What is dropshipping?

In recent years, the term dropshipping is more and more common in entrepreneurial circles, forums, and articles. However, most people need to become better acquainted with it and know about the possibilities it provides. We at AffiliateNinja.Co decided to prepare this material with a detailed infographic to help those new to dropshipping and those needing clarification on explanations and definitions of what dropshipping is.

What is dropshipping?

Wondering what dropshipping is? This is a trading model. But before we get down to it, let’s take a look at the traditional model:

A shop owner sells his goods on his premises to his customers, monitoring the stock of goods in the shop every day, keeping a diary, sending orders, and receiving goods at a lower than market price.

Dropshipping is similar. As a store owner (virtual), you sell products to your customers (and, more precisely, visitors). The difference is that you do not keep the product in stock or stock but place an order with the manufacturers after the customer’s purchase has occurred. The manufacturer or supplier is responsible for the product’s manufacture, packaging, and delivery. But like any business model, this one has its advantages and disadvantages.

What is dropshipping, and what are its benefits?

Not much capital required  – This is one of the most often cited benefits of dropshipping. In the traditional model, merchants have to invest upfront in a commodity to have at their disposal. However, with dropshipping, you order the product after a purchase has already been made by the customer online. You don’t need to invest thousands in a product to get started. You only need working capital to keep the business running.

Greater selection of products  – When you don’t have to purchase the product in advance and keep it in stock, you can offer more products.

Mobility  – The advantage that attracts many young people is that you can run your business from anywhere there is an internet connection. You only need to communicate successfully with customers and dropshippers.

Reduced Risks  – If the business doesn’t take off for some reason, you don’t risk being left with thousands of unsold inventory that you have to sell at a loss.

High Growth  – Because you do not have to place the orders manually, you can grow your business quickly. As long as you sell well.

What is dropshipping, and what are its disadvantages?

Low-profit margins  – Barriers to entry and costs are low, giving rise to strong competition. As a result, margins are shrinking. Most people compete solely on price and are willing to sell at a lower profit to increase their turnover.

Inventory Management  – ​​When you have an item in stock, it’s easy to keep track of inventory. But with dropshipping, you often use different manufacturers who work with other merchants. Product availability and quantities change every day and hour, and if there is no system in place to synchronize them, complications can arise.

Delivery Complications  – If you work with three or more manufacturers and your customer orders products from each of them simultaneously, at least three obligations to shipping companies arise. You can’t pass those costs on to your customers and make them pay triple shipping.

Dropshipper Mistakes  – Even the most experienced in the industry make mistakes. Mistakes for which you must take responsibility to your customers and apologize.

How to weed out good dropshippers?

We can conclude from the considered advantages and disadvantages that choosing a good dropshipping partner is a strategically important decision that dooms our venture to success or failure. The question arises:  How do we know which dropshippers are credible?

They offer shipment tracking  – which gives you access to information on where a shipment is at any time. Most forwarding companies offer this service.

Well organized  – a dropshipper should have experience and established practices that allow them to deal with day-to-day problems. Another important condition is the availability of a well-built information system.

They don’t set price limits  – some of the dropshippers set a limit on what price you can sell at, keeping you selling at the same or higher price than theirs.

They allow product branding  – imagine the following situation: you order a clipper online from brand “A,” and after a few days, you receive the product from brand “B.” This creates doubts and confusion among customers. A good dropshipper allows you to put your brand on the product packaging.

Some dropshippers require a minimum order size of 30-50 USD. This is normal as they screen out rogue traders. But be careful! It is most likely a scam if they ask you for 300, 500, or more USD to join a dropshipping program.

What is dropshipping, and how to find partners?

Google is your best friend – you’ll often have to get to the 10th or 20th page of results, but that shouldn’t stop you. You can usually find good dropshippers there, as SEO is not their priority. Some of them are deeply hidden in the results. Use Google search operators. For example: “intext:dropshipping clothes” will return relevant results. Don’t limit yourself to dropshipping; use variations of the word – suppliers, partners, wholesalers, distributors, and more.

Contact the manufacturers directly  – ensure the dropshipper is a manufacturer or importer of the products, not a retailer. The earlier you are in the chain, the better profit rates you can negotiate.

Do a Test Order  – The best way to get a feel for a dropshipper is to do tests. Order the product to your address, pay attention to how long the shipment takes, it is branded, what is the dropshipper’s system, and so on.

Don’t get swayed by design  – because they delegate the sales function to merchants, dropshippers often have very basic sites with unfriendly designs.

Look for feedback from their customers  – the sale doesn’t end with the act of receiving the money. It continues even when using the product. A satisfied user can attract 3 new ones, and a disappointed user can repel ten. Look for other merchants who use the dropshipping service, contact them and ask for their opinion. Check out their site for customer reviews. Look for reviews specific to the product.

Most dropshippers prefer to work with legal entities. Before contacting them, ensure your company’s records are in top condition.

Advice

I don’t want to dampen your enthusiasm if you’ve decided to dropship, but I think it’s better to know in advance. The road to a sustainable and profitable dropshipping business is long. Here are some tips to help you grow your business:

Start with a product you’re interested in  – it’s easier to sell a product you understand and have experience with.

Don’t compete solely on price  – focus on increasing customer value. An easy-to-use site, convenient terms and delivery times, as well as useful information are things that add value and allow for maintaining better prices. Be creative and try alternatives.

Choose a niche  – that’s where you should start. Research the competition well: at what prices are they selling? How are they different? Do they have established sites? Which sales channels can be used? When you’ve established yourself in your niche, look for new horizons.

Don’t expect your products to sell themselves  – apparently, online business is like any other – it takes a lot of time and effort to start and run it. Most days will be filled with many working hours.

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