Drop-shipping is a system by which you offer something for sale but don’t actually have a physical inventory to get the item from and sell. Instead, you have a contract with one or more companies who will actually package and ship the item on your behalf. It is easier than it sounds. But not too easy;)
How Dropshipping Works.
- You get orders in your store
- At a set time, on the day you report the orders to your dropshipping provider
- You pay the drop shipper with the money you just got off of your customer
- Your drop shipper handles the order
- Processes your order
- Finds the products in his stock
- Orders new products when stock runs out
- Packages the order
- Adds an invoice with your name (sometimes logo too) on it
- Ships the package to your customer, often internationally as well
- You go drink some tea
There are three elements of Dropshipping:
- Webstore: Your products need a home. The website is the functional part of this whole system. It’s what your customer sees, never knowing or caring what happens behind the scenes.
- Supply Chain: Your products need to come from somewhere. In the past, you needed to stock up on products from a supplier before starting your website, resulting in high investment costs. Well, there is a new game in town preventing such a situation (hint: you won’t even have your own stock).
- Marketing: What good is a website if nobody knows about it? There are many tactics to promote your website and we’ll run through some of the most successful ones.
Advantages of Dropshipping Business :
- No Risk: As a drop shipper, you don’t manufacture physical products, and don’t have to work manually. At the same time, you spend no money on buying items for reselling. Plus, you don’t have any extra costs related to renting a warehouse or an office and hiring staff. Even if your business doesn’t work as planned at first, you don’t lose money or reputation.
- Minimal Effort: Drop shipping, in turn, doesn’t demand you to invest all your time and efforts in the store management. It works quite the opposite way: with dozens of automated solutions, you can complete the majority of tasks automatically and save enough time for the things that require your personal attention and individual approach (most importantly, customer relations management).
- Making Money from Hobby: The same is true for your current hobbies that you love and enjoy: if you like sewing, or dedicate your evenings to the drawing, or adore pets’ grooming and training, you can definitely create a store aimed at like-minded people with the same interests. You work with something you’re really passionate about, so you are highly motivated to keep going even if something doesn’t work out at the beginning. You know the niche really well, so it’s easy for you to pick the most appealing items for your store and follow the most recent and relevant market trends.
- Helpful Guidance: Drop shipping business is quite young. Still, the experience and knowledge accumulated in the industry are already impressive. People who already tried drop shipping are willing to share their business journeys and smart tips on thematic forums, and it gives you a brilliant opportunity to interact with proficient businessmen to learn a trick or two. Plus, there exist enough educational materials and even guides to help you sort out anything you don’t know yet. You can even opt for video tutorials if you prefer this form of learning.
- Learning from the best: On the one hand, it’s quite mature already: successful entrepreneurs share their business stories, so you can take a look at some real-life examples and understand what you can expect from drop shipping and what is its potential. On the other hand, this business field is not overly saturated yet; as for now, this model is mostly tried by people from well-developed countries with unlimited access to the Internet. This is why it’s safe to say that drop shipping still has a huge potential for growth, especially in the emerging countries. And this is why it’s so important to get involved in business NOW
- Expanding your Skill Sets: Even if you decide to quit this business in some time, you won’t be left empty-handed. Apart from all the money you’ve earned, you’ll have something even more valuable: knowledge and experience. When you do drop shipping, you eventually get a bunch of priceless skills that can come in handy for your regular full-time job. These skills include social networks management, digital marketing in general, customer relations management, website performance analytics, and many others.
- Unlimited Growth Potential: This is the year 1999; Jeff Bezos, the founder of Amazon.com, has no idea yet that he will build an unprecedented e-commerce empire and become the richest person of all time by 2018. Having started from scratch, from launching a really basic online store, he became a role model and inspiration for thousands of people all over the globe who explore the opportunities of e-commerce.
This is not the only story of this kind; Tony Hsieh, the founder of Zappos, also had a simple drop shipping store at the beginning of his business journey. Look what he managed to achieve!
- Thousands of Vacant Niches: As we have already mentioned, drop shipping business is still staying at the growth stage. Technologies and automated solutions for its smooth running emerge every year, and new exciting products and product categories appear daily. The point is, if you use AliExpress as the core platform to find and pick suppliers, you have over 100 million items to choose from – this lets you create a unique product offer and explore a highly specific product niche that is not taken by anyone yet.
- Fortunate Growth of Manufacturing Technologies: Speaking in simple terms, it means that the more you produce, the lower are your production costs. Since technologies and machinery are evolving rapidly, it becomes more and more profitable for manufacturers to produce items in huge amounts, and the price for this items gets lower gradually. This means that you can find great items on AliExpress for a fraction of the cost, and as the result, you can increase them several times after adding to your store – your buyer won’t notice the difference!
- Information Technology Boost: With the rapid rise of various information technologies, transport infrastructure and logistics services, you as a drop shipper get unrivaled opportunities to meet effective demand on the markets that were previously unavailable in terms of their geographic location and/or Internet penetration, devices affordability, payment gateways availability, etc.