In all likelihood, you have, by now. heard the basics of dropshipping. But, whether you think it sounds too good to be true – or simply that it is too complex a concept for your fledgling e-commerce business, dropshipping is something from which many entrepreneurs and small business owners stand to benefit.
Dropshipping: A Quick Summary
While we all like to imagine starting, running, and scaling a small business to be something we can do from our spare bedrooms – or even the garage – the truth is that, in order for those SMEs to be ready to weather the storm of success, they need to be equipped to handle a growing demand for their products.
Unfortunately, the overwhelming majority of entrepreneurs and small business owners do not have the space, resources, time, or money to invest into stock management that is both scalable in the long-term, and manageable in the short-term.
This is where dropshipping comes into play. Rather than storing and packaging their own stock on site, business owners can rely on a third-party to handle all these aspects – and, of course, ensure timely postage as well – from a remote location.
In essence, the business does not own their stock. Rather, each time an order is placed by a customer, the dropshipping supplier receives the details, and takes a fee for the cost of the item(s) – and, of course, fulfilling the order – from the customer’s payment.
What are the Benefits?
At first, dropshipping may seem like something of a compromise in the face of the more traditional approach of inventory curation and management. Afterall, pursuing a dropshipping model means lengthening your supply chain, putting your faith into an ‘unknown’ third-party, and, as a result, rendering yourself vulnerable to their own potential shortfalls.
In reality, however, the many benefits of a successful dropshipping model have ensured that a number of the most prominent services pursue rigorous practices and standards.
For instance, the market-leading e-commerce website builder Wix has turned the ability for entrepreneurs and online sellers to start dropshipping into yet another tool of their platform – thus ensuring that this business model is both highly attainable, and built upon trust, rather than representing a vague and risky venture.
The potential benefits are wide and varied. For instance, forgoing the traditional process of acquiring and storing stocks means that users of this service can circumvent the many risks of investing significant capital into items that have not yet been tested on the business’s existing customer base. At the same time, the time saved on acquiring, unpacking, and mailing orders can be invested into other areas of the business, such as customer service.
For another, dropshipping avoids some of the main bugbears that were once highly detrimental to new and small businesses. One example of this is the ‘minimum order quantity’ – a phrase which will forever strike fear in the hearts of entrepreneurs – which can quickly drain any and all of the initial financial resources with which SME begin their journeys.
Finally, not only does dropshipping offer a much faster route to selling, but it also ensures scalability. If an entrepreneur chooses to invest into a warehouse, for instance, then they are locked into the capacity offered by that warehouse until the time comes when they are able to invest into a larger site. With dropshipping, they need only expand their product offering – and, of course, only pay for the stock that sells.
Is it Profitable?
One of the key factors that can determine how profitable dropshipping can be is the selection of products to sell, and researching and identifying profitable dropshipping products is an essential step in building a successful business.
Dropshipping can be used as a standalone business venture – or in complement to an existing and already-established e-commerce venture. In this way, those who already produce or store their own stock (and sell it via an online store) can augment their offering with products that require much lower overhead.
Of course, the current prevalence of dropshipping is proof of its ability to turn a healthy profit. Many first-time entrepreneurs and existing online sellers alike have turned to this fulfilment solution in order to boost their online sales, and lower their expenditure on stock.
As with most things in life, however, an object (or, in this case, process) is only as strong as its weakest point, and the only way for any dropshipper to find success is for them to utilise a strong, established and market-leading third-party supplier. If not, they risk falling afoul of the pitfalls of a supply chain that has been stretched beyond its means.
In summary, then, dropshipping can be a powerful tool for new and existing e-commerce businesses to utilise. It takes advantage of the unique traits of online selling, and enables a far more manageable, affordable, and scalable solution to any business that has grown fatigued by the challenges of stock investment, storage, and order fulfilment. It does, however, only offer the strongest chance of success if businesses opt to work with suppliers who maintain a high standard, and who have already made a strong mark on the world of e-commerce.