There are so many gauche articles written online about dropshipping, but how many of those articles can really help you learn about what dropshipping is really about? How many of those articles are accurate and not paid? How many of the things you read online are just there to sell you something without providing value? In this article, we will try to address that issue. We will tackle the different and essential, and at the same time elaborate practical information that you need to know about dropshipping. Don’t worry. We will try to make it short, so you don’t get enervated just by reading it. Sounds good? Let’s get it started.
Part 1: Understanding Dropshipping
You may find it hard to understand dropshipping just by reading a textbook manual about it. You could even be wasting a lot of your time because most of the content in those books could just be noise. Distracting noise. It could be noise that’s even deleterious to your health. So let’s make things a bit simpler.
First, dropshipping is a method in the retail business where a store outsources the storage of the products they sell. A store doesn’t have a storage of all the products in their company. They’re paying another store to contain the products for them. That paid store keeps the stocks for a fee, and when a customer orders a product from the seller, the seller just contacts that drop shipper to directly sell the product to the person ordering it. So the system goes simply like this: a person orders an item from the seller, and a third party ships that product to the customer, making the seller free from storage baggage. It’s one of the many ways that the seller can save money on overhead and operations costs. As a result of this system, the product never gets in the hand of the seller and goes directly to the buyer. Sounds simple enough, right?
Second, the one distinct trait of having a dropshipping system for a retail business is that the owner no longer needs to keep their own inventory. They just have to pay the third party the amount of storage they needed. This way, the seller doesn’t need to worry about inventory costs. Delivery is also covered by the third party. It’s the perfect cost-cutting technique. It’s one of the most effective strategies of a business to cut their expenses.
Part 2: The Benefits of Dropshipping
There are multiple benefits of using drop shipping for one’s business. One of them would be the fact that the business now requires less amount of capital. With dropshipping, anyone can now start an e-commerce store and not worry about the extra storage costs. Usually, when you start a business, you need to acquire a lot of money just for the storage of your merchandise. This is one of the big challenges of starting a business. One needs to get thousands of dollars first just to acquire the right capital to purchase inventory for the merchandise. With dropshipping, this is no longer the case. No more worrying about loaning money for such costs. No need to add an extra burden to the businessmen. No need to actually waste money on overpriced inventory system.
Another benefit of drop shipping is that there’s more guaranteed payment system. This type of model doesn’t require you to purchase the product you’re selling unless the buyer has actually paid for the product. This is a way to secure payment and guaranteed sales. This saves the business of buying products that don’t actually get paid. That said, it might even be easy for anyone today to start their own drop shipping business even with little money needed.
You’d also get the benefit of Easy Start-up with the help of dropshipping. When you want to start your own business with limited budget, dropshipping could really make a whole lot of difference to your income. With a good dropshipping system, you don’t have to worry about a lot of business elements. First of all, you don’t have to pay a warehouse for your products. You don’t even have to worry about packing and shipping the orders for your clients. There’s also no need to worry about tracking inventory for the merchandise in your business. No need to worry about any accounting concerns. That’s a lot of relief for any type of business, isn’t it?
With drop shipping, you could also have a better handle on the inbound shipments and returns for your business. There won’t also be any problem for you when it comes to managing the stock levels of your business. This all means that you have a low overhead cost for your business. As a result, your profit gains, and your costs get lowered. How neat is that? Isn’t that something that all businesses want?
Because of this, there’s little wonder why many businesses today start a dropshipping home straight from their home. That’s one clever way of earning money!
Also, even if you have a dropshipping business, you could still end up paying a lot for the third party. However, this cost is still lower compared to getting your own storage for your products. Traditional brick-and-mortar infrastructure would also be more costly than dropshipping simply because you not only pay for the storage, you also have to pay for employees. Drop shipping doesn’t have this issue.
Another good thing about dropshipping is that you can just start it wherever you are. Wherever there is solid connection in the internet and cellular phone, you could make a start-up with a good dropshipping business. You can even transfer your business wherever you are, which makes it very flexible for your operations.
Another big advantage of dropshipping is the fact that you can use the strategy for scaling your product. Generally speaking, when you scale your business, you receive three times the normal order you get. When you do, you need to do a lot of extra work for this. By leveraging the solutions from a dropshippng business, you can still continue doing business without worrying about having the manpower do so. Because the extra work will be covered by the suppliers, you can concentrate more on the other parts of your business, including tending to customer service issues in your brand.
With all these things said, you can understand how dropshipping can become a reliable way to do and expand one’s business without spending a lot. However, all of this comes with a price. What are the disadvantages? Read on.
