Everything You Need To Know About Dropshipping

by blueribbontechnologies

Inventory management is one of the major challenges that e-commerce businesses face in their day-to-day operations. Having the right products at the right time requires proper demand forecasting, and it can be quite a daunting task, especially for new merchants. To reduce the risk involved in inventory management, you can opt for the most sought-after model of retail fulfillment- dropshipping. It is a powerful online business approach that enables aspiring entrepreneurs to generate high returns without the need to manage inventory themselves. Ever since its inception, dropshipping has proven to be extremely lucrative and beneficial for merchants who don’t have a warehouse facility. In this article, we will discuss how dropshipping works and if it’s the best choice for your business. But first, let’s get a clear understanding of what dropshipping actually is.

What is Dropshipping?

Dropshipping is an online retail fulfillment method for e-commerce businesses. In this approach, instead of warehousing inventory, merchants forward the orders to third-party suppliers, who in turn ship them directly to the consumers. The merchant and supplier are bound by an agreement wherein the order fulfillment responsibilities and profit margins are justified. When a customer places an order, it is directed to the supplier, who ships it under the seller’s brand name. The supplier gets his share of the profit, and the remaining amount goes to the merchant. Dropshipping makes the order fulfillment process much easier for the merchants as they mostly play a passive role and do not handle the products directly. However, while selecting third-party suppliers, merchants must consider the quality of the products and the efficiency of delivery. It helps in maintaining a positive brand image, trust value, and product credibility. Moreover, dropshipping doesn’t require as much operational capital as in the case of traditional retail setups. This makes it highly beneficial for startups and new entrepreneurs. To begin your operations, you don’t have to open a brick-and-mortar store, stock products, order inventory in bulk, hire employees, or physically fulfill the orders in any way. Instead, you can set up your online storefront, coordinate with suppliers who already have the products, and fulfill your customer demands.

Benefits of Dropshipping

There are several beneficial aspects of dropshipping. Some of them are listed as follows:

• Setting up a dropshipping business basically consists of 3 simple processes: finding a supplier, setting up a website, and selling goods. Compared to the traditional retail business, it is a simple and easy-to-manage approach without much investment.
• Traditional businesses usually need a lot of investment for setup, from acquiring a shop and warehouse space to managing products. Dropshipping eliminates these processes and the additional costs associated with it. Here, you just need to wield the cost of running and maintaining your website.
• As there is no need for physical inventory and investment, you don’t have to worry about your business going down or bear the pressure of selling all your inventory.
• With dropshipping, businesses can choose their niche and sell any type of product they want.

Also read: How Can Retailers Use Omnichannel Marketing To Boost ROI

Tips to Consider While Starting Your Dropshipping Business

Although there are several benefits of establishing your business with a dropshipping model, there are also certain aspects that you should be mindful of. It includes the inadequacies of order delivery, quality of product, no control over the consignments, and so on. However, you can overcome these inefficiencies with the following considerations:

• Choose your third-party suppliers wisely and make sure they provide the right quality products.
• Keep a check that the consignments are delivered within the given timeframe.
• Maintain a well-defined agreement with the suppliers that states all the responsibilities and profit margins of both parties.
• Provide an explicit guide on the return policy and any penalty/expense charges related to the same.
• Maintain pragmatic coordination with your suppliers regarding the availability of inventory.

Staying in touch with your suppliers and discussing any loopholes that arise in the process is the key to a successful dropshipping business.

How Dropshipping Works?

The working process of dropshipping business is quite simple and convenient. It includes 3 primary steps, which are as follows: Step 1: The store owner or merchant publishes the products he wishes to sell on his website. If the potential customers find the listing enticing, they place an order. Step 2: Once the merchant receives the order details, he forwards them to the dropship suppliers. The retailer can carry out this process either manually or through an automated system. Step 3: Subsequently, the supplier packages and ships the required products directly to the customer under the merchant’s branding. With dropshipping, you don’t need to have a physical business location or purchase the inventory. Instead, just redirect your orders to the correct supplier. The supplier then carries out the order fulfillment process on your behalf.

Is Dropshipping Right For Your Business?

Although dropshipping is a great way to start your business, it does not suit all business types. Let’s understand the main attributes of the dropshipping model and find out if it’s useful for your entrepreneurial business.

• Dealing with new and lesser-known products usually has a risk that you may not be able to sell them easily. If you want to lower these initial risks and perform product validation, dropshipping is the way to go.
• Dropshipping allows you to sell in the online marketplaces with the least amount of expenses. Due to this reason, it is highly beneficial for entrepreneurs with a limited or low budget, or for startups who want to minimize their costs.
• If you’re new to the e-commerce business and lack comprehensive digital marketing knowledge, it can get quite difficult for you to survive in the cutthroat ecommerce competition. In such cases, you can choose to start with dropshipping till your website gets fully optimized.
• If you haven’t decided on a specific product type or want to sell a huge variety of products, this business model can help you here. Without the need for massive funds to maintain all the inventory, you can conveniently sell thousands of products with dropshipping.

Conclusion

As we discussed, dropshipping is a great option if you are just beginning your e-commerce business and want to test the audience response first. While you can start selling with low investment and fewer risks involved, most entrepreneurs consider it as an initial step till they create their brand value. E-commerce Platforms like Amazon and Shopify, and social media channels like Instagram and Facebook give a huge customer base to kick-start your business. Besides, it allows new entrepreneurs to learn about setting up an online store, conversion optimization, driving traffic, and other e-commerce fundamentals. If you find this article valuable and need professional help with dropshipping and eCommerce website development, feel free to connect with our team.