Is the storage and shipping of inventory a cause of concern for your business? Don’t worry, you are not alone.
There are a lot of businesses that find it difficult to rent or buy storage space and manage to ship. This is where dropshipping comes to the rescue.
In this article, we have compiled all the information you need to know about dropshipping, whether it is how to start dropshipping, how dropshipping works, or anything and everything about it.
So, read on with an open mind and consider all the following factors before you decide to start a dropshipping eCommerce business.
- 1 What is Dropshipping?
- 2 Pros of Dropshipping
- 3 Cons of Dropshipping
- 4 How to Start Dropshipping?
- 5 How Does Dropshipping Work?
- 6 Ways to Make Dropshipping Work
- 7 Final Thoughts
What is Dropshipping?
Dropshipping is a retail business model wherein the seller’s problem of stocking products is effectively tackled by a third party, who directly ships the products to the seller’s customers. The main difference between dropshipping and the traditional retail business lies in inventory management.
The dropshipping business idea can prove to be a great one since you don’t require much capital investment in the operational department. In dropshipping, you earn money as a margin from what the seller makes by selling the product.
It can feel like an easy venture to start, but it certainly is not as easy as it seems. There is a lot of work that goes into setting up a dropshipping eCommerce business. Like a coin has two sides to it, dropshipping also has its share of pros and cons.
Pros of Dropshipping
Apart from just inventory management, there are other benefits of starting an online dropshipping store too. We have enlisted various advantages of a dropshipping eCommerce business which are as follows:
1. Lower Capital Investment In Setting Up The Business
In an eCommerce dropshipping store, there is no need to hire staff and have a physical location for inventory storage. Thus, the capital required to set up an online dropshipping store is equivalent to nil.
This makes it a no capital and low-risk eCommerce business. If you are someone just putting your foot in the world of eCommerce you must look out for dropshipping business ideas.
2. The Scalability Is High
The online dropshipping business can be rapidly scaled as the dependencies are less on drop shippers compared to sellers. Even when customers place an order much more than expected, the work of the seller is more than the drop shipper. This helps in expanding dropshipping business with comparatively less work.
3. Extremely Flexible in Nature
An eCommerce dropshipping business gives the flexibility of working from any part of the world and adapting to the changes in the market accordingly. The flexibility that dropshipping eCommerce business provides is priceless. Imagine working in the comfort of your home, according to your convenient time, the productivity, and the success in achieving your business goals, in this case, are excellent.
4. Vast Range of Products And Other Offerings
The pain point of a retailer is its inventory management, with a dropshipping store, the retailer gets a perfect opportunity to add more products across various categories without worrying about carrying inventory. This makes eCommerce dropshipping stores highly demanding.
5. Easier To Manage
As there are fewer requirements (such as hiring staff, and low capital investment) in the dropshipping eCommerce business, it’s much easier to manage the business. The majority part of the work lies in finding the right suppliers, rest is just about managing your online dropshipping store.
Cons of Dropshipping
1. Level of margin is low
Without an iota of doubt, any venture with a low rate of margin can’t do good to
the business. In dropshipping, the product margins are low, and with heavy competition in the industry, it can become challenging for your business to thrive.
2. Difficulties faced in supply chain
As a dropshipping store, you source products from not just one but multiple suppliers. This can potentially lead to a lot of complexities in the supply chain. If a customer places an order of three products, all of them to be sourced from different suppliers, you would have to effectively manage to communicate and get all the products to be shipped to the customers on time. During this process, the margins you make become even lower and, if the quality of the products or its packaging isn’t up to the mark, your reputation could be at stake.
3. You Don’t Have Control Over The Product
You as a drop shipper are only involved in shipping the product and getting it delivered on time, apart from that you have no control over the product. There could be potential issues related to the quality or availability of the products, which could affect your brand or drop shipping business adversely.
How to Start Dropshipping?
