Dropshipping, in a nutshell, is a business model whereby an online store doesn’t own the inventory it sells. Instead, when a customer places an order, the store purchases that item from a third party that will then ship it directly to the buyer. Put another way, the online store is a middleman, taking orders from customers, which it then forwards to a supplier or manufacturer to fulfill on its behalf. When adding new products to your range, the risk of not selling is always in the background. Using dropshipping suppliers means that when you decide you want a product on your site, you can start advertising almost immediately.
Since you don’t stock the product, you don’t pay for it until it’s sold you can greatly increase your cash flow by selecting dropship manufacturers. You only order products from your dropshipping suppliers once a customer has purchased them from you. This means you’ll never need to worry about storing your inventory, and you can focus on attracting more people to your store. The biggest difference between dropshipping and the standard retail model is that the selling merchant doesn’t stock or own inventory. Instead, the seller purchases inventory as needed from a third party—usually a wholesaler or manufacturer—to fulfill orders.
Dropshipping is a straightforward business model that requires store owners to work closely with their distributors, ensuring a seamless supply chain and keeping the behind-the-scenes hand-offs out of sight from the customer. A dropshipping supplier service should be able to provide e-commerce business owners with high-quality products at a reasonable price. They should have a solid plan for handling customer service and should be able to ship products on time. This is why it’s very important for any business owner who’s interested in using dropshipping services to spend time researching providers.
For example, if you own a dropshipping store and someone orders a product from your online store you are responsible for ordering that product from your wholesaler. On top of that if they return the product you’ll be in charge of processing that as well. On the other hand, if you are selling a product as an affiliate and someone buys a product from you, they are responsible for shipping the product, processing any returns, and paying you the commission.
Both traditional and online stores often require a hefty financial investment to develop, manufacture, and source products. Additional costs associated with stocking inventory, maintaining a physical presence, staffing locations, and marketing to new customers can really add up! Dropshipping is a great way to start making money online, but it’s not always easy when it comes to balancing costs and profits.
Dropshipping has a much lower barrier to entry because you don’t have to worry about developing new products or purchasing and storing inventory. There are no existing laws barring anyone from running a dropshipping company. Depending on the country, however, some regulations govern how such activities are run. For people who dropship between online platforms, there are also a few additional regulations for each website.