When starting an eCommerce business, dropshipping strategy is advantageous for beginners. It helps you begin with a small amount of capital. Plus, it won’t require you too much equity. Therefore, you have a better chance to scale your business. In addition, you can allocate your budget for brand building and advertising.
Dropshipping
Dropshipping is a business strategy that calls for a third party to store and ship products for you. A customer orders on your online store. You will notify your supplier to fulfill the order. They will stock your items and pack and ship the ordered goods.
With dropshipping, you need to reach a common ground with the dropshipper. The success of your eCommerce business depends on your agreement. For example, you choose to sell printed t-shirts. Before posting any design photos, ensure your drop shipper can deliver them. So every time a customer places an order, you will forward it to your dropshipper. Once payment is made, they will start working on the shirts. Afterward, pick and ship it based on the customer’s address. However, you will be charged for the printed shirts and dropshipping fee. That’s why you must know all the necessary expenses beforehand. So you can price your items with profit before posting.
Dropshipper
A dropshipper is your supplier or manufacturer of goods you sell online. It is responsible for the inventory management of any retail merchant. In addition, it covers the shipment of orders made by their customers. Basically, you are only responsible for attracting buyers to your online store. You drive the traffic and order processing. In other words, you are a retailer or a middleman. Meanwhile, the dropshipper will do the remaining work for you. It is like reaping the lion’s share of profit by simply marking your items to sell.
The Dropshipping Process
The dropshipping process is a kind of order fulfillment. You will sell your products without worrying about storage inventory as a merchant or retailer. Here is how it works.
Agreement between the merchant and dropshipper
As a seller, you look for manufacturers or suppliers open for dropshipping. Then, you discuss the information about the production and shipment to complete a single order. Then, you display the goods you want to sell in your shop. Finally, you may ask for photos of the products from the dropshipper. Take note that these items are within the scope of your chosen dropshipper.
The customer places an order.
With a fully equipped online store, customers will flock in. Some will inquire first, while others will place an order immediately. Provide all the needed details or give relevant images. Whichever happens, what matters is that you give attention to your potential buyer. Then, accept the order, which will notify the customer that it has been confirmed.
Your shop forwards the order to dropshipper
Once an order is in, you notify the dropshipper. It includes all vital details like the customer’s name, address, and contact number. Also, your drop shipper will receive the product type and quantity.
Dropshipper prepares and ships directly to the customer.
With the correct information about the new customer order, your supplier will ready it for you. It includes picking, packing, labeling, and shipping directly to the buyer’s doorstep. All you need to do is track the package’s transit until the customer receives the product. You may contact your customer when their goods are in their hand. Give final instructions about the items or ask for feedback. Then, that’s it. You have completed one dropshipping transaction.
Dropshipping is a cycle, and each party plays a crucial role in accomplishing an order.
Dropshipping Benefits
Dropshipping is the best choice for first-timers in the eCommerce business. Let’s show you the reasons why.
Easy to set up
Setting up your eCommerce with dropshipping does not require you to be an expert. Even if you are a newbie, you can manage it. Just learn the basics and adapt as your business grows. Your start-up business costs are low compared to another business strategy. There’s no need to rent the warehouse and hire staff. Plus, paying for your inventory only applies when an order arrives.
No inventory problem
One of the best perks of dropshipping strategy is the lack of keeping inventory on hand. As a result, you will not struggle to find the best warehouse space. More so, you have no liability in keeping products safe and secure. Finally, as a result, you can spend your funds on other resources and marketing.
No shipping struggles
With dropshipping, product shipment is the least of your concern. This endeavor falls under your dropshipper’s responsibility. Therefore, you will have no trouble with packaging materials, the packing team, and shipping facilities. However, you will be charged the drop shipping fee.
Minimum to no loss
Without the inventory under your supervision, losses are close to none. You are not responsible for ordering new stocks. It prevents you from reordering too many or too few products. As a result, you only purchase goods needed to cover all the customers’ orders.
Low risk
Dropshipping is advisable for beginners, especially when testing the waters. Let’s go back to our example earlier. If you are still unsure of the t-shirt design, it’s best to check which style your target market will love. Don’t jump into one design without studying all aspects. Don’t trust all your eggs in a single basket. Although ordering per unit is more expensive, the financial risk is minimum.
Dropshipping Challenges
Although drop shipping is a practical strategy for first-time sellers, there are still drawbacks you need to be aware of.
Slim margins
Since you are still starting, having low margins is reasonably expected. It doesn’t mean choosing dropshipping is non-profitable. It is, but you have to learn your product margin. Research, and you will notice that some niches are smaller than others. On the other hand, some are over-competitive. It means you must fight tooth and nail to gain customer attention. Do your work and pick the most suitable moneymaking products to reach your target audience.
Minimum quality control
The lack of interaction with your inventory means you have no actual control over them. Also, you don’t have a personal touch on order fulfillment and shipping. You depend solely on how your dropshipper will work to deliver your brand seamlessly. It is challenging and tricky, especially when something wrong comes up. It’s like how you can appease your unsatisfied customer if it is not your fault first-hand. You can mitigate the situation but not the damage itself.
Challenging customer service
Order processing, fulfillment, and shipping are out of your hands. You’ll face irate customers when a delivery fails, or the product gets damaged. Since you are the shop owner, you have to handle them even though it is not directly your fault. With dropshipping model, you and your eCommerce business take the blame. And it ruins your name and brand’s reputation.
Dropshipping aids in paving the way for your business. However, lowering your product price is not highly advisable with a saturated marketplace and competitors. That’s why sticking to dropshipping for a long time will lead to high costs of goods. Once you reach your target product market, you can adapt a different strategy. For example, you may opt for a 3PL service offered by Red Stag Fulfillment Center.
