If you have been online lately, you must have seen or probably heard of the word DROPSHIPPING. While many people have been very curious to know what it is all about, others are already reaping its fruits. You might be wondering why everyone, especially entrepreneurs seem to be interested in dropshipping or most importantly, how it can benefit your business. To someone that might be new to the ecommerce world, dropshipping could be a whole lot confusing but, not to worry, here`s a beginners guide to drop shipping.
What is DROPSHIPPING?
Dropshipping is the process where a store does not keep the product it sells in stock. Instead, it purchases the item from a third party and has it shipped directly to the customer. The store purchases the item from the third party (could be the manufacturer) and has it shipped directly to the customer. This enables a company to operate without maintaining inventory, owning a warehouse to store their products, or even having to ship their products to their customers themselves.
In simple terms:
1. A customer sees a product on a retailer/wholesaler store (the dropshipper)
2. The customer places an order
3. The retailer/wholesaler forwards the order and customer details to the seller with inventory (usually the original manufacturer or another vendor)
4. The supplier then packages and ships the order to the customer directly.
With as simple as a mobile phone and the internet, you can start your own dropshipping business. AWESOME isn`t it? However, as awesome as it is, you need to know the pros and cons of dropshipping.
Pros of Dropshipping
1. It is easy to set up: You do not need a store or staff to be a dropshipper, all you need is to find a supplier, set up an online store and you`re good to sell.
2. You do not need to break the bank: Dropshipping eliminates steps such as setting up a physical store, running the retail operations and purchasing inventories, which will cost more money. Since dropshipping eliminates those steps, all you have to pay for is the costs of running your online store.
3. There are lots of varieties of products to sell: There is a supplier for anything you might want to sell. All you need to do is find your niche. Your niche has to be something you are genuinely interested in. If your project range isn`t focused, it could be hard for you to market your products.
4. You only buy a product when the customer does: You do not have to worry about investing a lot of money on a product that might not sell out since you only order for a product when the customer pays.
As appealing as dropshipping is, a lot of things can go wrong if you are not following the right protocols of the business
Cons of Dropshipping
1. Competition: Because there are almost no barriers to entry for dropshipping businesses, that means if you’re using the same supplier as everybody else and selling the same products, you’re entering a market saturated with competition. One of the ways to beat this is to do proper research and stick to a niche.
2. Shipping: Selling different categories of products might seem like a good way to make
more sales and meet everyone`s need. However, it is advisable for you to consider that some products have shipping complexities which might make you spend more on shipping and might not create a profitable return on investment.
All the cons of dropshipping could be avoided by doing proper research and you are good to go.