For those who may not know, a little explanation to get you started. Dropshipping is a type of retail sales, but we as sellers do not have direct contact with the product, because the product in question comes to the customer from a third-party supplier. The big advantage of dropshipping is that it can bring a lot of benefits and profits with little money. However, like everything, it has its pros and cons but you will learn about this later in the article.
What does dropshipping consist of?
The functioning of dropshipping is not so difficult. It involves the transfer of picking tasks to a distributor or manufacturer. Our role is based only on completing the order, handling the payment and transferring the shipping data to the sending unit. It will be in our interest to get as many customers as possible and increase the reach of the online store to bring in the right financial expectations. Good, solid advertising will help in this regard.
Dropshipping will be a great solution when we are first-time entrepreneurs and don't have enough capital to develop a store with our own products, or when we sell bulky resources whose transportation can be problematic. Dropshipping is a versatile sales model, however, when we want to get the profits that are right for us, it is worth developing the right business strategy. We should choose a supplier that is conscientious and reliable in its tasks, and one that has an interesting range of products.
How does dropshipping work?
In a nutshell, it looks more or less like this:
- the customer places an order with us,
- we accept the order and the wholesaler puts down the appropriate amount of product,
- we accept payment from the client,
- when payment is received, the wholesaler packs and ships the order.
As you can see, it's nothing complicated so it's worth making sure the process is as optimized as possible.
Don't confuse dropshipping with commission on sales. In this case, we try to get the lowest possible price from the wholesaler ourselves and set such a margin that is satisfactory to both the seller and the customer. Examples of portals to which everyone has access and we can do dropshipping include AliExpress, Allegro, SkyShop or Shopify.
Advantages of dropshipping
Let's start with the fact that setting up an online store these days is extremely easy. All we need to do is find a freelancer who will make us such an online store for a small amount of money. It used to be much more complicated because it required writing software from scratch, but these days you can even make an online store yourself with the help of tutorials and all sorts of website builders that are free. The plus side is definitely that you don't have to have your own warehouse or goods, this is one of the biggest advantages when it comes to e-commerce. Failure to sell a particular item often involves losing money or selling at retail price or even lower, but not in this case. In dropshipping such risks simply do not exist. A big plus, in my opinion, is also the fact that we work completely remotely, which means that we do not have to pay for the rental of premises and all the other costs associated with it.
Disadvantages of dropshipping
Now let's move on to the disadvantages of dropshipping, which unfortunately also occur as in any field of work. First of all, it would be good to mention the lack of control over shipping and the goods themselves. By not physically seeing the goods, we can't determine their actual condition. We can't see whether the goods are decently made and have no defects, and whether they are properly packaged for shipment. Another disadvantage is the high level of competition. Unfortunately, due to the simplicity of dropshipping, there are a lot of people choosing this very way of earning money. Because of this fact, we are often forced to reduce our margins. For some, the lack of product personalization may also be a downside. Why for some? Some prefer to have a unique product that no one else has but them, while others follow the prevailing trends.
Another disadvantage is that the law obliges the store to accept returns of goods from retail customers under certain conditions. So you have to expect that some small percentage of customers will return the goods. Unfortunately, it is not possible to return such goods to the wholesaler, because cooperation between the store and the wholesaler is B2B (business to business). In this case, the same rights and obligations do not apply as in the case of retail customers. So you have to, in a way, include returns in costs. In the case of large-scale trade, returns are unavoidable, so you also need to have an appropriate place to store such goods.
In conclusion, before you start dropshipping you need to analyze whether this way of earning money is suitable for you and whether you can handle it. However, when asking yourself what is dropship, you can certainly answer that it is a great opportunity to earn money.