Dropshipping refers to a fulfilment process where you don’t own or ship any inventory. There is a third party involved whom you connect with after getting orders. It is gaining importance in today’s business world and if you are anywhere around building your e-commerce store, you must have heard about it a lot.
In case you have confusion regarding how dropshipping works and what the strategies involved, this blog will help you understand dropshipping in detail.
What is Dropshipping?
Dropshipping is a business model where a retailer (seller) doesn’t keep products in stock. Instead, when a customer places an order, the retailer purchases the item from a third-party supplier (usually a wholesaler or manufacturer) who then directly ships the product to the customer.
In other words, the retailer acts as a middleman, taking orders and passing them to the supplier, who handles the products’ storage, packaging, and shipping. The retailer makes a profit by selling the products at a higher price than they pay to the supplier. Dropshipping allows businesses to sell a wide range of products without the need to invest in inventory or handle shipping logistics, making it a low-risk and cost-effective way to start an online store. Dropshipping has a ton of advantages for people who are just starting an e-commerce business Delegating the fulfilment of your order to a third party help save time and resources in addition to avoiding the hassle of handling delivery and shipment on your own. So that, you can spend more time focusing on building marketing strategies and growing your brand.
Who is a Dropshipper?
A drop shipper is a person or business entity that operates using the dropshipping business model. As a drop shipper, they act as a retailer or seller who sells products to customers without keeping any physical inventory. Instead, when a customer places an order, the drop shipper purchases the products directly from a third-party supplier or wholesaler, who then ships the products now to the customer on the drop shipper’s behalf.
In essence, the drop shipper serves as an intermediary between the supplier and the customer, handling the marketing, sales, and customer service aspects of the business, while the supplier takes care of inventory management, order fulfilment, and shipping.
How Does Dropshipping Work?
Your needs and arrangements will determine what goes into the logistics of drop shipping, but generally speaking, the process works like this:
- The signing of an agreement between the drop shipper and the seller
- The customer then orders online
- The seller receives the order placed by the customer
- The customer is sent an order confirmation
- The seller then forwards the order to the drop shipper
- The drop shipper ships the order directly
- Customers receive their product
What are the Benefits of Dropshipping?
Cost-effective model
Dropshipping is a very low-cost and cost-effective business model because it does not have any overhead costs, i.e. you do not have to focus on inventory, warehousing, etc. and your money is saved in these processes. Other than this, you also have the liberty to start your own business with minimal or no starting costs because you are sourcing products from a different place and are not responsible for storing them.
Reduced Risks
As you are not responsible for any inventory or warehouse, you dodge a lot of risks relating to them. Be it a natural calamity, fire, or any other form of damage, you don’t have to bear these risks alone.
Flexibility
Dropshipping model allows you a lot of flexibility, you can try out different products or sellers and choose which ones you want to stick by. There is no obligation of selling only limited products to customers as you can experiment with a different range of products, without inflicting any risk associated with inventory.
Wide range of products:
As said above, you are free to choose the products and brands you want to sell. With time and careful consideration, you are free to work your way to different products.
Multi-channel selling:
Adopting the dropshipping model allows you to handle multi-selling channels. You can use dropshipping channels like Amazon, SOurceinfo, or social media channels to get orders.
Scalability:
With drop shipping, you can quickly scale your business. With different channels of sale, you can check your dropshipping partner and where they operate and find business partners spread all over the world.
Conclusion
No matter how confusing the word may be, till now you might be clear with dropshipping meaning and how it can help you become the entrepreneur you always wanted to be. Dropshipping makes it easier for people who are just starting a business and not willing to get into the hassles of handling inventory or shipping. You can easily scale your business and work your way up by slowly incorporating new technology and brands.
If you are looking for a platform to help you with dropshipping in your business, you can contact NimbusPost, a tech-enabled shipping aggregator that helps you with all your supply chain and logistics needs. It connects you to different companies/partners as per your requirements.
