Dropshipping is an e-commerce business model, in which the seller does not store any inventory of the products he sells. It is an excellent option for people who want to trade without investing in a store or a warehouse. Find out everything you need to know about it, and how to start your store.
In the past, to to start a businessIt was essential to open a physical store and stock your own inventory. With the internet, everything changed.
From now on, it is possible to to be satisfied with the role of intermediary by opening an online e-commerce store and letting his supplier take care of the shipping of the orders. This practice is called Dropshipping.
Table of contents
What is Dropshipping?
The dropshipping business model is mainly adopted by e-commerce sellers who do not wish to stock their own inventory. The vendor simply receives orders for the products listed on their online store, and forwards them to the supplier for shipment.
In this way, vendors and suppliers are both winners because they can focus on their core business. The retailer can take care of his relationship with the customer, and the supplier can maintain his inventory and ship his products with peace of mind.
This is a ideal solution for new entrepreneurs sales-savvy entrepreneurs because they don’t need to worry about inventory and shipping. They can just choose the best supplier and shipping process, and focus on the quality of their store, looking for rare products to offer for sale, driving traffic to their website and converting visitors.
All over the world, dropshipping is used by wholesalers and manufacturers to sell their products. This business model has been booming for several years now, and represents a 15 billion dollars industry.
A person or company using the drophshipping model for their e-commerce store is called “dropshipper”..
How does Dropshipping work?
The dropshipping process can be broken down into four steps. First, the customer places an order with the seller.
The vendor processes the order, and forwards it to his supplier. The latter prepares the order in its warehouse, and sends it to the customer.
If the customer is satisfied with the product, everything is perfect. The salesman only has to keep him loyal to ensure that he comes back, in particular through the use of CRM software.
On the other hand, everything gets complicated if the customer is not satisfied and wants to return the product. This is one of the main weak points of Dropshipping.
In order to find a product supplier, simply consult a database or a mobile application dedicated like DSers from Shopify. These applications allow you to browse the Chinese AliExpress platform and to import products with ease for its Dropshipping store.
The existing applications also allow to automate the process of order taking. The seller simply has to check that the details are correct, and validate. The product is sent directly from the AliExpress supplier to the customer.
Advantages and disadvantages of Dropshipping
Like all economic models, Dropshipping has its advantages and disadvantages. It is important to weigh the pros and cons before launching.
One of the main strengths is a low initial cost. There is no need to invest in renting a physical store, stocking inventory or paying employees.
The only thing needed is an online store On which to attract your customers and sell your products. This online store can be on a personal website, or on an e-commerce platform like Amazon, Shopify or Squarespace.
On the other hand, a Dropshipping business is easy to start. E-commerce becomes much simpler when there is no need to procure, ship and maintain the products.
It is possible to set up a store in only 15 minutes. Allow two more days to set up back-end processes such as order acceptance and processing, transfer to suppliers and payment acceptance. At comparison with a physical storeit is a child’s play.
Another advantage is the absence of inventory managementThe absence of inventory management, order processing, returns management and all the logistical tasks traditionally associated with commerce. Moreover, knowing that all the activity is online, Dropshipping sellers enjoy total flexibility and can set up anywhere in the world as long as they have access to the internet.
This model also offers a flexibility in product offering. Since there is no need to manage the inventory yourself, there is no obstacle to diversifying your catalog to meet demand.
Finally, it is very easy to extend its activity if successful. The only requirement is a platform that is robust enough to handle the traffic and the influx of orders. You also need to choose a provider that can keep up with the pace of shipments and returns.
Nevertheless, Dropshipping also has several drawbacks. And many of these weaknesses are only the other side of the coin benefits.
First, given the ease of access, the competition is extremely tough in the field of Dropshipping. Anyone can start their own business, and there are countless vendors worldwide. Many can offer the same products as you, so it is necessary to stand out with a superior customer experience.
Also, since the vendor is responsible for maintaining inventory and shipping products, the vendors have less control over product availability and quality. Many think they are selling a well-made product, but disappoint their customers with poor merchandise.
In addition, the margins of Dropshipping are low. In the face of fierce competition, don’t expect to make a huge profit on every transaction. Prices must be competitive, and the only way to generate a profit is to sell in high volume.
It is also not possible to offer customization options or value-added services on a Dropshipping store. The seller has no contact with the product, and therefore cannot modify it in any way.
Finally, if a customer is not satisfied with the product, returns and exchanges can be complicated. It is necessary to coordinate with the supplier to resolve the problem, which requires cooperation on their part.
Is dropshipping legal?
Dropshipping is totally legal. It is a model of e-commerce used by many merchants around the world.
This activity is often wrongly perceived as illegalThe reality is that customer satisfaction and quality of service are just as important as in any other business model. In reality, customer satisfaction and quality of service are as essential as in any business model.
