Why Dropshipping Is A Good Idea And Why You Should Dropship
With the increasing business opportunities online, chances are that you have heard about dropshipping. Some business models explain it as a setup with a middleman that manages orders between the customer and a supplier.
You enter an agreement with a wholesaler, create a website, and publish some of their items there. The commission is then paid to you per completed order. No need for a physical store! Zero contact with the product till it's sold! Just be the wholesaler-to-customer link and watch the profits roll in. The perfect "passive money-making scheme".
It all sounds great, right? But is dropshipping that easy?
Keep reading to learn why dropshipping is a good idea.
1, What is Dropshipping
Dropshipping is a retail business order fulfillment approach for online stores that sells products by accepting customer orders, forwarding them to a third-party supplier who ships the order to the customer in the name of the online store.
Compared to the conventional business stores, the dropshipping idea is seamless. It is easy to startup. You don’t have to get a physical store or worry about how to stock products. The items remain with your supplier/wholesaler. There is also no need to hire employees.
All you have to do is open an online store that customers identify with and make their purchases. You forward each order to your third-party supplier, who then ships the items directly to the customer.
Dropshipping can be an extremely lucrative business model for the few, and with popularity soaring, it's no wonder entrepreneurs are opting for dropshipping over physical products.
"Estimated market size in 2021 to 2026"
Source Dropshipping predictions
Still confused about how the process really works?
2, How does Dropshipping work
Dropshipping works like a normal sales store. Customers visit the store; select the products they like and make payments for them. That’s the same way dropshipping works.
The only difference is that you do not set up an actual warehouse for the products you sell. The products remain with the wholesaler. Think of it as selling for a wholesale business and getting your commission on each sale. However, you decide the selling price in this case. The customer is not expected to know about the wholesaler’s involvement. All customer interactions are direct with you. That also includes complaints if an error occurs with the shipment or product quality.
3, Benefits: Why Dropshipping is a good idea
Anyone can be a Dropshipper
While some business knowledge will certainly be helpful, it doesn’t matter in the long run. You can always learn with time and that’s why dropshipping is a good idea. There are lesser factors to worry about when starting.
Compared to the traditional business setup, you don’t worry about renting a store, stocking up goods, getting employees, or how to ship customer products. That leaves enough learning room to grab the basics on getting orders and completing them.
This guide contains some of the startup fundamentals. But you also have to be willing to learn on the job. That’s where many startup dropshippers get it wrong. Like any other business, getting the basics is crucial to success.
3.1, Flexible growth plan
The ease of scalability is another reason that makes dropshipping a good idea. The business structure essentially remains the same and leveling up simply involves getting to manage more orders on time. Efforts that could have been put into maintaining stores/warehouses are channeled into marketing for improved sales conversion.
3.2, Work remotely
Working remotely is also one of the benefits of dropshipping. As the dropshipper, you are your own boss and can decide to stay indoors to complete the day orders from the comfort of your bed. You also get to work only when it’s convenient.
Complete management of the business takes place on your laptop and business running costs remain relatively low. That’s a total flex when you think of the rigors of managing a full-time business in a physical store.
3.3, It’s not time-intensive
Since dropshipping allows you to work remotely coupled with non-physical warehouse management, you have enough time to focus on other things. There is even the possibility to take dropshipping as a side hustle, or passive income while still maintaining your present job.
3.4, Easy to Manage
The flexibility of setting up a dropshipping business explains the ease of management. The productive time that could have been spent on managing warehouse spaces is channeled into the advertisement of your products.
Your sole business routine will be searching for trustworthy suppliers and keeping in contact with them. Other business activities do not exceed forwarding the custom]er orders to the suppliers.
3.5, Low risks; instant buy and sell
This benefit applies more to commodities that have fluctuating prices. There is always that fear by business owners that the goods might lose value before being sold out. However, that is not the case with dropshipping. You only buy from the supplier after confirming the customer’s order on your end.
With a strategic marketing plan, this could be your chance to enter the world of eCommerce with very little investment.
Starting a business takes sheer determination, consistency, and patience!
Read the below posts to dominate the market:
4, Who can be a Dropshipper
Everyone! Yes, anyone can be a dropshipper. You don’t need too much marketing knowledge to run a successful dropshipping store. Just ensure that you are willing to learn and study from other successful business owners.
However, dropshipping is not a guaranteed fast money-making scheme. Like any other business, you are bound to experience some early challenges. But they are slight issues that can be tackled by learning the fundamentals before getting started.
5, Getting started with Dropshipping
Have you made up your mind to start dropshipping? Thinking about the right approach to build a successful dropshipping store? Read our startup tips below.
Decide what works best for you!
Failure to prepare is preparing to fail. That means you need to adequately plan and devise strategies you think will work for you. One of such decisions is knowing whether you prefer dropshipping as a side hustle or full-time dropshipping.
5.1, Dropshipping as a side hustle
This refers to keeping your present job while managing your new store. The flexibility in setting up a dropshipping store allows it. Besides, managing customer orders and sales is not that time-consuming too. You probably only need a few hours a day.