After knowing the benefits and drawbacks of a dropshipping eCommerce business you proceed to start a dropshipping store but are wondering where and how to start?
We have got it covered for you in capsule form, which will save up your time and get you started faster. There are 6 crucial steps you need to follow to start an online dropshipping store.
1. Selecting an Idea from a Pool of Dropshipping Business Ideas
You have to select an idea that is a combination of your passion and scope of profitability. There are a lot of dropshipping business ideas, and the first step is to start an online dropshipping store and select a niche business idea.
2. Identify your competitors in the market
Now that you have a strong business idea, the very next step should be to keep your eyes on the competition in your field. If you know what they sell, how they sell, and other important statistics about your competitors you can make a business plan that will help you make your business not just thrive but be profitable too.
3. Find and connect with your suppliers
Once you are aware of the competition and ready with the business plan you must find the right supplier of products for your niche. To find the right fit for your business, you must have a checklist of your priorities and match them with the supplier. Always go for multiple suppliers but remember to get the product and your criteria met by placing a sample order before you finalize the supplier for your business.
4. Build your online dropshipping store
You can easily build your online dropshipping store with the help of a website builder. You have to register the domain name you like for your eCommerce business. There are many reputed store builders like WorksLeader which will ease your process of building an online dropshipping store.
5. Formulate a strategic marketing plan
As soon as you build your online dropshipping store before going live, you must have a strong marketing plan in place. Marketing is the most significant part of any business, especially in a cut-throat competitive space of dropshipping. Your ways of marketing will make you stand out. You can choose to go organic marketing or run ads across social media. Try influencer marketing or any strategies but make sure you have a marketing plan in place.
6. You can optimize based on analysis
When you go live and start your journey make sure you put your analysis glasses on and extensively analyze your business. When you analyze your business, there are bound to be things that are not working in your favor. As and when you stumble across them, optimize them.
A business that analyses and optimizes at regular intervals based on the inputs from statistics is open to evolving with the market and thus it succeeds.
How Does Dropshipping Work?
The process of dropshipping is very simple. The customer places an order with the retailer through an online store. As soon as the order is placed the dropshipping store is intimated and collects the order from the retailer for shipment. The drop shipper then ships the order directly to the customer.
Ways to Make Dropshipping Work
Irrespective of the cons of dropshipping there are some ways by which we can make it work.
1. Stay Connected With Your Customer
You need to stay connected actively with your existing as well as potential customers. You can do this in various ways, some of the best ways to reach and actively engage with customers are through Facebook ads and interacting on Instagram pages.
The visibility of your business increases when you have established a brand. SEO also increases the traffic on the store’s website which contributes to increased visibility.
2. Lead Conversion
The potential buyers are your hot leads and the conversion of leads contributes to increasing sales and profits. For the conversion of leads, you must have a well-written website copy with attention-grabbing CTA’s that persuade the customers to buy.
3. Enhance your USP (Unique Selling Proposition)
You need to highlight your unique selling proposition to your customer. Position yourself in your customer’s shoes, what factors do you think the customer would be looking at. Imagine you are searching for an online dropshipping store as a supplier and come across more than 100 odd dropshipping stores, with similar products. You will choose the one with the best-written product description, a website that looks good which ultimately creates a better user experience, an appealing image of the products, etc.
If you incorporate these things and make your dropshipping store more unique from the rest, the customers are going to prefer you which makes your dropshipping store more profitable.
If you still pondering whether dropshipping is profitable or has faded out from the scene, the answer is NO, it has not. Dropshipping eCommerce business has become a highly competitive field and may have reached its saturation, but the dropshipping market still holds out to be one of the most profitable ventures. Surveys predict dropshipping industry to touch a $557.9 billion valuation by 2025. So, really if you are to planning to start a dropshipping eCommerce business, the year 2022 is the right time.
We have covered all that you need to know about dropshipping and the ways to make it work in 2022. Hope you find this helpful. Wishing you good luck with your entrepreneurship journey.