In case you are in search of an online business idea, then Dropshipping might surely be the way out for you.
In the year 2026, the dropshipping market is expected to almost double to $476.1 billion, from $243.42 billion in the 2023. This growth of course suggests a promising future for aspiring ecommerce entrepreneurs.
So what is dropshipping and how does it work? This article compiles everything you need to know in order to help you launch your own dropshipping business.
Table of Contents
What is Dropshipping?
Dropshipping is actually an ecommerce strategy where you sell products on your website even though you do not have them in stock. You act more like a middle man cause when a customer places an order, you simply forward it to the supplier or manufacturer. They now are in charge of shipping the product directly to the customer.
Dropshipping is an amazing idea for entrepreneurs cause running a store online doesn't demand as much operational capital as the traditional retail model. You do not need to open a physical store, hire employees, pay overhead, or stock products, Instead, you simply just open an online and buy from suppliers who already have products and warehouse space.
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What Is a Dropshipper?
In the simplest of words, a dropshipper is an individual or company that sells products online without actually having them in stock. Rather than keeping a warehouse full of items, they buy the product from a third party whenever a customer orders it. This third party will also be in charge of shipping the item directly to the customer.
So as a dropshipper, what you do is simply place the order on behalf of your customer and then provide the shipping details to the company where you have placed the order, as they are also in charge of shipping the product to the customer.
How Does Dropshipping Work?
Dropshipping is basically a hands-off approach to selling products online. You set-up a customer-facing store and leave the remaining to a supplier.
There exist two main ways in which one can adopt the dropshipping model:
Option 1: Finding Suppliers Yourself
By going with this option, you will need to search for suppliers yourself. You are able to make use of online databases such as AliExpress, Worldwide Brands, or SaleHoo. In these platforms, you can easily find list of wholesale suppliers from North America and beyond.
You simply select the supplier you want to work with, choose their products, and then add those products to your online store. Its somehow hands-on since you are directly picking and managing your suppliers.
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Option 2: Using a Supplier Connected App
This number 2 option is more digitalized cause you can make use of an app like DSers on shopify, that links you to a network of suppliers. This actually saves you to the time you might spend in searching for suppliers by yourself.
With DSers, browsing products on AliExpress becomes very easy. As soon as you find an item that suits your store, you can add it with a click and once the customer places an order, you now process it via the DSers app.
The app automates most of the dropshipping process so you will only need to verify the order details and confirm it. The supplier from AliExpress will now ship the product straight to your customer.
This dropshipping business model is quite easy and straightforward but it is necessary you keep in mind that it is not a shortcut to instant waelth. Just like any other ecommerce business, it requires hard work and dedication to grow. If you do it properly, dropshipping can become a reliable way to handle orders and shipping for your growing ecommerce store.
Benefits of Dropshipping
Dropshipping is a retail fulfillment method where a store doesn't keep the products it sells in stock. Instead, when you sell a product, you purchase the item from a third party and have it shipped directly to the customer. Here are some potential benefits of dropshipping:
1. Low Initial Investment:
Since you don't need to purchase and store inventory upfront, the initial investment required to start a dropshipping business is typically lower compared to traditional retail models.
2. Reduced Risk:
Traditional retail models involve the risk of holding excess inventory that may not sell. With dropshipping, you only purchase products when you have a confirmed sale, reducing the risk of unsold inventory.
3. Wide Product Range:
Dropshipping allows you to offer a wide variety of products without the need to manage and store an extensive inventory. This flexibility enables you to test different products and find the ones that resonate with your audience.
4. Location Independence:
With dropshipping, you can run your business from anywhere with an internet connection. This is beneficial for digital nomads or those who prefer a location-independent lifestyle.
5. Scalability:
Since you don't have the limitations of physical inventory management, scaling your business is relatively easier. You can add new products and scale up your operations without the constraints of warehouse space.
6. Focus on Marketing and Sales:
With the logistics and inventory management taken care of by the suppliers, you can concentrate on marketing, sales, and customer service to grow your business.
7. Lower Overhead Costs:
Dropshipping eliminates the need for warehousing, packaging, and shipping. This can result in lower overhead costs compared to traditional retail models.