However, there is a caution line here. Dropshipping is not time-intensive, but you still have to consciously provide time for it. Individuals who work overtime and do extra jobs that barely give them breathing space may struggle with dropshipping.
In other words, it requires effort too. A few hours a day during your leisure time is great. Just create a good time management schedule and stick to it.
5.2, Dropshipping as a full-time business
One truth about dropshipping is that you can earn much as you can imagine. By increasing your customer reach and sales conversion rates, venturing into full-time dropshipping becomes an option. You can decide whether you want to put more effort into increasing sales. More time, more money!
There is also the possibility of focusing on dropshipping as a full-time business while having another business as a side hustle. There is no limit to what you can achieve. What you need is proper planning, and that includes choosing which of the options fits your schedule.
5.3, Understand the process
Getting familiar with the sales cycle behind every dropshipping order is crucial in understanding why dropshipping is a good idea. This section explains the process from two perspectives: the customers and the dropshipper’s.
5.3.1, Quick illustration
Imagine owning an online shoe store named Classy Wears with a third-party supplier called Comfy Kicks. Now, a certain Mrs. A checks online for fancy Nike shoes and comes across some on your Classy Wears website. She orders the shoes and got the delivery after a week.
How do we explain the sales cycle involving Classy Wears (dropshipper), Comfy Kicks (supplier), and Mrs. A (customer)?
5.3.2, Customer’s perspective
All things being equal, Mrs. A would be satisfied with the order and delivery method. Here’s how she would have narrated the sales cycle:
- She saw a shoe she liked on your page and paid for it.
- A payment confirmation mail was sent to her.
- Another email was later sent as a notification of shipping. The shipping was addressed from Classy Wears (your store).
- Mrs. A received her parcel on arrival.
Now, that’s pretty straightforward, right? There is no trace of a dropshipping arrangement as far as customers are concerned. They see what they like, select it, and pay. It’s just like buying items from a grocery store. Seamless!
However, it’s a bit different when you consider the sales from the perspective of a dropshipper.
5.3.3, Dropshipper’s perspective
While the customer’s convenience was highly prioritized, a lot of activities occurred behind the scenes to make that work. Here is a brief description of how the dropshipper views the process.
- Mrs. A places an order on the Classy Wears website and receives a payment confirmation mail. The same mail is also sent to Classy Wear via automated software that directs the email to both the seller and buyer.
- Classy Wears then forwards the confirmed order to Comfy Kicks(supplier). Classy Wears also pays for the order and keeps back the extra as profit. Assuming Mrs. A pays 20.50 for the Nike shoe and Comfy Kicks charge 17.50. Classy Wears would have made a profit of 3.00 from the sale.
- Upon receiving the order, Comfy Kicks packages the shoe and prepares it for shipping. The shipping order will have Classy Wears as the supplier since that’s who received the initial payment.
- The invoice and tracking information are sent to the dropshipper (Classy Wears). Classy Wears then forwards the received details and other shipping information to the customer.
- The shoes are delivered to the customer (Mrs. A) and the sales process is completed.
Note one thing all through the process; you don’t get to touch the product as the dropshipper. That’s the beauty of dropshipping.
6, Misconceptions about Dropshipping
Read on as we discuss some of the popular ideas that often discourage people from starting their dropshipping business.
6.1, Low profits
This fact is partly true. While dropshipping is a promising avenue to get steady income either as a side hustle or full-time business, the eventual profit is not that high as one might expect. That’s a challenge for those that are just starting.
Since you will be buying the products per order received, you cannot expect the lowest rates as someone else that’s making a bulk order. The additional cost of shipping is another factor that reduces the overall profit.
However, these are general challenges for any business and not just dropshipping. You probably have to endure minimal profits as a startup until you are established and have a higher sales conversion rate.
6.2, It requires minimal effort, time, and setup cost
This theory is also not entirely true. Yes, dropshipping is relatively easy to set up. Nevertheless, it is not a lazy man’s business. You have to create original product descriptions different from the ones on the page of your supplier/wholesaler.
You also have to advertise/market the items you hope to sell. Branding is another part that takes time, especially for new dropshippers. That’s because people prefer to buy from already established businesses.
Therefore, having a wrong perception that dropshipping requires zero effort is a poor way to achieve success in the business.
6.2, Too competitive
People prefer to buy from only established dropshippers and that’s okay. It is the norm and holds for any other business. That is why you must not allow the fear of competitors to make you wonder why dropshipping is a good idea.
An excellent step is to carry out proper market research before choosing a niche. Think of one that allows you some leveling ground when starting up.
There are many reasons why dropshipping is a good idea. This article has discussed such points as well as common misconceived theories that people have heard about dropshipping. It also explains how dropshipping is favorable to both the customer and dropshipper.
In terms of convenience, the customer does not have to stress themselves before receiving their package. The dropshipper also enjoys the ability to sell without even having to see the product. The possibilities are endless and it all depends on finding the right approach when getting started.
To summarize we've briefly covered:
- What is Dropshipping
- How does Dropshipping work
- Benefits: Why Dropshipping is a good idea
- Who can be a Dropshipper
- Getting started with Dropshipping
- Misconceptions about Dropshipping