It is very important to to comply with the various rules and laws in force not to sink involuntarily into illegality. To create your dropshipping store legally, it is best to consult a lawyer.
Can we do Dropshipping on Amazon and eBay?
No need to go to a specialized platform to start Dropshipping. It is quite possible to adopt this model on a traditional eCommerce platform.
For example, on AmazonDropshipping fees are between 10% and 15% depending on the type of product sold. The margins are therefore fine, and it is imperative to respect the specific rules set up by Amazon.
It is also possible to do Dropshipping on eBay. However, listing a product before purchasing it from another seller who will ship the order is a prohibited practice.
Should I create my own Dropshipping store?
It is very easy to create a Dropshipping store and to start your business. However, it is better to think before you start in the adventure.
First, make sure you have the right frame of mind to start a business and have enough time. Also check that your business idea is viable, for example by doing a market study.
Also be sure you have the resources and skills required to run an online business. Finally, you must be willing to continue to learn over time and continually optimize your business.
Many times, Dropshipping is mistakenly perceived as a way to get rich quickly and effortlessly. In reality, like any other type of ecommerce store, such a project requires the investment of time and energy to be profitable.
Dropshipping as a complement to an e-commerce store
Dropshipping is not not necessarily a main activity. It can be a secondary activity to accompany a traditional e-commerce project. It should not be thought of as an end in itself, but as a means.
For example, Dropshipping can be used to test products before you decide to add a stock to your inventory. You will be able to see how well a product sells, at what price, and thus better decide how much to buy for your initial inventory.
This approach is particularly useful for new types of productswhich always represent a risk. This is a prudent way to venture into unknown territory.
Dropshipping can also avoid storing a product in too large quantities. If the market fluctuates greatly, you can always rely on your supplier to meet the demand. This is particularly useful in the event of a seasonal peak. Similarly, if your warehouse is devastated by a natural disaster, it is still possible to ship orders by Dropshipping.
In addition, Dropshipping can allow you to to extend the reach of your business. If you receive an order from a foreign country far away from your warehouse, shipping costs and export taxes may become too high.
Finally, Dropshipping is ideal for products too expensive to store and to ship. Examples include bulky, heavy, fragile, valuable, or products that require special storage conditions. Rather than paying extra for the storage of a few specific products, it makes more sense to let your supplier take care of it.
How to start Dropshipping?
To create a Dropshipping store, start with come up with an idea and do some research to see if there is competition. Also make sure the project is potentially profitable.
After finding a good idea, search and choose a supplier. Create your e-commerce store, and define the structure of your business. You will then need to manage your finances, orchestrate marketing campaigns and improve your offering over time.
How to choose a Dropshipping provider?
Choosing the best provider is a crucial step in Dropshipping. The quality of the product, the punctuality of the shipmentsthe legal conformity depend entirely on him.
Therefore, select with extreme care. Make sure that the products are conform to the advertisementsand that the shipping conditions meet your criteria.
Beyond the condition of the products, there are several criteria you should consider. In particular, check how the supplier handles returns and damaged products, how quickly they can complete an order, and test their customer service. Also find out if they offer order insuranceand fraud protection, and see the reviews left by customers.
How much does it cost to create a Dropshipping store?
The cost of creating a Dropshipping store can vary greatly depending on many factors. However, here is an estimate of the price needed to start your business.
First of all, you will have need an online store. You can create it on an e-commerce platform or with a website creation tool. On average, count 29 dollars per month.
You will also have to pay for the domain name of your store. It is recommended to choose a domain name in .com, and to choose an attractive name. Count on between 5 and 20 dollars per year.
Another cost related to dropshipping is product testing that you plan to sell. It is important to order the products in advance and take the time to test them to ensure their quality. Otherwise, you risk selling low quality products to your customers and driving them away.
Finally, online advertising is extremely important for dropshipping. A 500 dollar budget is recommended to get started, but you will need to invest more as your business grows.
The most common advertising channels Are SEM (search engine marketing), and advertising on websites, social networks and mobile applications. After that, it is also possible to look at content marketing and SEO to reach more potential customers.
You should also consider the cost of customer service to provide if there is a problem with an order, and the price at which you purchase the product from the supplier.
How to make money with Dropshipping?
Dropshippers have the role of choosing the right products to offer to their customers. The marketing is the key to attract customers and get them to buy your products.
In order to make a profit with a dropshipping business, the secret is to estimate the cost of acquiring a customer and adjust the price of your products accordingly. Afterwards, it is up to you to find solutions to reduce this cost of acquisition and increase your margin.
Dropshipping can be profitable for merchants, and it is a low risk business model allowing to sell products at a lower cost. Profitability can therefore be achieved more easily than with another traditional business model, provided that good practices are adopted and a solid strategy is developed…