8. Testing and Iteration:
You can quickly test new products or markets without committing to large quantities of inventory. This agility allows you to adapt your product offerings based on customer preferences and market trends.
9. Easier Entry into E-Commerce:
Dropshipping can be a more accessible entry point for entrepreneurs new to e-commerce, as it reduces the complexities associated with managing inventory and fulfillment.
While dropshipping offers various advantages, it's essential to note that it also has challenges, such as lower profit margins, reliance on suppliers, and potential issues with product quality and shipping times.
Success in dropshipping often requires careful product selection, effective marketing strategies, and building strong relationships with reliable suppliers.
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Disadvantages of Dropshipping
While dropshipping comes with several benefits, it's crucial to be aware of its disadvantages as well. Here are some potential drawbacks associated with the dropshipping business model:
Lower Profit Margins:
Due to the convenience and reduced financial risk, profit margins in dropshipping tend to be lower compared to traditional retail models. With multiple parties involved (retailer, supplier, and sometimes a marketplace), each taking a portion of the profit, it can be challenging to maintain high margins.
Dependence on Suppliers:
Your business relies heavily on the reliability and efficiency of your suppliers. Issues such as stockouts, delays, or quality problems with the products can directly impact your customer satisfaction and business reputation.
Limited Control over Inventory and Fulfillment:
Since you don't handle the inventory or shipping, you have limited control over stock levels, packaging, and order fulfillment. This can lead to challenges in managing customer expectations and ensuring a consistent brand experience.
Product Quality Concerns:
Without physically handling the products, it can be challenging to assess their quality. If your supplier provides subpar products, it can result in customer complaints, returns, and damage to your brand reputation.
Increased Competition:
The low barrier to entry in dropshipping can lead to increased competition. With many sellers offering the same or similar products, standing out and attracting customers can be challenging.
Shipping Complexities and Delays: Shipping times can be longer in dropshipping, especially if products are sourced from overseas. Customers today often expect fast shipping, and delays can lead to dissatisfaction and potential order cancellations.
Is Dropshipping Profitable?
With typical profit margins of 10% and 15%, dropshipping can surely be profitable. The key here is picking up the right product and building strong relationships with suppliers.
They way to approach dropshipping depends on you and the activities you have. You can choose to run it as a side hustle or as a full-time business.
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Is Dropshipping Legal?
Yes of course dropshipping is legal. There are several retailers that make use of this ecommerce fulfillment model to sell products without inventory. In the same way as many physical stores do not manufacture their own products, dropshipping applies the same principle to online businesses. Retailers select and sell products from different suppliers without having manufacture them.
How Much Do I Need to Invest To Start dropshipping?
Similar to several other businesses, it is not that easy to say exactly how much you need to invest to start a dropshipping business, since the cost can vary depending on many factors.
But the simple truth is that every dropshipping business will need to spend money on a few essentials; such as buying a domain name and setting up an ecommerce website for your online store.
More to that, you will have to budget for online marketing which will help you attract customers and meetup with some other expenses online.
Getting Started With Dropshipping
Dropshipping may sound like a complicated puzzle, but once you learn how to do it, it’s a smooth process for everyone involved. You, the dropshipping merchant, can do everything remotely and never even touch a single product.
There also are numerous resources that help make dropshipping easy. You can have absolutely zero business experience and still make a profit.
Here are the steps required to start a dropshipping business:
- Select a dropshipping business idea.
- Conduct market research.
- Find a dropshipping supplier.
- Set up your ecommerce store.
- Decide the legal structure of your business.
- Organize your finances.
- Launch and market your dropshipping store.
Your dropshipping business may be small at first, but all successful entrepreneurs have to start somewhere. Draw up a strategic plan, evaluate opportunities and costs, and make your business dream happen.
Final Thoughts: What is DROPSHIPPING?
It's essential for aspiring dropshippers to carefully consider these challenges and develop strategies to mitigate risks. Building strong relationships with reliable suppliers, offering excellent customer service, and differentiating your brand can help address some of these concerns.