What Is Dropshipping business, How Does Dropshipping Work

What Is Dropshipping business

What Is Dropshipping business

What Is Dropshipping business, How Does Dropshipping Work

Dropshipping is a business model where items purchased from an online store are shipped directly to customers by the supplier or manufacturer.

Dropshipping is an easy, popular way to start an online business. It removes common retail challenges like buying, storing and shipping inventory.

When a dropshipping store makes a sale, it forwards the order to a supplier, who handles delivery to the customer. This allows store owners to focus on other tasks such as marketing and branding.

Ahead, learn what dropshipping is, how it works, and how to get started as a dropshipper.

What is dropshipping

Dropshipping is a retail method where an online store does not keep its products in stock. Instead, when a customer places an order, the store forwards it to a dropshipping supplier with payment. The supplier then ships the product to the customer.

Many business owners prefer dropshipping because it passes the task of fulfilling orders to suppliers. This means stores don't have to invest in warehouse space or risk being stuck with unsold inventory As a result, businesses can allocate more resources to other retail activities such as marketing.

It is estimated that dropshipping generates more than $300 billion in ecommerce sales each year.

What is dropshipper business

A dropshipper is a person or business that accepts customer orders and sends them to suppliers for fulfillment.

Dropshippers often run online stores to market and sell products. When a customer buys a product, the dropshipper places a corresponding order with the supplier.

Let's say you own an online dropshipping store that sells pet products. When a customer purchases a cat collar, you forward the order to your supplier, who has a pet product warehouse.

(Confoundingly, in some resources, the term "dropshipper" refers to the supplier. This article defines dropshippers as sellers of dropshipped products.)

What is a dropshipping supplier

What Is Dropshipping, Dropshipping suppliers fulfill orders placed by retailers on behalf of customers. They store the product, package it for shipping and arrange for delivery to the customer's address.

You can work with an individual supplier or a platform that hosts a directory of suppliers, such as AliExpress. Some manufacturers also operate as dropshipping suppliers.

In the pet store example, the company that receives the order, packages the cat collar, and ships it to the customer is the dropshipping supplier.

What about wholesalers

Wholesale suppliers are not part of the dropshipping process. Unlike dropshipping suppliers, wholesalers sell products in bulk to retailers, who then sell to consumers.

If your pet store buys organic dog treats in bulk at a discount price, stores them, and then sells them individually to customers, you're a traditional retailer working with a wholesaler.

A cardboard shipping box has a question mark on it

Discover three easy ways to get started dropshipping on Shopify, each suitable for different experience levels and business goals.

How Dropshipping Works

What Is Dropshipping business, Here's a step-by-step breakdown of how the standard dropshipping process works:

1. Partner with dropshipping suppliers

Find a dropshipping supplier that offers the products you want to sell. After signing a contract, they will manage the storage, packaging and shipping of the customer's purchases.

You can partner with an individual business in your niche. You can use a dropshipping app to sell products from multiple suppliers.

2. Set up an online store

Next, create your online store. Your store lists products from your suppliers for a price you set.

Add a dropshipping app to your store to keep product inventory updated and automatically forward orders to suppliers:

DSers connect Shopify stores to AliExpress.

Gendrop has a catalog of over a million products.

Spocket includes dropshipping providers in the US, Europe, Brazil and India.

3. Receive a customer order

What Is Dropshipping business, When a customer visits your store and places an order, the checkout process happens as normal. Customer pays, receives order confirmation and waits for delivery.

4. Forward the order to the supplier

Once your customer pays for the order, send the order details to your dropshipping supplier. This step is automatic if you're using a dropshipping app.

5. Supplier prepares and ships the product

The dropshipping supplier prepares the order and ships it directly to the customer. Many suppliers offer branded shipments and custom packaging to enhance the shopping experience.

6. Customer receives the product

What Is Dropshipping business, The customer receives their product from the supplier while the store handles customer service requirements.

The six steps of dropshipping, from partnering with a supplier to the customer receiving the product.

Should you start dropshipping?

Trying to decide if dropshipping is worth it for you? Here are some signs that a dropshipping business model might be right for your business:

You are all about marketing

If you're good at search engine optimization or social media marketing, dropshipping can be a great fit.

The primary goal of dropshippers is to drive traffic to an online store using platforms like Google, YouTube, TikTok, and Instagram. Dropshippers leverage content marketing skills and an understanding of ranking algorithms to connect potential customers with products.

You are not sales-driven, brand-focused

If your business strategy is more focused on generating high volume sales than building a distinct brand, dropshipping may be right for you.

In other retail models, retailers add branding to their stores, products, packaging and communications to create a consistent brand experience, building customer loyalty.

Dropshipping offers less branding opportunities. Packaging and delivery leave little room for personalization, and dropshipping products are rarely exclusive to a single retailer. This makes it difficult to deliver a unique experience that resonates with customers and keeps them coming back.

If you want to sell branded products using dropshipping, explore options for private label dropshipping or print-on-demand products.

You prioritize product diversity

Dropshipping gives merchants the ability to sell a wide range of products from a global network of suppliers without worrying about inventory.

However, this comes with a trade-off: less control over product quality and consistency. Beyond ordering samples, you can have little influence on the manufacturing process.

You are comfortable with long shipping time

In the era of ultra-fast delivery, most customers expect their purchases to arrive quickly. This presents a challenge for dropshippers who partner with overseas suppliers.

Products shipped from international locations such as China with ePacket can take significantly longer to arrive, risking customer dissatisfaction.

