipping work?
You can sell without any inventory.
Still not clear
Ok, here is how dropshipping works, pay attention.
Imagine you set up an ecommerce store and consider it as a showroom.
Find a supplier who took the images of their products.
Post those images on your store as your product.
A customer comes to your store, likes the product, adds the item to his cart, buys the product, and pays you the amount.
But you don’t have the product.
Your supplier has the items.
Here’s the trick!
Once you receive the order, you send the order details to the supplier.
Your supplier then directly ships the product to your customer.
So, the customer gets the product, but how do you earn from dropshipping?
Customer pays you, not your supplier. You then pay your supplier.
You can charge any amount from your customer and pay supplier his price.
The remaining amount is your pure profits.
Did you get it? Great!
Pros and Cons of Dropshipping
Every coin has two sides; similar goes with dropshipping.
I am trying to be super honest to tell you about the pros and cons of dropshipping.
So, let start with the pros of dropshipping,
Easy to setup and low startup cost
Every ecommerce entrepreneur knows how easy it gets when you do not have to take care of your warehouse or inventory.
82% of businesses fail due to cash flow issues. Dropshipping does not require much investment to start and need only a few things to setup such as:
- Ecommerce Platform e.g., Shopify or WooCommerce (website and hosting)
- Laptop and internet connection
That’s it! These are the mundane things you need to start a dropshipping business.
Sell from anywhere
Portability in a business is the biggest advantage of dropshipping. You do not need to stick to one place to operate your dropshipping store, you can manage it from anywhere on the globe. All you need is an internet connection and a device (mobile or laptop) to run your business.
Another advantage of dropshipping is that it opens the cross-border opportunities.
You can sell globally where shipping is allowed and find your niche and target them without any restrictions.
Easy to handle (Automation)
One of the reasons that makes dropshipping easier to handle is the ability to automate your operations.
Apps like Oberlo makes it a lot easier to import product details on your Shopify store from supplier’s store (Aliexpress).
It automates the process and allows you to keep your focus on marketing to increase your consumer base.
Also, you do not have to handle any inventory or own a warehouse to keep your stocks, which is a great relief.
You are the boss
Become your own boss!
Imagine how cool it is to work from anywhere, work on your passion, and don’t have to report to anyone else other than yourself.
Dropshipping is the most comprehensive gateway to become a sole entrepreneur.
Dropshipping can start with little investment and low entry barriers that means a lot of competition.
With growing competition, there is an increasing difficulty in having an exclusive deal with the suppliers.
That means you will find a higher competition in the market you want to penetrate. Competitors might be selling the same product that you are selling in low competitive prices.
No control on supply chain
In dropshipping business – you do not have the inventory – so do not have control over the fulfillment process and inventory issues.
You are totally at the mercy of your supplier to handle delays and return policies.
Communication channel issue
Because you are in a loop of communication between your customer and supplier, it becomes difficult to maintain clarity between different communication channels.
If one communication slows down, it will affect all other communication channels and resulted in solution delays.
Need a lot of research to find the right niche
The success in dropshipping is highly dependent on how long it takes to find your winning product.
You have all the niches open in front of you but it takes a lot of research to find out your target market and testing a lot of product to find your winning item.
Well, the idea of listing down the pros and cons is to give you a clear picture of dropshipping. However, it depends on how well you can avail the benefits from pros and what plans you have to deal with the cons.
What is Private Label dropshipping?
Private label dropshipping is to buy goods put your brand name and resale it on profit.
In this process, the manufacturer makes the products but it is sold under sellers’ brand name.
Private label dropshipping has higher acceptance among people. Because the product that customer receives comes with the name of the seller that increase the trust of the buyer on the company.
The retailer has more control on the quality as the seller can contact the manufacturer and can tell their requirements of quality.
It is a different dropshipping model. You need a large capital to order stock, keep in your warehouse and ship it.
So, it is not exactly dropshipping.
Here is a list of good private label dropshipping suppliers,
- Dropship direct
- China brand
What is Aliexpress dropshipping?
Many people ask this question.
It is nothing new it is basically dropshipping.
You need to set up an ecommerce store like Shopify or have a store on ecommerce marketplace like Amazon.
When a customer makes a purchase from your ecommerce store or your Amazon store, you directed that order to your Aliexpress supplier.
You pay the supplier,
The supplier sends the product to your customer,
And, you receive the payment from your customer with a profit margin.
The customers do not find out about the product coming from Aliexpress. They believe it is coming from your store.