Dropshipping is a retail fulfillment method where a store doesn’t keep the products it sells in stock. It’s an online business model that requires very little initial investment.
Dropshipping, drop-shipping, is a viral business model, especially for new entrepreneurs familiar with online marketing methods. The fact that the products offered for sale are not kept in stock makes dropshipping attractive, especially for investors with limited budgets.
If we need to explain dropshipping in one sentence, we can say “Stockless e-commerce.” Dropshipping, one of the methods used by e-commerce companies in product sales, is frequently used by entrepreneurs who have just entered e-commerce.
Drop-in sales mean that you supply the products you post on your website after you sell the products. Not only does this reduce operational costs, but it also creates an opportunity for you to spend all your efforts on marketing and customer development.
Suppose you are ready to start a business that can compete with retail giants and do so on a limited budget. In that case, it means that you have to pay attention to every point while setting up your business model and sales system and work very hard for both sales and procurement processes.
For the store, dropshipping is a mostly hands-off process. The merchant doesn’t have to order inventory or fulfill the orders in any way. Instead, the third-party supplier takes care of the product itself.
The most significant difference between dropshipping and the retail model is that the seller does not stock or own inventory. Instead, the seller purchases inventory as needed from a wholesaler or manufacturer to fulfill orders.
How Does Dropshipping Work?
Companies working with the Drop Shipping method do not keep stocks. Sells the products it lists from its suppliers through its website and catalogs. It is a system based on directing the customers’ orders to the supplier firm, sending the products directly to the customer from the supplier’s warehouse, or first delivering them to their warehouse and sending them to the customer.
Two of the most common approaches for dropshipping are to seek out a supplier located anywhere else in the world, using e-marketplaces & B2B web portals to seek out a bridge application that connects you and your store to thousands of suppliers.
For the latter, we recommend a marketplace that helps independent business owners find products to sell. You can browse top-rated B2B e-marketplaces as Alibaba, GlobalSources, Amazon, Zagano. After you find suitable products and agreed with the supplier, the following process should import the products that pique your interest directly to your e-store. At this stage, it is important to set up a system where you can track your supplier’s stocks and integrate them with your e-store.
In addition, you need to agree with your supplier on processes such as when the order is placed, how the shipment will be made, and the documents that need to be sent with the product. If you are offering different shipping options to your customer, for example, economical shipment, express shipment, you should organize how these processes will take place at the beginning.
Drop shipment: Workflow
- You display your products in your e-store.
- The buyer buys the product from your store.
- You forward the order list to the supplier.
- The supplier delivers the order to the buyer.
Dropshipping e-Store Setup & B2C Integration
A dropshipping-style business is usually set up as an e-store. When planning to start a dropshipping business, you should determine the platform through which you will be selling your goods.
Using specialized e-commerce platforms such as Shopify, BigCommerce, Wix, WooCommerce, you can create an e-store from scratch. We are talking about a website where you will sell on your own domain. For example, Shopify is an integrated e-commerce platform. Provides integration with the websites of your suppliers,
Once a customer buys a product, you’ll be able to fulfill their order in the Shopify Oberlo app. automatically. As the store owner, all you have to do is check that the order details are correct, which means you only need to click the approve the order. The product is then sent directly to your customer from the supplier that you integrated with Shopify before.
e-Commerce software that allows you to operate an online store. Through the platform, you can build your website with a few clicks, manage commerce settings, manage products, calculate shipping rates, sell across multiple channels, etc.
The point is it’s hard to reach the target sales audience. Among millions of sites, how will customers find you? That’s why many dropshipping companies, although they have their own e-stores, also open stores on B2C platforms such as Amazon. The e-commerce software you use can be integrated into the sales pages you open on these sites or new e-stores. So you can follow a multichannel sales strategy.
Is Dropshipping A Legitimate Business?
Dropshipping is completely legal. In addition to the advantages of working without stock, the most critical point that dropshipping businesses should pay attention to is instant tracking of their suppliers’ stocks. Meeting customer expectations, managing the supply chain most effectively, and creating a brand that appeals to the right target audience is the key to long-term success.
This question often arises due to a misunderstanding of how dropshipping works. Most retail stores you are shopping at probably don’t sell personally produced products. Dropshipping takes this curated approach and turns it into a fulfillment model suitable for an online business.
Of course, there are more essential things you need to do to run your business legally. To make sure you are doing business legally in your area, consult a lawyer specializing in these matters.
What is the Difference between Dropshipping and Amazon FBA?
Many entrepreneurs who want to do e-commerce compare Amazon FBA and Dropshipping. The two business models differ in matters such as supply chain provision, investment, time, and stock management.
Fulfillment By Amazon (FBA) is a service provided by Amazon that provides storage, packaging, and shipping assistance to sellers. In short, FBA allows sellers to stock their goods in Amazon warehouses and to make post-sales shipments.
Dropshipping is stockless, and FBA is a different e-commerce method based on stocked sales. Selling in stock gives you the chance to brand, stocks, and control of the shipment process are in your hands. On the other hand, drop shipping does not require capital, there is no stock cost, there are no risks to arise from the products you cannot sell.
Whether dropshipping or Amazon FBA should be preferred to do e-commerce, deciding this is basically about your ability to take risks and capital.
