What is Dropshipping? How Does Dropshipping Work?
What Is Dropshipping?
Dropshipping is a reseller-type of business model, where the seller acts as an intermediary between a manufacturer or distributor and the end customer. Dropshipping is a business model that is generally lower-cost to start up and easier to scale for ecommerce entrepreneurs. The biggest plus is that there are no upfront costs for inventory build up and no costs associated with keeping a physical inventory.
The dropshipping business model is managed as any regular retail business. And, as with all modern online stores, dropshipping businesses can increase sales significantly by listing products on multiple marketplaces, as well as on the main web store.
You can follow this strategy by choosing your product niche and listing on your own website, alongside selling on e-commerce marketplaces. Even better, when you list products both, say, on eBay, and on your own online store, you increase your exposure to potential buyers. Just remember to always reformulate your product titles for each of your selling channel for better search engine ranking.
Pros and Cons of Dropshipping:
- Low start-up costs
- No physical inventory
- Easy to scale
- Lower profit margins
- Work can get overwhelming
One of the reasons dropshipping has low start-up costs is the actual lack of physical inventory, since the business model of dropshipping is such that the dropshipper acts as a reseller between the suppliers and the buyers, ordering the products directly from the supplier and having them shipped to the respective buyers.
Starting a dropshipping e-commerce venture can be fast to start and easy to scale your inventory at first, however, as your inventory grows so does the working hours you’ll need to invest in order to keep up with your sales. At some point, you will need to hire part or full-time assistants to help you with order processing and inventory management. Successful dropshippers use automation tools and inventory management systems to streamline their work and eliminate errors as much as possible.
Successful online dropshippers advise that before contacting any suppliers, you need to get your online store looking fantastic and also make sure to stock it up with some products beforehand. All serious manufacturers and suppliers of goods will want to see your live web store and if you show them a work in progress or an empty store, this will not impress them and your partnership request will likely be declined. It is best to contact only suppliers that have indicated that they accept dropshipping partnerships.
How Does Dropshipping Work?
As explained in the beginning of this article, dropshipping is a reseller-type of business model where you list products from catalogues or CSV/XML inventory files provided by the manufactuers you have partnership agreements with. When a buyer places an order at your store for a particular product, you then contact your suppliers to purchase the product and give your buyers’ address for delivery.
So, you need to prepare your online store and make it good looking and all set up. Then, you contact a list of suppliers that you have already gathered in advance as part of your suppliers research. When you reach agreements with your suppliers you can begin listing products on your website.
A well set and well organized communication between you and your suppliers is essential for your business success. Reliable partners are key, as suppliers who process slowly your orders and take too long to ship out orders to your customers will have a negative impact on your seller rating. So you need to research your suppliers well and just determine the best of them on practice when you begin sending them orders, and filter out those who don't perform well.
Selling on your own online store is great and good SEO practices can bring in some good traffic of potential buyers. However, industry statistics show that having multiple selling channels increases your sales significantly. The best places to list your store inventory in addition to your own website, are popular marketplaces and/or social networks. With more sales coming from multiple selling channels the need to manage everything efficiently and error-free becomes more urgent. Thus, it is best to use multi-channel sales and inventory management software from the beginning.
Managed online merchant software is the best solution that will not require you to solve technical issues and will give you more time to focus on growing your inventory and managing your sales.
Ready to Dive In?
We, at Dream Club, have built the e-comm.plus platform from the perspective of active multi-channel online sellers to provide all the essential tools and functionalities that streamline merchants work and help them better manage their multi-channel online sales and inventories. E-comm.plus is made by sellers for sellers.
We’re constantly expanding the System with features and functionalities, so that it evolves and adapts to the demands of the e-commerce dynamics.
With Professional Seller account you can take full advantage of all tools and functionalities for orders and inventory management with automatic synchronization of all your selling activity, so that you can manage it all from your user Dashboard. Graphs and stats of your monthly sales and expenses. History and error logs. Automatic invoice and message sending to your buyers, automatic re-pricing tools and more.
Free full system access with Professional Seller account trial for up to 45 days. Don't wait! Try it now, poke around, tweak, test and evaluate!
So, opportunities await!
If you’re serious about growing a successful e-commerce business, we’re serious in providing you the tools you need to achieve better results and better profits!