Part 3: Disadvantages
One of the prominent disadvantages of having a dropshippng business is competition. Since many people can now start their own dropshipping business, there’s now a lot of service providers to choose from. Anyone can now start an e-commerce site. Anyone can now sell an item online. When this happens, there’s now a lowered profit margin for the sellers. This forces the sellers to lower the prices of their products because there are so many options for the potential buyers. In order to offer a better rate against the competition, the seller would need to lower their prices and profit margin almost against their will.
Tracking inventory could also be a challenge in dropshipping. Because you as a seller have a lot of sources for your merchandise, you might be having trouble tracking down where you all got your products. While there are ways to circumvent on the situation with online tools, you still would need a lot of time and effort to do so. In a traditional inventory system, you can just see all the merchandise you have in your own garage or storage place. That makes for an easy inventory.
Part 4: Supply Chain and The Delivery Fulfillment System
The supply chain is just one of the fancy business terms that mean the process that the products get delivered from manufacturer to the seller until they get into the hands of the customers. So how does the supply chain work in the dropshipping industry? It starts with the manufacturers. The manufacturer creates the merchandise, but they just keep the products in their own storage. They usually don’t sell the product themselves. What they want is to sell their products to retailers and various wholesalers. It is then the duty of these secondary buyers to deliver the products directly to the customers.
As an aside, it may be useful to say here that sellers of merchandise can save a whole lot of costs when they directly buy from the manufacturers. When they do that, they can get a better cut for their business. However, most of the manufacturers require minimum amount of order to make up for the production costs. This requires the seller, too, to store the products in their own storage house, which offsets the benefits they got from the storage savings.
Part 5: How The Dropshipping Order Works
The first part of getting order through dropshipping is that a customer places an order through a system of the e-commerce website. When the order is approved, the seller who owns the ecommerce website alerts the dropshipper to deliver the product to the buyer. This is an oversimplification, but the simple system is that the order is transferred to a third party, which does the actual delivery of the product. Another aspect of this delivery process is that the drop shipper is totally invisible from the delivery process.
The system makes it appear that the delivery is directly from the seller itself, and not outsourced to a third party. What the dropshipper actually does is just keep the merchandise that is being ordered by the customer through the seller. The dropshipper already covers everything else in the business, which includes marketing and the development of the product is already acquired by the dropshipper.
Important Things To Consider When Involved In Dropshipping
Before you finally decide on starting a dropshipping business, you should know some of the important notes and tips to consider. One of the first ones would be to know whether the manufacturers of your dropshippers are legitimate. Most of the suppliers could not even show a record of their previous clients.
It may also be necessary for you to check on the manufacturer yourself. If possible, you could go to the dropshipper or manufacturer and see what their office is really like and how their operations is going to be. It may also be necessary for you to check the previous clients of the dropshipper. If their records are great from their previous clients, then it’s all a good reason to trust them with your business.
Another good tip that you should remember when deciding which dropshipper to pick is whether the one you chose is not a fake supplier and is just about to scam you. Some of the dropshippers who pretend to be so may probably just be middlemen who want to earn a profit without actually creating the structure for a drop shipment.
There are many ways you can weed out the type of dealers and dropshipper-wannabes from your list of choices. For one, if the dropshipper is trying to charge you with monthly fees just by doing business with you, then chances are that it’s not a legitimate business.
Another thing you should make sure, too, is whether your supplier is actually a dropship supplier or just a supply directory. Supply directories may be actually charging you a little for the information that they provide you, and that fee isn’t necessarily a sign that the business is illegitimate.
There are legitimate dropshipping fees that you need for your business to operate. The first fee would be a Per-Order Fee that you have to cover as a seller. This would go about $2-$5, depending on the size and the difficulty of delivering the packages you ordered. There would be more fees in this regard if you’re trying to ship for a bulk order or you have other special requests in your shipment.
You should also remember about the dropshipper’s minimum order requirement. Missing that requirement may invalidate your order and could cause delays in your shipment. It’s also important to talk to the dropshipper, too, if you could negotiate the minimum order that you’re making, if you promise to have a recurring order from them. The reason they have a minimum requirement for the purchase is to simply weed out the window-shoppers out of their list. These window shoppers could be asking a lot of questions without actually translating into a good sale. Knowing the minimum order is important because not agreeing with the right order could mean a waste of a lot of opportunity costs. One example of a problem about this regard is when you regularly just want a $100 order from a dropshipper but the dropshipper requires $500. You don’t want to buy a lot of orders just so you can open a dropshipping account with the manufacturer, right?
