You may have heard of a new form of e-commerce making the rounds across the internet recently: dropshipping. No, it does not refer to drones delivering your packages to your doorstep (yet), but it is a kind of business model that makes selling products online easier than ever.
If you’ve heard the buzz, you may also be asking—is there any way for you to partake? Maybe you have been considering opening your own business for some time now, and this model is the opportunity you need. Whatever your reasoning, let’s explore if the dropshipping method is for you.
What dropshipping means
First question:what is a dropshipper? When you purchase something from an online retailer, they often produce the item themselves or have an inventory ready to ship. You place your order, the seller processes it, and you have a nice package at your door within a few business days.
Dropship retailers, however, do not hold inventory. Instead, a consumer visits a dropship website—say, a virtual clothing outlet—buys a pair of pants for $40, and then the seller forwards the order to the supplier/manufacturer and pays a $30 wholesale price. The supplier ships the paints directly to the consumer and the dropshipper retains the $10 profit margin.
Naturally, you are asking yourself: why would consumers buy from dropshippers instead of directly from the suppliers? It’s about branding. They establish themselves as trustworthy resources that provide a variety of quality goods. Dropshippers almost always have multiple suppliers so that they can offer different kinds of products, which makes their platforms convenient places for consumers to purchase what they want in one place.
What lifestyle does it support?
If you were to become a dropshipper, you would almost never come into contact with the products you sell. If you have an internet connection and a working phone, you can vet suppliers, communicate with them, build a website, conduct online outreach, and run your entire business from your home (maybe in your pajamas, if you would like).
The dropshipping method entails far fewer overhead costs than other forms of e-commerce or brick-and-mortar businesses. If you are not a developer capable of constructing a website, that’s fine—there are numerous online platforms available to build your store, like Shopify. Much of your effort will go towards marketing.
Dropshipping is advantageous for individuals who want to work their own hours and be location-independent. Maybe you have children at home, live as a digital nomad, or do not want the pressure of selling inventory if you are experiencing a slow period; dropshipping enables a significant amount of flexibility.
Are there any caveats?
Dropshipping has its benefits, but it is not without its downsides. Profit margins are smaller; you do not want to charge astronomically higher rates than the wholesale price you paid, or you will lose customers. You already need to charge higher shipping costs to cover what suppliers spend (if consumers order more than one kind of item from you, then you will probably have two separate suppliers sending you their respective bills).According to Mywifequitherjob.com, most dropship stores retain 10-30 percent gross margins, while traditional shops with inventory have 50. If you want to make money, you’re going to need to reach a lot of people.
If something goes wrong with shipping and a customer does not receive an order, that customer will call you, not your seller. It’s up to you to contact who you need to (and if you partner with international suppliers, they might not speak English) and get the matter resolved—all remotely. It is your reputation that will take the hit.
Your supplier’s geographical locations will alsoaffect logistics, too. Depending on their shipping times, customers may receive parts of their orders days apart from one another. Competition is also high in the dropshipping space, which means your brand and prices need to be on-point.
Is it for you?
Whetherdropshipping is for you depends on what kind of person you are. Are you hoping for a flexible schedule, but also prepared to deal with customers and suppliers when things go wrong, but from hundreds of miles away? Are you creative enough to execute effective marketing campaigns and convince a loyal following of people to purchase from you? It’s possible to scale a dropshipping store quickly, but you need to be adept at customer service.
Dropshipping is an attractive business model that many entrepreneurs are taking advantage of. It will not be free of headaches, but it will cost you less and is easy to get up and running. Do you believe that dropshipping is for you?
Image Credits: Dropshipping from Nik Symkin /Shutterstock