Karunesh worked as an intern at an eCommerce agency. He was struggling to understand the concept of dropshipping. He researched about it and read numerous articles but to no avail.
Then Shruti saw him struggling and offered to help.
Let us see what insights she offers for Karunesh to understand and grasp the concept of dropshipping.
The what’s, the who’s?
Dropshipping is a concept of retail fulfillment for online retailers where merchants buy goods from outside suppliers as customers place orders rather than keeping inventory in storage. After that, the merchandise is delivered right to the customer. In this manner, the seller is relieved of direct product management.
A manufacturer or supplier who manages inventory for a retail merchant and sends orders to their customers is known as a dropshipper. Since the merchant is mostly in charge of bringing clients to the business and handling orders, dropshipper essentially acts as a middleman. Despite this, by adding a markup to the things you sell, you will make the majority of the money. It’s an easy business strategy that has the potential to be incredibly lucrative.
What it entails
Dropshipping is a method of fulfilling orders with the aid of a third party, such as a wholesaler or an online retailer who offers the product for even less money. Because most goods are extremely inexpensive in China, the majority of dropshippers get their merchandise directly from Chinese producers. A dropshipper will offer a product for $8 and pocket $3 of the sale if the wholesaler’s price is $5. The majority of dropshippers focus on nations with more purchasing power.
The Perks and liabilities
- Reduced start-up costs; You won’t need to spend much money hiring employees, stocking inventory, or renting a store if you run a dropshipping firm. All you require is an internet storefront from which you can lead consumers and do business. This online store may be located on your website or well-known e-commerce platforms like Amazon or Shopify.
- Simple to begin; When you don’t have to buy, keep, and provide things operating an online store is significant. In as little as 15 minutes, you may set up an online store. It can take a few extra days to set up the background procedures such as receiving and processing orders, forwarding them to the supplier, and accepting and processing payments. However, beginning a dropshipping business is far simpler than opening a physical retail location.
- No inventory control; You don’t have to bother about keeping an inventory or managing shipments and returns when you dropship.
- Competition; The dropshipping industry faces intense competition due to decreased entry barriers. You might compete with dozens of companies that sell the same thing. You need to concentrate on things like the customer experience to stand out because a product cannot be a differentiating element.
- Little control over transportation and inventories; You have little control over a product’s availability or its quality because the supplier is in charge of keeping stock and shipping orders.
- Small margins; The margins for dropshipping enterprises are quite low due to the intense market competition. To produce a good profit, you must operate on volume.
Many international shops use the well-liked fulfilment strategy known as dropshipping. Like with any business, long-term success still depends on meeting consumer expectations and creating a brand that appeals to the correct market.
Businesses that dropship serve as product curators by choosing the ideal assortment of things to sell to clients. Keep in mind that marketing is an expense you expend to assist potential customers in discovering, evaluating, and purchasing the correct product.