One good solution for this problem is to build a pre-pay account with the dropshipper. It’s a sort of a down payment for orders that you’re going to make later. For example, if you pay $500, and your first order is only $100, then you still have a remaining credit of $400, which you can redeem later on. You can’t just assume that the dropshipper offers a set-up like this. You have to talk and negotiate with the dropshipper. Don’t worry. Most dropshippers are very open minded when it comes to issues like this. Besides, they want to build business with you, don’t they?
Part 6: Finding The Right Suppliers That Fit Your Business
Now that you’re able to find now the right system to weed out the fraud and the hoax from the real suppliers, it’s now time to scout the right dropshippers for your business. How do you do that? Well, my friend, tap the ominous power of the internet! There are many ways to do this, but one initial strategy of doing this is to contact the direct manufacturer yourself online. Call them. Talk to the owner. Use your salesmanship skills. Ask for their listings. Ask for discounts and other ways to save on costs.
Another good way to get the good deals from your dropshipper is to ask for the complete list of the dropshipper’s wholesale distributors. Doing so makes sure that you have a back-up account in case you want to contact the wholesaler and ask for extra supplies.
When you’re looking for the best suppliers online, it’s a no brainer to use Google. Searching for suppliers via Google may not be as simple as it appears. Why? Because manufacturers are not really masters of marketing. They don’t really know how to put themselves out there. They can’t be searched online. They won’t even be able to promote themselves in various social media. This is the reason why you have to search extensively. This is the reason why you have to pick various sources for your search. Use Facebook. Try to use Google Plus. Access Facebook Pages of various suppliers to know what their new products are. This also means that you have to dig deeply in the pages. It might even be necessary to send a few messages to the owner of the Facebook pages of the distributor. You may even need to get a Skype Chat with the owners. In fact, the supplier you need who can dropship your products could only be found at the Page 67 of Google. If you don’t dig up that deep, then you might not be able to find the right manufacturer for your niche.
You should not also be put off by manufacturers’ websites. Sometimes they’re atrociously designed. Sometimes these manufacturer’s home pages have gauche writing and kitsch color palette that you almost can’t stand it. Don’t worry. You’re not doing business with the website. You’re doing business with the manufacturer or the owner. Just because it’s not the strength of a manufacturer to create a website doesn’t mean you can’t rely on their products. Don’t judge the book by its cover, they say. Don’t let a manufacturer’s poorly designed website turn you off.
You also need to make sure that you specify your queries. Sure, you can type “manufacturer of baby diapers” in the Google Search, but some of the manufacturers don’t know SEO and they’re not able to make their products searchable using your keywords. That’s why you have to be more specific with your searches. Add keywords like, “reseller”,”supplier” and “distributor” in your searches to narrow down the results of your searches.
Another clever trick that you can do to find the best drop shipper for products in your niche is to do the Order From Competitor Approach. Here’s how it works: you go to your competition, order from them a product then when their delivery arrives to you, search the dropshipping address and Google search it for you. Generally speaking, the supplier you can find will be somebody that you can easily contact. This is already a tactic that many people have used, and it’s effective because if the competitor is acquiring the dropshipper’s service, then the dropshipper is probably one of the greats out there. If you already tried all the other supplier searches techniques out there, then it might be a bit worth it to use this strategy. There’s also a good reason to use this tactic when you have so small of a market in your niche to justify the existence of a demand. Keep this tactic on mind, but try not to make it your main strategy.
Another interesting strategy to find the right supplier for your niche is to attend trade shows. These trade shows exhibit all the new products and platforms out there that can offer you drop shipping solutions that you couldn’t find online. A trade show enables you to connect with a network of suppliers that can get you the best services and products there are in the market. This strategy, by the way, can only work when you already have decided which niche you’re going to pick for your business. This may not work as a good strategy for those who are still deciding what niche to pick. These trade shows could also require you to shell out a bit of a fee. However, if you have the time and resources to attend to these shows, why not give it a try? You might find something in them that you couldn’t find by just doing a simple search online.
Summary And Conclusion
Did we just cover all the essential information about drop shipping? Maybe. Or maybe not. There is probably more information you need to know about drop shipping than there is time for you to read them. You’re probably already enervated from the info overload we just offered you here. Don’t worry. You can always read it again and keep the article as a cheat sheet should you need a reference later on.
That said, we hope that you learned a lot from this article about what drop shipping is all about. We also hope that you’re now able to either start your own drop shipping business or find a good supplier or manufacturer for your e-commerce today.