As an entrepreneur interested in e-commerce but with limited resources, you will appreciate the essence of dropshipping. With dropshipping, you don’t have to bother yourself much about manufacturing, supply chains, and fulfillment. Guess what? You are also free from the inventory management challenges.
So what exactly is dropshipping? What are the benefits? How does it work? This article will provide you with the necessary information about dropshipping.
What is dropshipping?
Dropshipping is a retail fulfillment technique. For this, as an online store owner, you don’t keep the products you sell in stock. Instead, you purchase the products from a third party and get them shipped directly to the customers. This means that you don’t handle the product directly. To illustrate further, when your store sells an item, the order is sent to a third party (i.e., your supplier), who ships it directly to the customer. You don’t have to touch the product and you only pay for what you sell.
The key difference between dropshipping and the standard retail technique is that you don’t have to stock or own inventory. All you have to do is to purchase inventory as needed from a third party (usually a wholesaler or manufacturer) to fulfill orders.
Benefits of dropshipping
As an aspiring or beginner entrepreneur, you may find dropshipping to be a good, cost-saving option for you. Dropshipping allows you to test different business ideas and products with less downside, and this will enable you to learn how to choose and market in-demand products.
Some of the key benefits of dropshipping are presented below:
- Easy to start your e-commerce business
It is much easier to begin an e-commerce business through dropshipping as you don’t have to deal physically with products. Dropshipping saves you from a series of stress involves in retailing, such as tracking inventory for accounting reasons, managing or paying for a warehouse, packing and shipping your orders, handling returns and inbound shipments, and regularly ordering products and managing stock level.
It also makes it easy for you to test the customer’s appetite for additional product categories, e.g., accessories or totally new product lines. Basically, you have the option to list and potentially sell products before committing to buying a large amount of inventory. Therefore, it is a suitable method for those interested in launching an e-commerce store.
It is cost-effective because it demands less capital, unlike the traditional method that requires retailers to tie-up large amounts of capital purchasing inventory. Dropshipping allows you to launch your e-commerce store, without having to pour in a lot of money into the inventory upfront. You only have to purchase a product when you have made the sale and have been paid by the customer. This means that you don’t need significant up-front inventory investments to begin an e-commerce business. With dropshipping, you can source for products and launch your business with less cost. There is also less risk and low overhead costs involved. Most dropshipping businesses run as a home-based business. With just your laptop and a few recurring expenses, you are good to go. There may be more costs as you expand, but the costs are relatively lower than those of traditional brick-and-mortar businesses.
- Flexible location
As stated earlier, you can begin your e-commerce business from the comfort of your house with your laptop. As long as you have an internet connection, you can run your business from anywhere. All you need to do is maintain excellent communication between suppliers and customers, and you are good to go.
- A vast range of products to sell
Since you don’t need to pre-purchase the items before selling, you can offer a wide array of trending products to your potential customers. As soon as your suppliers stock an item, you can list it for sale on your store at no additional cost. So you can sell as many products as you want as long as you are sure you have the right supplier to deliver the products.
There are several e-commerce solutions can power your dropshipping business. We will the highlighting them in subsequent post.