Benefits of dropshipping
1. Less capital is required
2. Easy to get started
3. Low overhead
4. Flexible location
5. Wide selection of products to sell
6. Easier to test
7. Easier to scale
1.) Choosing Product
a.) Highly Competitive Product Groups: Dropshipping allows you to start a business with a low budget. In this way, you can spend extra on advertising and marketing. Especially if you are in a highly competitive industry, you need to allocate resources to e-marketing.
b.) Niche Products: If you sell rare products that are of interest to a limited audience, or if a part of your product range includes these products, you need to create a severe liking and demand among the customers who are likely to demand these products. Provide detailed Information about the products on your niche product pages, encourage your customers to comment.
c.) High-Profit Products: Products with high-profit margins are attractive to every seller. A high-priced product also has a high stock cost. Dropshipping of these types of products is advantageous. The fact that it is sold in small numbers makes it easy to track the stock.
d.) New products: People are keen on new products. Look for products that people will have difficulty finding in physical stores. Follow the trends in different countries. When you encounter a new product, can it be sold in the target market? What should sales strategies be followed? Investigate all of these.
2.) Create Your e-Store
To sell your products, you must open an e-store. There are many e-commerce compatible integrated e-store brands. Create an e-store that can integrate with B2B and B2C systems, such as Shopify, WooCommerce, with stock and sales management options. For sales, use not only the store with your own domain name but also e-marketplaces, try to open a store in popular B2Cs, for example, Amazon.com
3.) Shipping cost
Shipping costs, trouble-free and express delivery are important for online trading companies to offer their customers alternative delivery options at different prices. Problems experienced in the cargo may cause you to lose customers; therefore, the cargo company’s selection that provides services is as important as the selection of the supplier.
4.) Create your own brand
Dropshipping means that you sell products currently produced by a company from their stocks. Branding in this business model is complex. However, there are many manufacturers specialized in private labels. After the order, you have received, if there is time for processes such as branding, re-labeling, and packaging, and if the product group is available for this type of operation, you can sell with your own brand.
Branding can enable you to develop a different pricing policy than your competitors and create a loyal customer base for your brand. Still, it is difficult and risky to make branded sales with dropshipping.
e-Marketing replaces classical marketing as e-commerce becomes widespread. If you own an e-store, you should determine how internet users can find your store, how you should promote your brand and products, and how much you have to do so. Advertising on social media, advertising on search engines such as Google, Adsense are issues you should prioritize.
Use Google’s Keyword Planner and Trends to check some general search terms related to your potential products. Work with e-marketing professionals to promote your products and site. Use social media channels effectively, do not neglect classical methods such as e-mail marketing.
When you start doing dropshipping, you will find that you have a large number of competitors trading differently. Retail stores, e-traders, e-stores, e-retailers, dropshippers, etc … You will have big competitors who have managed to become a brand in online shopping.
Competition in e-commerce is difficult because you are not in a street or shopping mall, so you are not just struggling with competitors in the same neighborhood. You are trying to sell the same products at the same time with millions of companies selling online. But you also have the advantage because there are millions of potential customers who shop online. The key to competition in online commerce is that you can be successful with effective marketing tactics even if you have a limited budget.
7.) Work with Reliable Suppliers
The biggest risk for dropshipping is the problems you will have with your supplier. You have sold the product, but your supplier cannot ship because they are out of stock, or your supplier is delaying shipment; worse, the wrong products have been shipped. Our first recommendation is to work with multiple suppliers producing the same product, track stocks, use software integrated with your supplier’s system.
8.) Gather Information
Gather Information about dropshipping and your competitors. There are easy ways to do this. Follow customer reviews of competitors, follow what is written about your competitors on complaint sites, follow what is written about your competitors on blog sites, forums, and social media. Remember, some of what you read in all these channels may be things created for your competitors’ PR work, marketing, and advertising. But an important part is user experience. Gather Information, analyze it.
9.) Customer Acquisition
You have an e-store, integrated purchasing system, and competitive products. In fact, the hardest part is selling. It would be best if you used effective e-marketing strategies to reach potential customers.
Using social media channels for e-marketing allows you to generate sales and revenue that can contribute to rapid scaling. In this way, you will have the chance to compete with big brands and retailers that have a much more marketing budget than you. Sometimes an influencer video or an Instagram post can change a lot at once. Internet is different from conventional media; you can accomplish big things with small budgets.
10.) Analyze and Optimize
You need to collect all the necessary data and data to grow your business. Analyze your data, including Google Analytics traffic and social media conversion data. You need to identify where the customer comes from, which keywords or ads attract customers to your store, and which lead to a purchase. This data allows you to create new sales strategies and understand which methods work.
- Drop-Shipping offers the opportunity to start a business with low capital and low risk.
- Drop-Shipping business, no storage required, no stock costs
- If there is no marking and repackaging, there are no costs such as packaging or packaging.
- If your customer is making the shipment, there are no shipping costs.
- Since there is no pre-purchase and stock cost, it is possible to work with many suppliers at the same time, storage areas are not required, and many products can be offered for sale at the same time as physical space is not required.
- With the dropshipping business, you are dependent on the supplier’s capacity and reliability in every aspect, such as the quality, packaging, and delivery processes of the products sold.
- If you are doing dropshipping, the product is not in your inventory control.
- If the products you sell are not in your supplier’s stock and there are delays in shipment, you will lose customers, and the company image may be damaged.
- Working with dropshipping makes branding difficult. Many issues required to be a brand are beyond your control.
- Dropshipping business requires working with low-profit margins due to competition. All expense items such as bank commissions, shipping costs, costs arising from returned products affect your profitability.