As a new e-commerce businessman, inventory management and investment must be bothering you. Hence, dropshipping becomes popular among the e-commerce field. Besides, many veterans in e-commerce business also will choose dropshipping to test a new product before they choose to sell it in bulk.
However, no matter you are a new e-commerce businessman or a veteran, before starting your dropshipping business, you must have such questions: what is dropshipping? Why should I choose this model? Is dropshipping worth it?
In my today’s post, your questions will be answered. Besides, I will teach you how to start the dropshipping business step by step.
1. What is dropshipping?
Dropshipping is an online retail order fulfillment model, in which you needn’t have a brick-and-mortar store or prepare abundant inventory in advance. There are 3 parties involved in the dropshipping process: the end customer, you, the third-party supplier.
Let’s explain how the dropshipping works with the help of an example.
① An end customer places an order for sourcing a T-shirt on your e-commerce store at a retail price.
② You place a same order on your supplier’s e-commerce store or over the phone at the wholesale price.
③ Your suppliers pack and send the parcel to your end customer’s address directly.
That means, your suppliers will handle all the processes on behalf of you including packing, shipping. And what you need to do is just to open an e-commerce store and receive an order from customers, then purchase the same product from your supplier.
2. Why to choose dropshipping?
After learning what is dropshipping, you may wonder if it is a good model for your business. Absolutely, it is a good option for those businessmen without any experience, there are 4 reasons for why to choose such a model.
When new beginners want to start business, for traditional retail business, huge capital is the largest problem they will encounter firstly. However, the biggest advantage of dropshipping is the minimal cost to start up the business. You needn’t invest a lot of money in stocking inventory in advance.
For dropshipping, it even will be OK if you don’t have any business experience. You just need to spend a little time in learning the basic knowledge before starting the business. Moreover, as you needn’t prepare inventory in advance, you don’t have to rent a warehouse to store products. Besides, you needn’t worry about the shipping.
If you are a new businessman, it is advisable for you to start with dropshpping. As you needn’t undertake the pressure of large stock.
Or if your business is relatively mature and you want to develop a new product to sell on your e-commerce store, dropshipping will be a better option for you. The reason is that you can spend a small amount of money in testing the product market before you step into the market, and minimize the risk of failure.
For example, when you want to sell a kind of shoe on your store but you are not sure about if it will get good feedback from the market. You can dropship the shoe at first to test the market then you can decide whether to buy it in bulk. Besides, it also can help you test if the supplier is suitable for long-term cooperation.
A dropshipping business can be run and managed well almost from anywhere. If you cooperate with a supplier that will handle returns, what you need is just a computer to communicate with suppliers and customers. But if you need to handle the return, you may need a storage space to handle it.
3. Three demerits about dropshipping
Limited profit margin
When speaking of the disadvantages of dropshipping, the first one is the limited profit margin. As the startup cost is very low, there will be many competitors selling the same product as you. Sometimes, they may set a very low unit price because of bad quality.
But you may have such a thought: the quality of your products is better than the competitors’ products, then it is reasonable for you to set a higher unit price. In fact, although buyers may know the quality difference, they still will compare the price. So you have to lower the unit price to achieve the sales quantity.
Moreover, when you place dropshipping orders on your supplier’s store, the unit price will be definitely higher than the wholesale unit price. Accordingly, the profit margin will be very limited.
Quality control problem
Under dropshipping model, what you do is just to place an order according to the customer’s requirement on your supplier’s store. And the supplier will fulfill the order on behalf of you. So you can’t see the product in the whole dropshipping process, and can’t conduct the quality control.
Sometimes, some suppliers will lower the quality standard for the dropshipping orders. The direct result of it is that you will get bad feedback from your customer, which is bad for your long-term business.
Supply chain control problem
Generally, in standard e-commerce, you can tackle all the potential problems in the business process, like customers complaint, returns, etc.
But in dropshipping, you can’t control the supply chain well. Once there is a problem, what you can do is just to communicate with suppliers and let them tackle it. And there will be a delay in the processing time, as you not only need to communicate with suppliers but also customers. So the time-consuming after-sales service may bring a bad comment from your customer, which will bring a bad influence on your sales and long-term development of your store.
4. FAQ about dropshipping
How do I start a dropshipping business?
There are mainly 4 steps to start your dropshipping business:
① Select a product to sell on your e-commerce store.
You should spend enough time in doing product research and analyzing whether the products are profitable.
Niche product is a good option for you. The reason is that there will be fewer competitors selling the exactly same products as you. Besides, as there are not many the same products on the market, buyers will be willing to spend more money in purchasing such products, which will let you make a more profit.
② Select a reliable supplier to cooperate with.
A good supplier is very important for a long-term and stable business, as they can ensure the product’s quality. Because of the price advantage of products made in China, many new beginners will choose to import from China. Aliexpress will be their first website they choose to find suppliers.
But there are many other good platforms in China where you can find reliable suppliers. I have summarized the top 15 China dropshipping suppliers for your reference.
③ Build an e-commerce store.
The most commonly used platform for building an e-commerce store is Shopify. There are three price plans for you to choose. And there is a 14-day free trial.
Customers sources is significant for your dropshipping business. But how to acquire the customers? Instagram, Facebook, Google ads, or other social media?
Actually, you can create an account on Facebook and share some posts about your product to gain some customers. But no matter which method you utilize to obtain customers, you had better do research about the method thoroughly and choose the suitable way.
In a word, starting dropshipping business is easy, but it is not an easy thing for you to run it well. You must do a lot of work in many aspects, like choosing products, finding good suppliers, advertisement, etc. But there may be some dropshipping scams you should avoid.
Is dropshipping legal?
Definitely, dropshipping is a legal business model and is just a fulfillment form that the suppliers will handle the shipping. Moreover, many mature businessmen will choose it as an additional sales channel.
But some countries will have specific rules for running the business. For example, in the USA, if you want to operate dropshipping business, you need to obtain a USA reseller permit.
Therefore, to let you run your dropshipping business smoothly, you should learn the dropshipping policy in your local country before you start.
Is dropshipping worth it?
Of course, dropshipping is a worthwhile business no matter you are a new beginner or you just want to develop a new product. As I have mentioned in the above, there are many advantages of the business model, for example, it just will take you a very low startup cost to begin the business.
But if you want to operate it well, you need to spend time in learning how to run a store. Only doing so, can you make good money from your dropshipping business.
How to deal with product quality issues?
As you can’t touch the product, a good supplier appears very important to ensure the product quality. Generally, the manufacturers need to conduct regular checks for quality. But sometimes, a quality issue is inevitable. So before you decide to cooperate with a supplier, you should communicate with them about the return policy in detail.
When you receive a return request from your end customer, you should tackle it according to the agreement between you and your supplier.
To wrap up
I hope you can benefit from my post, and get the knowledge you need. If you think the post is helpful, welcome to share it with others. Besides, if you have any question about dropshipping, or you have dropshipping experience, feel free to share with us by leaving a comment.
We, the leading sourcing agent in China, can not only help you wholesale products from China, but also provide dropshipping fulfillment service. That means, we can help you dropship products to your end customer, which can help you save a lot of time and money. If you want to learn more, feel free to contact us.