Dropshipping is a supply chain management method in which the seller accepts payment for an order, but the customer receives the product directly from the manufacturer warehouse. Dropshipping is a process of selling products without having to stock or store any items and the seller acts as a middleman between the manufacturer and the customer.
The Early Days of Dropshipping–
It was AliExpress that made the term “dropshipping” popular way back in 2006 in the United States. As the prices of the China made products were lower, most of the business owners launched their stores and promoted their products on AliExpress. Since then, this business model becomes a huge hit. Many renowned stores all across the USA and Europe are prospering under the dropshipping banner, and search for marketing platforms that make dropshipping easy for the users.
The Profit Equation of Dropshipping–
According to Fit Small Business, you can predict your income using these variables (they’re averages, so they’ll change depending on your industry and situation):
- 20% margin
- 2% conversion rate
You can then calculate a working estimate using this equation:
(Traffic x 0.02) x (Avg order value x 0.2) = Profit
Why is Dropshipping So Tempting?
The idea of selling products without having to stock inventory or worry about shipping appeals to many, especially to the new business owners.
- There is no headache of maintaining employees, no overhead cost to bear and no need to waste money on warehouse charges. You sell other people’s goods and take a cut for yourself.
- Looking for quick and easy money, lots and lots of people launch their own dropshipping store and commonly start working in the same business areas.
- You don’t have tons of money tied up in inventory that potentially might not sell. You only buy a product if a customer has already purchased it, in which case, you’re already guaranteed some sort of profit margin.
- As the majority of the extra work falls on your suppliers, it is absolutely easy to scale your dropshipping operation.
Dropshipping is a very successful way of selling China wholesale products online especially for the first-timer looking to take that leap and start their own business. In order to make your dropshipping business successful, you need careful planning and implementation of contact between the seller and the supplier.