Dropshipping can be a viable option if you can source domestic suppliers or manage customer expectations around delivery times.

Are you ready for customer service needs?

What Is Dropshipping business, Although dropshippers do not handle product fulfillment, they are the primary point of contact for customers. This means they often deal with customer service issues that are beyond their direct control, such as shipment delays, delivery issues, product defects and return requests.

If you are prepared to navigate these challenges and manage customer inquiries effectively, dropshipping can be a viable business model.

Dropshipping with Shopify Collective

Connect with US-based Shopify brands to sell their products easily. Use Shopify Collective to create items from like-minded stores and ship directly to your customers.

Explore Shopify Collective

6 Benefits of Dropshipping

Here are six reasons why dropshipping has become a popular ecommerce model for businesses:

• At low cost
• Wide selection of products to sell
• flexible position
• Getting started is easy
• Easy to test
• Easy to scale

1. Low cost

Since you don't buy inventory, dropshipping requires minimal upfront investment. Many dropshipping stores are run from home with little more than a laptop, making it an attractive small business idea.

With this advantage, however, comes competition from other dropshipping entrepreneurs. Applying tips from dropshipping experts to make your business work requires you to invest your time instead of capital.

2. Wide selection of products to sell

Use dropshipping to offer your customers a wide array of trending products. With no unsold inventory to worry about, you can change your product catalog at will. If suppliers stock a new item, you can immediately list it for sale.

3. Flexible position

What Is Dropshipping business, A dropshipping business can be run from anywhere with an internet connection. As long as you can communicate with suppliers and provide timely customer support, there are few restrictions on where you live and work.

4. Getting started is easy

Dropshipping eliminates many retail barriers. Running an ecommerce business becomes easier when you don't have to:

Operating a warehouse or paying

Inventory monitor

Pack and ship orders

Track inventory for accounting

Manage returns and inbound shipments

That said, successful dropshippers carefully oversee the fulfillment process and are committed to providing a satisfying customer experience.

5. Easy to test

Dropshipping is an effective fulfillment model for testing customer interest in a new product category. Stores can test sales of dropshipped products before committing to purchase inventory.

6. Easy to scale

A traditional retail business drives the scaling plan forward. If a large number of orders come in unexpectedly, it can be challenging to accommodate them and you may sell out quickly.

Dropshipping businesses scale more efficiently. Also, you can expand your reach by dropshipping to popular marketplaces like Amazon, eBay and Etsy.

Disadvantages of dropshipping

Like all retail models, dropshipping has its downsides. Here are four disadvantages to consider:

• Low profit margin
• Inventory volatility
• Shipping complications
• Supplier error

1. Low profit margin

The accessibility of dropshipping can lead to intense competition, resulting in lower profit margins as businesses undercut each other.

The more you discount, the harder it is to calculate a profit margin that works for your store.

Mitigate this problem by choosing the right products and choosing a dropshipping niche that is not oversaturated.

2. Inventory volatility

For all its inventory management benefits, dropshipping exposes retailers to sudden changes in product availability.

With suppliers filling orders for multiple retailers, inventory levels can fluctuate unpredictably—which isn't a problem when you stock your own products.

Fortunately, dropshipping apps like DSers give merchants options when a supplier runs out of stock. For example, you can automatically unpublish the publication of sold products or set a "sold" label.

3. Shipping complications

Working with multiple suppliers can complicate order fulfillment. If a customer orders three items from three different suppliers, you will need to cover separate shipping costs for each. Items may arrive at different times.

One possible solution is to pass the shipping cost on to the customer. However, this can make your pricing less competitive.

4. Supplier Errors

Even the best suppliers develop perfectionism. Unfortunately, it falls on the dropshipper to fix these mistakes.

This makes it important to choose a reliable supplier to reduce missing items, packing errors and product quality issues – all of which damage your business's reputation.

Dropshipping

Dropshipping is a popular choice for online store owners, side hustlers, and people looking to start a retail business.

Dropshipping is easy with Shopify. Integrate a dropshipping app or use Shopify Collective to dropship products from US-based Shopify brands. Here's how:

Sign up for a free trial with some basic information about your business.

Personalize your store with a logo, supporting content and a free theme that fits your brand

Set up the Dsers app to connect your AliExpress account to your Shopify store or choose another dropshipping provider.

Import products into your store and set prices that ensure profit margins.

Start selling and marketing your products.

Dropshipping FAQ

How much do I need to invest to start dropshipping?

Starting a dropshipping business requires investing in an online store with a domain name and an ecommerce website. You may also need to budget for online advertising to reach potential customers.

How do dropshippers make money?

Dropshipping businesses make money by ensuring that there is a profit margin on the products they buy from suppliers and sell to consumers.

Is dropshipping legal?

Dropshipping is a legal and widely used ecommerce fulfillment model that has become a popular option for ecommerce businesses around the world.

How profitable is dropshipping?

Typical profit margins for dropshipping businesses are between 10% and 15%. By finding the right products to sell and building strong supplier relationships, you can build a profitable dropshipping business.

What is the difference between dropshipping and retail arbitrage?

Unlike dropshipping, retail arbitrage involves buying products from other retailers and reselling them at a higher price.

How do I start a dropshipping business?

Choose a dropshipping niche.

Partner with dropshipping suppliers.

Create an eCommerce store.

Market your dropshipping store on Facebook, Instagram, and TikTok.

Receive customer orders and send to suppliers.

Analyze and improve your sales strategy.