First and foremost, what is dropshipping?
Dropshipping can be defined as a retail fulfillment method whereby you are allowed to sell a product and have the product shipped directly to your customers without you seeing or even handling the products.
The result of this is that, unlike other traditional e-commerce models, you don’t need to go about with any inventory, you don’t need to buy your products using a huge sum of money, and you don’t even need to ship the orders to yourself.
Your dropshipping third-party supplier will get it shipped directly to your customer.
To have a better idea of how the dropshipping business works, let’s take an example of how the business model works and this business model is loved by many entrepreneurs.
For instance, a customer search for your Shopify store, click on a product and place an order for a product that cost him/her about $30. After seeing the product requirements, you then place an order of that same product with your supplier, of which you both agreed on $15.
You place your customer’s address to your supplier and your supplier ships the order to your customer directly. Doing your calculation, you will see that you have earned a profit of $15 with you earning a profit which is not visible to your customers.
An advantage of this model is that, instead of buying your goods in bulk at a wholesale price and going about with an inventory in your shop or warehouse and also undergoing the stress of shipping down your customer’s orders, your dropshipping supplier will do that for you and get your customers product shipped down.
After understanding what dropshipping business is, let’s talk about the advantages and disadvantages of this kind of business model?
Let’s start with the pros of dropshipping business
One major advantage of the dropshipping business is that you don’t need to have a huge sum of money before you start up your business, you can start with low capital since you are not buying products in bulk, your starting capital does not need to be huge.
Besides the starting capital, the risk you will be undergoing is generally low. You don’t need to get tied up to certain goods, if the goods you choose does not sell immediately, you are not tied to such inventory, in dropshipping business, you are allowed to select other goods since you have a lesser commitment to a certain product.
Lastly, your e-commerce store is not tied down to a certain location of their inventory since it is dropshipping, the advantage of this is that you can run your business from anywhere in the world.
As much as we’ve talked about the advantage, let’s take a quick look at some of the disadvantages that could be encountered.
First of all, because the dropshipping business allows a low start-up capital, there is a lot of competition.
The supplier or manufacturer you are getting your amazing products from might also be supplying many other online stores, just like yours.
Although this problem can be overcome, we will talk about how to overcome the problem and add value to your product.
Besides starting your dropshipping business with low capital, you should also know that the product you will be purchasing will have a low margin compared to the product you will be buying in bulk.
For example, if you are buying a product at the rate of $15 per unit, you might be dropshipping such a product at the rate of $20, meanwhile, if such product is purchased in bulk, it will be at a rate of $12. Although some suppliers might allow you to have a large margin of buying, we will discuss that as we proceed.
Lastly, dropshipping might offer little to no product customization as compared to when you purchase a good in bulk, buying a product in bulk enables you to brand and customize your product to suit your taste.
Although, some sellers might allow you to customise the brand while others might get the product customized for you, however, it is always uncommon with most sellers, so, if you find such flexibility with any seller, the count is as a bonus.
Now that you are having a better understanding of the dropshipping business, in the next lesson, we will learn how to identify a niche and how to decide on what to sell.
About The Author:
Samwel Dollah is a Shopify dropshipping expert,with expertise in niche research,Facebook ads,store design and also offers dropshipping consultation to newbies and those who want to advance in Shopify Dropshipping. Check out his blog www.dropshippingit.com