What is a Drop-Shipping business?

. 5 min read
What is a Drop-Shipping business?

Drop-shipping is a retail fulfilment system where goods are ordered from a third-party retailer instead of a store stocking products. The goods are then distributed directly to the customer. This way, the vendor doesn't have to manage the items personally.

This is mainly a hands-off operation for the store. The merchant doesn't have to order and maintain stocks or in any way fulfil the orders. The third-party supplier, instead, takes care of the items.

For startups, drop-shipping is lucrative since it does not need as much investment as the conventional retail model. You don't have to open, pay overheads, and stock goods in a brick-and-mortar store. Instead, you open an online shop to purchase goods in bulk and storage space from vendors who already stock products.

In drop-shipping business, the retailer is responsible for attracting clients and handling orders, ensuring you only need to be a middleman. Despite this arrangement, by jacking up the price of the goods you offer, you can reap the lion's share of the proceeds. It's a straightforward model of business and one that can be very satisfying.

The Concept of Drop-shipping

Suppose you create an online store using Shopify (*Shopify is a complete commerce platform that lets you start, grow, and manage a business. Create and customize an online store. Sell in multiple places, including web, mobile, social media, online marketplaces, brick-and-mortar locations, and pop-up shops. Manage products, inventory, payments, and shipping.)

Now you do not want the headache of inventory management and block your investments in inventory stocked in your online store.

Drop-shipping is a saviour here since it acts as a retail fulfilment method where your Shopify store does not need to keep the products it sells in stock.

Instead, your Shopify store sells a product using the drop-shipping model where you display the images of your products from a third party (AliExpress or Oberlo -Find Products to Sell on Shopify With Oberlo!), which helps you find and add products directly into your Shopify store and you can start selling right away.

Now when a customer likes and orders a product at your Shopify store, the third party ( the suppliers at Alibaba or Oberlo) ships the order directly to the customer.

As a result, the owner of a Shopify store doesn't have to handle the product directly.

drop shipping banner on grey background

How Does Drop-shipping Work?

The drop-shipping model involves low startup costs and ensures division between the retailer and manufacturer. It is based on collaboration between retailers and drop-shipping service providers where retailers manage their website and orders, while drop-shipping services take care of the rest. It involves three steps:

Step 1: Customer Orders the Product

The customer places an order through the e-commerce website of the primary seller. If you have built an e-commerce website, the customer will visit your website and place the order for you.

Step 2: Retailer Informs the Drop-ship Supplier

You will receive the order and forward the request to your drop-ship supplier/partner. You can either automate this process or do it manually.

Step 3: The Drop-ship Supplier Packages & Sends the Product

As the last and final step, your drop-ship supplier/partner will accept the order, pack it, and send it to your customer on your behalf with your name on the package.

The Benefits of Drop-shipping Services

There are several advantages of using drop-shipping services.

  • You can start in no time
  • Doesn't need a lot of monetary investment
  • Flexibility of location
  • It can be scaled up easily
  • Can include a wide range of products

Advantages of drop-shipping

1. It is beginner-friendly.

You do not need to be a business guru to start. In fact, you don't even need any prior business experience! If you take some time to learn the basics, you can get started quickly and learn the rest as you go along.

It is easy to start drop-shipping, and it takes little effort. You don't need a warehouse to store goods or a staff. You don't need to think about packaging or storage either. You do not even have to devote a certain amount of time to your shop every day. Surprisingly, it's hands-off, especially once you get moving.

2. There is fast growth in drop-shipping.

Your business model doesn't have to change at all when you ramp up. As you expand, you'll have to boost your sales and promotion efforts, but your daily operations will remain the same, more or less.

One of the advantages of drop-shipping is that when you scale, the costs do not spike. It's easy to expand fast. If you want to build a little squad at some point, you can do about anything by yourself, too.

3. You do not need a lot of capital for drop-shipping.

Since you need very little to start a drop-shipping company, you can get started with minimal funds. You can create a whole corporation on your desktop and do not need to invest much. Your costs will be relatively low even as your organisation expands, particularly compared to conventional business expenses.

4. Outsourcing is adaptable.

This is perhaps the greatest advantage. You will work for yourself and set your own standards. It's by a long shot, quite possibly, the most adaptable professions that anybody can seek.

You can telecommute and work at times that suit you. This is ideal for business visionaries who need a business that works for them. You won't need to retrace your steps to complete tasks.

5. Outsourcing is not difficult to oversee.

Since you do not need to take up too many responsibilities, you can oversee everything with little issue. Once you have established service providers/vendors and set everything up, you're only answerable for your online retail front.

Points to remember.

Starting a drop-shipping business is easy if you follow the points given below.

Research the current trends and analyse how long these trends will remain valid.

2. Decide the niche as per the demand:

After researching trends, determine which product is in demand, and understand how long it will be in demand.

3. Look for markets/areas where the product is in great demand:

Research the areas where the demand for the product is high.

4. Understand your competitors:

Thoroughly research your competitors. Understand their module from the purchase to delivery.

drop shipping stamp on white background

Final thoughts

Outsourcing may seem difficult, yet once you figure out how to outsource, it'll be smooth. You, the outsourcing dealer, can do everything remotely!

You do not need business experience to start an outsourcing customer-facing platform. Many budding entrepreneurs never pursue their startup dreams since they think an MBA or business experience is necessary. This isn't true, though. One of the advantages of outsourcing is that you can figure out how to outsource as you go.

Even better, various assets have made outsourcing simpler in recent times. For instance, this helpful video gives some incredible counsel on how to begin. You can have zero business experience and still make a profit.

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