Dropshipping is a business model where retailers order fulfillment option can outsource the process of storing, procuring and shipping products to a third party that is a supplier.
In simple words it helps retailers and ecommerce businesses to sell products directly to the customer without stocking inventory themselves. It works in a simple method such as retailers tie up with the supplier or a manufacturer directly and they fulfill the order on behalf of retailers and ship the product directly to the customer.
Let’s see how dropshipping actually works:
- The retailers sets up an online store and highlights the products they want to sell. To create an online presence they may use woocommere, shopify etc. and promote their brand.
- The retailers finds a supplier or manufacturer who offers dropshipping facility for the product they want to sell. There are number of directories that has dropshipping suppliers such as oberlo, aliexpress, salehoo etc.
- The retailers showcase the supplier’s products to their online store, including product details, descriptions, images etc.
- When a customer places an order on the retailer’s website, the retailers send the order details to the suppliers along with the payment details of a particular order.
- The suppliers then put the order in the bucket list and ship the product directly to the customer address with the retailer’s branding on the package.
- The retailers know what price needs to be quoted to the customer and what price needs to be shared with suppliers. Thus retailers know how to make profit and it is also known as retailer’s profit margin.
Dropshipping can be a productive option for entrepreneurs who have started with their online ecommerce business without investing a lot of money upfront in inventory. If you are new to the industry and have limited investment then one can opt for dropshipping options because it saves time, cost and inventory burden on head.
But at the same time it also comes with cons as well.
- Retailers need to share some amount with the suppliers or manufacturer if they really want to start with dropshipping facilities.
- The retailers will have less control on the shipping
- Most of the time there are issues with product quality and timely delivery
- Such issues may arise as an entrepreneur to ensure to reduce these drawbacks in ecommerce business to stay connected with your audience.
However while connecting with the suppliers and manufacturer for the dropshipping option ensure to deal with reputed suppliers or manufacturers. They will not compromise on the quality of the product and will try to ship on time. This will build the brand reputation and will make you stand out from the crowd.