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The Complete Guide To Dropshipping

 

Dropshipping is an entirely hands-off method of fulfillment, meaning you’ll never have to touch the product before it’s shipped to the customer.

That’s right: when you use dropshipping, you won’t have to manage inventory or deal with the specifics of fulfillment – saving you precious time and energy.

If this sounds like something you may be interested in for your business, keep reading. Dropshipping is an excellent alternative to traditional fulfillment, but there are several details you should know before committing to it.

The Advantages of Dropshipping

Dropshipping has an odd reputation among eCommerce store owners – some prefer it, while others would instead use other methods of fulfillment. There are many reasons to choose dropshipping for your business – some of the best advantages include the following:

  • You do not need to purchase inventory upfront, nor will you need to manage, track, and store inventory.
  • Dropshipping lets you focus on other business parts, like marketing, sales, and customer relations.
  • You can test out new products at shallow risk. If your customers do not tend to purchase a product, you will not lose your initial investment.

The Disadvantages of Dropshipping

Dropshipping has apparent advantages, but it’s not perfect for everyone. Because you are outsourcing much of the fulfillment process to another company, they will take a more significant portion of the final sale than if you were to fulfill each sale yourself.

When you purchase products in bulk online for inventory, you take the upfront cost on the chin, but you will profit much more from each product. However, you must purchase, store, track, pack, and ship each product yourself (or hire a team to do so).

In addition, dropshipping gives you much less control over the fulfillment process than more traditional fulfillment methods. Because you are outsourcing the process, you will not have direct control over much of what happens. This means orders may be delivered late, and you’re at the mercy of your drop shipper’s stock. If they run out of a particular product, you need to be aware so you can list it as out-of-stock on your store – otherwise, you may find yourself with some angry customers and chargebacks.

Picking Your Partners

Dropshipping means you’ll work with other teams of people to fulfill your orders. These partners are known as your suppliers, and they manage inventory and control the shipping process.

Choosing the right partners is essential when you enter the dropshipping scene. The wrong vendor choice could mean the difference between a highly successful online store and a failing one. You’ll also be providing your vendor with sensitive customer information, so you want to ensure they’re trustworthy – otherwise, your customers could find themselves in a less-than-ideal position.

You also want to work with trusted vendors to deliver and fulfill on time. Many vendors have a terrible reputation for on-time fulfillment, and late deliveries will severely hurt your store’s reputation. Other vendors are also known to pack products improperly, resulting in broken products and unhappy customers.

Dropshipping suppliers can be very difficult to locate, as they don’t typically advertise themselves like regular stores. Some popular dropshipping directories include:

How Much Will Dropshipping Cost?

The most crucial factor of dropshipping to many store owners is the cost. Dropshipping involves using a middle-man, which will understandably raise the product's price to some degree. But exactly how much more can you expect to spend using dropshipping rather than traditional methods?

Most dropshipping suppliers have membership and per-order fees you’ll need to pay attention to. Many also have minimum orders, meaning they will not work with you until you can place orders over a specific limit. These factors will impact your bottom line, so plan accordingly when you predict your revenue.

You’ll also need to consider the vendor’s price of each product. You won’t make as much profit margin per product because the vendor also needs to profit. Profit margins will fluctuate widely depending on the product you are selling, what you charge your customer, and how much your supplier charges. You want to sell products at a competitive price, but the lower you set your price, the less you’ll make per sale.

The Dropshipping Process

dropship

The dropshipping model is pretty simple and easy to follow:

  1. Find a supplier who you trust. Your supplier should offer the products you wish to sell and be located near your target audience.
  2. Sell your supplier’s products to your shoppers using your store.
  3. Send your orders to your supplier via phone, email, or an integrated online system.
  4. Allow your supplier to fulfill the order.

Dropshipping has become extremely popular among online retailers because of its ease of use and low upfront costs, but it’s not the best choice for every store. You should not expect to make as much as you would by purchasing your products upfront and fulfilling orders independently, but you will save time and reduce your investment risk. By selecting the best dropshipping suppliers, you can ensure a smooth operation for your ecommerce business, keeping your customers satisfied and loyal.

Do you use dropshipping for your business? If so, why did you choose to dropship over other methods of fulfillment? Let us know in the comments below!

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