With manufacturing and retail hubs situation at two ends of the planet, dropshipping as a retail channel gaining popularity with new retailers and small business owners today.
You may be a new entrepreneur with a lot of vendor contacts, but limited start-up capital. You could have ideas for a niche, boutique or subscription business, and great taste, but stay in a remote location.
Or, you may simply not want to invest in warehouses and save yourself the hassle of inventory management.
Even if you lack time, expertise, or investment, you can succeed at dropshipping with marketing alone.
What is dropshipping? How does it work?
Dropshipping is simply a means to an end: viz. order fulfillment in retail, where you don’t buy or stock the products you sell. You don’t even have to handle the product yourself.
In a dropshipping model, you “curate” products and market them to a niche audience on an online platform where they can place orders. Your partners ship the order directly to the customer.
Your partners can be product manufacturers, wholesalers, or retailers. They actually hold inventory. In many cases, they are also the manufacturers of the product you wish to sell.
The dropshipping process flow, in a nutshell, is as follows:
- You post the products for sale on your eCommerce website
- The products are marketed to the target audience
- The buyer can browse and make a purchase via your website
- Your system tracks the orders and notifies the respective supplier/partner
- The dropshipping partner prepares the order
- The dropshipping partner directly ships the order to the buyer
All you need to do, then, is find a reliable supplier with a track record of selling good products. Once you accept an order, you can route it to the supplier and leave it to them to fulfill it.
If you plan to sell high-priced items, you must have some form of customer support available to reassure potential buyers of your credibility as well as the quality of the product. This form of pre-sale support must be covered through your profit margins.
Selecting partners and products for your dropshipping business
Shopify’s Oberlo marketplace can connect you to a multitude of products as well as suppliers you could tie up with for your dropshipping business. You can import products at a click to Oberlo, which is connected to your Shopify store. When a customer places an order, the automation features allow you to arrange for the AliExpress supplier to ship the product to the customer at a click of a button. This system works worldwide.
Selecting products to dropship can be tricky, which is why you need to know your target demographic well. Hobbyist products, business supplies, and old favorites that are likely to turn into repeat purchases are all good bets.
Order fulfillment in dropshipping
This can be done by any of the following ways:
Routing all orders to a preferred reliable supplier
This works if you have one particular supplier that continually offers you the best service and selection. You can set up an automated system for all orders to get routed to that supplier by default.
Route orders based on location
If you have multiple suppliers carrying your products, you can deliver the order most rapidly via the supplier closest to your customer’s location and save on shipping fees.
Route orders based on availability
This requires some additional automation because you would need to route every order based on which drop shipper has the item in stock.
You could also try routing the orders based on pricing, but that takes a great deal of fine-tuning.
Benefits and advantages
- The greatest advantage of dropshipping is that you don’t have to buy stock, maintain a warehouse, or partner up with shippers. You get to save your capital and focus your attention on other aspects of your retail business such as product scouting or marketing.
- It also helps you bypass the risk of buying products that may not sell as well as you’d hoped. Only when an order gets placed, the order fulfillment process is put in motion. Dropshipping lowers the benchmark for entry into a new, niche business.
- Besides, dropshipping is a great option if you reside off the beaten track. You simply have to list products on your website, including perishable goods or unwieldy items, and the supplier does the rest. Sorting, packing, shipping are all taken care of. In addition, the chances of damage in transit are reduced.
- With dropshipping, you can experiment without the burden of liability. You get to add new products and explore new trends in the repertoire without actually investing your money in new stock.
- You can scale up fast by leveraging your dropshipping suppliers. As your orders grow, most of the work to process them will be borne by them. This allows you to expand your business without having to handle this additional work yourself.
- Last but not the least, your dropshipping business handles a sufficiently large number of orders, you may be able to score better shipping rates compared to most small or medium retailers.
When, and why, dropshipping isn’t great
It is possible that you enter into a field already saturated with similar drop shippers and everyone slinging the same products.
Unless you have done a great deal of research and carved out a deep niche, you will have to constantly look for ways to set your identity apart from the crowd. Not just that, you have to be extra diligent with your metadata, Adwords, and search engine optimization to snag eyeballs.
A lot of dropshipping rides on faith. You have to be able to trust your vendors to stick to the terms of your agreement. Timeliness, quality of the item, packing and presentation, and timely delivery are all parts of the deal.
When you’re sourcing from multiple warehouses, which are not exclusive to your business, inventory can vary on a daily basis. One way to bypass this is by using an app that allows you to sync orders with suppliers. You can forward orders to a supplier and get a real-time estimate of how much inventory that supplier has.
After all, your reputation rests on timely order fulfillment. Far removed from the sourcing and supply chains, a customer complaint may turn out to be your first red flag; by then it is too late. Complaints and returns processing may cut into your savings.
Other things to consider before dropshipping
As a dropshipper, you may sometimes get an order for, say, three items from three different locations or suppliers. This means three separate shipping charges. Such costs can add up.
Let’s say a customer places an order for three items, all of which are available only from separate suppliers. You’ll incur three separate shipping charges for delivering each item, but it’s probably not wise to pass this charge along to the customer. And even when it does make sense to include these charges, automating these calculations can be difficult.
There’s also the issue of what happens when you share all of your customer data with your supplier. What is to stop them from selling to them directly?
However, for new retailers not willing to take on too much inventory risk, dropshipping is a great way to test the waters before deciding to stock and fulfill orders themselves. If you worry about managing inventory and don’t have the resources to run a warehouse, choose dropshipping!
Also, look out for vendors with good reviews on supplier websites so you know what you’re getting into.
Why choose Primaseller?
Your choice of inventory management software can decide if you succeed or fail at dropshipping.
With Primaseller, you have automation on your side to turbo-charge your dropshipping business.
- You can set up an automated dropshipping schedule. This means you can select the frequency at which all sale orders meant for suppliers will be compiled and sent as one drop-ship order. This ensures timely order fulfillment, thereby, you don’t leave customers hanging.
- Purchase orders are also created automatically. Integration of these Purchase Orders with Quickbooks Online makes for ease in accounting.
- Every dropship order is tracked till it is fulfilled or closed, or, in some cases, canceled. This gives you complete visibility on how customers receive their orders, who returns them, and why. Gain complete control of your dropshipping process with Primaseller. Read more about our dropshipping capabilities from here.