What Is Dropshipping?

If you are interested in starting your own online business, then you must’ve come across the term “dropshipping” somewhere on the internet. As dropshipping has become one of the most popular business models for e-commerce, we want to fully prep you up to help you make the entrance into the online business world. In this article, we will show you how dropshipping works and why you should choose this model to start your business.

Dropshipping: Everything you need to know in 2021!

How Dropshipping Works

Dropshipping is nothing new, and is generally very simple to understand. When you are dropshipping, you are a store owner, without stock.

You get an order for a product; you pass that order to the supplier of this product. The supplier then sends the product directly to your client.

Traditional retail stores and a lot of online businesses actually keep stock of products in a brick-and-mortar location, and then ship orders to their clients. With dropshipping, you don’t need to have a warehouse; your suppliers take care of it.

This business model allows you to focus on the most important things: getting orders for your products and making profits from the margin you created.

Everything about dropshipping can be performed on a laptop! For this reason, millions of people want to or have started a dropshipping business. Running a dropshipping store has become a full-time occupation for some of them!

Of course, nothing comes easy, and like every business, hard work is required, but once you understand the basics, you can easily keep going and improving!

Why Choose Dropshipping - Pros

Let’s first take a look at the advantages of dropshipping. They are the reasons why dropshipping has become one of the most popular business models for e-commerce.

Easy to Start

Many people with successful stores have no previous experience in retails, e-commerce or business in general. We live in a world where you can learn almost everything easily on the internet. There are 1000s of free online content for you to learn from on YouTube, Facebook and many other places.

You can create a store online now in a couple of minutes, there are plenty of platforms that specialize in this. You can then find products and start selling as soon as you feel confident enough!

Some basic knowledge is required, and finding the right tools to help you will most likely take some time, but you can learn as you go.

The same is true about the starting cost; you don’t need thousands of dollars to get started! There are plenty of opportunities for you to start making a profit once you had the right information!

Easy to Manage

You can manage your store and your expenses very efficiently and easily just from a laptop. You don’t need an office, you don’t need a warehouse, you just need internet.

You are your own boss, you make your own hours, and you get to work from where you want, as much as you want. You make the decisions, and you decide what’s good or not.

In one word, you are in charge of everything. Very few business models give you that much freedom and independence.

Growing your business will only depend on you. Once you have found the right product for the right audience, your only worry should be getting more sales!

Low Entry Cost

The cost of the majority of traditional businesses comes from having an office, store and warehouse. High-level investments are not required for dropshipping.

As mentioned above, you don’t need any of those to start your dropshipping business. You don’t even need to spend money on purchasing inventory.

Since dropshipping eliminates all the major costs of having an online business, all you need to pay for is the costs for running a website (including hosting service, themes, apps, etc.).

Large Variety Products

Dropshipping suppliers, like AliExpress suppliers provide almost anything that you would like to sell. It can be a niche and products that you are interested in.

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For instance, if you are a tech-savvy guy, you can choose to open a store that specializes in selling electronics such as wearable devices, smart home appliances, drones, phone accessories…The list goes on. As long as you can find the products you want on AliExpress, you can sell them in your store.

Manage Time and Resource with Flexibility

Flexibility is another advantage that makes people love dropshipping. Let’s say you are having second thoughts about online business; you can still start dropshipping as a side business because you have the flexibility to work whenever you want.

You can then fully commit to it later when the future is promising. Thanks to the nature of dropshipping, such flexibility enables more possibilities for people.

Too Good to Be True - Cons

Nothing is perfect, just like every other business model, dropshipping has its own disadvantages. Here’s the list of the cons of dropshipping:

Slim Profit Margin

Compared to other traditional brick-and-mortar business models, you should expect the profit margin of dropshipping to be lower.

Of course, it is still profitable, but considering that you need to cover the shipping expenses for your suppliers to deliver the products to your customers, the advertising costs so that people see the products you are selling and other expenses, there’s no surprise that the margin is slim.

It’s always a trade-off between low profit margin and setting a higher price for the products. You can easily lose your customers’ attention if you make the price too high, which will, in turn, lower your sales volume and revenue. Therefore, balancing the margin and product price can be very tricky.

Little Control over the Suppliers

The lower level of control is one of the disadvantages that many dropshippers face. Receiving orders, placing the orders to the suppliers and letting the suppliers deliver the products to your customers.

Dropshipping may sound simple and straightforward, however, things can get complicated when many parties are involved.

For example, order processing is a tricky part, especially when you are sourcing products from suppliers. There are minimum obligations between you and your suppliers since they don’t work for you.

Each of your suppliers might have a different timetable to fulfill orders. It can take up to weeks for some suppliers to finally ship out your products.

Challenging Customer Service

Since you have little control over the suppliers, sometimes you may be held liable for things that are not your fault. For instance, a customer blames you for receiving a damaged package. Saying "you are not responsible for the shipping but your supplier is" hardly satisfies your customers.

Even though you don’t have a lot of control over how your supplier ships out the package, you are the storefront that directly interacts with your customers.

Therefore, you have to take the blame when a customer complains. The customer service of dropshipping can be very challenging but it’s something you have to learn to deal with it.

High Competition

Whether you are running a business in the traditional way or on the internet, competition is everywhere. Unfortunately, it is exceptionally high for dropshippers. Due to the low barrier of entry, it attracts millions of online retailers that try to adopt dropshipping as their primary method of order fulfillment. Consequently, making yourself noticeable amongst them is difficult.

Conclusion

It is important to note that dropshipping is not an easy way to make money out of thin air, it also requires time and dedication. You will most likely not make millions with the first product you try to sell, and you will never stop learning.

Don’t let the disadvantages of dropshipping scare you. Nothing comes for free, and the secret to succeeding in dropshipping is to persevere and keep trying, keep learning.

There is always a solution to every problem. As long as you choose the right niche and use the right dropshipping tools, becoming a successful dropshipper will be no mystery to you.