Dropshipping has become more and more important as part of ecommerce in recent years. Due to the low entry barriers, it is particularly interesting for part-time jobs and for young people. The following article first clarifies the question of what dropshipping is with a definition. The article then explains how dropshipping works and how you can find dropshipping products. Then it is about the costs and risks that the dropshipper can face.
Definition of dropshipping – what is it?
Dropshipping is a form of e-commerce in which the retailer has no inventory. This means that he buys and sells goods without storing anything, i.e. all orders are fulfilled by third parties if necessary. The dropshipper simply acts as an intermediary between customers and manufacturers: when someone buys a product from them through their website or other online interface, the retailer sends the items immediately after receiving payment for them. So, to put it simply, dropshipping is a way of selling something that you don’t have in stock. You just buy it from the person who has it.
How does dropshipping work?
To take advantage of this business model, you need some knowledge of marketing – especially if you are new to new customers via social media (e.g. Facebook) or with Google Adwords campaigns in search engines like Yahoo! Want to address Search or Bing Ads. Also, you need to know how to use a payment processor like PayPal or Adyen and some website development basics. The latter is necessary so that customers can buy your products in the online shop.
Dropshippers can either be entrepreneurs with experience in marketing, sales and logistics who want to open an online shop for this purpose (local or international), or individuals who experiment at home with different products that they surf on Amazon or find other websites looking for new things that can be resold for profit. It is usually not necessary to invest more than a few hundred dollars in starting this type of business unless there are manufacturing issues such as: B. Importing goods from overseas manufacturers such as China, which incurs duties and customs fees.
How do you find dropshipping products?
If you already have a product idea for your shop, the next step is to look for suppliers who can make that product and sell it at the price point you want. When searching for manufacturers online, there are many places one can go to to do this: Alibaba – which has over 75 million registered members; eBay’s Global Products directory; or Google Shopping (with more than two billion shopping results). After identifying potential partners using these tools, it is important to contact them personally through their website or email to negotiate shipping costs and other terms before placing an order with them. For example, if they are across oceans from you, they will most likely charge higher shipping costs
There are two ways to find good products for resale as a retailer: either by searching on marketplaces like Amazon (which takes a lot of time) or through individual sales channels such as Alibaba in China. Another option would be to use an app like Oberlo that will find suitable suppliers depending on the type of goods you are interested in
What are the risks of dropshipping?
The main risk associated with this model is competition: by the time you start out there will likely be a lot of other retailers out there who are dropshipping as well. This means that you will have a hard time getting your company known and attracting new customers. The second risk is the fact that if a supplier doesn’t deliver, it will be difficult for you to find another reliable source
What are the costs?
Dropshipping can either cost money or not, depending on the type of business model you choose:
- If you are purchasing products from an overseas manufacturer, shipping will most likely be expensive due to duties and taxes; in this case it would only make sense if you try to resell goods domestically.
- If you sell locally made goods then the shipping costs will be minimal.
As a dropshipper, you also need to invest in marketing campaigns (Adwords, social media) and website development. In addition, there are duties and fees when you import products from overseas manufacturers into the country – these can quickly add up if you want to resell the goods domestically. Local manufacturing is much cheaper in this regard
Conclusion:
Dropshipping is becoming increasingly popular as part of e-commerce as the barriers to entry are low for part-time businesses and young people. The following article first clarifies the definition before explaining how this type of business works. It then discusses the risks that may arise from having one dealer out of inventory or another supplier being unable to deliver, and discusses cost considerations such as marketing and website development.