Recently, the term drop shipping has become very popular, and it has become one of the important types of business on the Internet, and there are many who have achieved great successes through a dropshipping business model. Let’s see the features of dropshipping that determine the form and nature of this type of business.
What is Dropshipping? Know the Most Important Features of Dropshipping Business Model
What is Dropshipping Business?
Drop Shipping is a type of online business that belongs to the world of e-commerce, and in which the online store does not keep its stock, but once the buyer makes a purchase order from one of the products offered in the online store, the store accordingly makes a purchase order from a third party and the third party (wholesaler, other large store or factory) ships the product directly to the buyer.
Dropshipping is a business model that you can use to run your store without holding any stock. Once the buyer makes a purchase order from your website (online store), your suppliers will ship your products from their warehouse directly to your customer’s doorstep. You will never have to worry about storing, packaging, or shipping your products.
From the above explanation, it is clear that your online store in the case of Dropshipping is just an intermediary, between the customer (buyer) and the wholesaler or factory, and therefore the profits here are the difference between the sale price and the purchase price.
If you want to start a dropshipping business, you can easily find a dropshipping company to sell. There are many marketplaces for both people looking to invest in a fully functional business or those wanting to skip the build phase and get straight to marketing.
They have an impressive array of online stores, including dropshipping e-commerce companies, from different price ranges and outlets that you can choose from depending on your budget and interests.
How Does Dropshipping Business Model Work?
A dropshipping business is a retail fulfillment method where the merchant lists products on his website, markets them, and takes the orders under his own brand name and logo but doesn’t keep the products he sells in stock. Instead, when he sells a product using a dropshipping model, he purchases the item from a third party and the third party is typically a manufacturer (or wholesaler), who dropships the product to the customer’s doorstep.
There are three major players in the dropshipping business model: the manufacturer, the retailer (you) and the customer.
The manufacturer’s role in the dropshipping business model includes creating products, carrying inventory, shipping products to customers on behalf of the retailer, and replacing defective products, and restocking them. They sell the products to the retailer at wholesale prices assuming the risk of unsold inventory.
In a dropshipping business model, the retailer (you) sells the manufacturer’s products on your website under your own brand. You will be responsible for selecting and marketing these products. Additionally, you will also be responsible for shipping costs and setting the prices that make you profit.
Finally, in the dropshipping business model, the customer purchases products directly from you, from the retailer. If questions or issues arise, the customer contacts the retailer who purchased the product from.
Top 6 Features of Dropshipping Business Model
Let’s see the features of dropshipping that determine the form and nature of this type of business.
After reading these features, you can understand the advantages of your business in dropshipping and also understand the obstacles you may face, and how to overcome them.
1. You don’t necessarily have to own an online store to start a dropshipping business. There are many marketers who use popular online stores as an alternative platform to display products, for example, you can use the eBay store as a platform to display products from Ali Express in a way of dropshipping. When an eBay visitor views your product and makes a purchase order, you make a purchase order from Ali Express, and the product arrives at the buyer’s address. You can also use social media as a platform to display products.
2. Dropshipping store does not play a major role in the trade process but is merely an intermediary. The main pillars that underpin trade are: the factory that performs the production process, the wholesaler buys from the factories in order to resell to the retailer, and the retailer that sells directly to the consumer (this represents most types of online stores in general).
With your business in drop shipping, your online store is just a channel that connects the consumer to the merchant or factory that provides the drop shipping service.
3. Dropshipping made the e-commerce process very easy and fast. The simple idea behind dropshipping allows anyone with some simple skills to enter the world of e-commerce. This represents an advantage for you, but it is an advantage for all of your competitors as well, and then this leads to a significant increase in the level of competition in dropshipping. This inevitably reduces the profit margin to get good sales.
4. You don’t necessarily have to rely on a single source of products. In dropshipping, you can display thousands of products from completely different sources. This is a very important feature because the diversity of products will attract more buyers and help to achieve more sales.
But on the other hand, the diversity of product sources may be the cause of the buyer’s discomfort (for example: if the buyer buys two products at the same time, but from two different sources, this will make him logically expect them to arrive at the same time because he assumes that they are directly from your store). As a dropshipping store owner, you should expect and prepare for it.
5. The dropshipping business method does not need a lot of capital. As a dropshipping store owner, you will purchase from a wholesaler after receiving the purchase order from the consumer. Here you do not have to keep any stock and inventory, this will not make you need a large capital to start, but this of course does not mean that there are expenses for creating the online store, and marketing expenses that you must take into account.
6. Dropshipping is a completely hidden process for the buyer. Your online store is the interface a buyer will engage with. The product reaches the buyer with your store’s name and logo on the cover. The buyer in the drop shipping will not know anything about the wholesaler who owns the product, so the sale process for him is from your store, who knows no one else, and if he encounters any problem, he will resort to you to solve it.
Can You Make Money Dropshipping?
Yes, you can make money through dropshipping, like many successful merchants continue to do so.
Dropshipping is a low-risk business model that doesn’t incur heavy costs and if you want to earn a decent income by starting your side business then dropshipping is definitely worth it. You can earn a good profit margin with the right suppliers.
Dropshipping allows you to find products that you’re passionate about, and create a business to sell them. When you are motivated to sell products, you are likely to invest more time in merchandising and marketing, which leads to more profits from your endeavors.
Dropshipping is worth the time and money you invest in. If you don’t invest time in your online business, you will never reap the rewards.
Dropshipping takes time as you need to create a store, import products, define a pricing strategy, and start selling. Nothing can happen if you don’t put in the effort. This is the secret of how to start a dropshipping business.
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Read Here: Dropshipping Business Advantages and Disadvantages