Dropshipping in 2021: Everything you need to know

Do you have a dream to be an entrepreneur? And, do you have more time than money to invest in that dream? Let’s find out how Dropshipping is your top bet.

What is Dropshipping?

Dropshipping is an e-commerce model that sources products from third-party suppliers or manufacturers and sells them further. Partnering with manufacturers cuts the costs for inventory and stock maintenance. The manufacturer fulfills the order on your behalf, which saves you operational costs.

The responsibility of the product and its shipping fulfillment rests with the suppliers, and you effectively become a middleman. However, with profit margins and price markups, it can be rewarding.

Dropshipping is great for budding entrepreneurs as it hardly demands anything as intensely as the traditional models. However, to make up for the ease of the model, you give it time and hard work. A well-developed website and smooth communication with customers and suppliers can result in a sustainable long-term business.

How does the Dropshipping Model work?

1. The customer orders and pays on your website from the selection you offer.
2. You place that order to the supplier or manufacturer on the customers’ behalf.
3. The supplier confirms and processes the order.
4. The order reaches the customer and is fulfilled.
5. And you earn a profit!

Attributes of Dropshipping

Benefits

It is easy to start

• It gives you the convenience to work from the comfort of your home without having to deal with physical products.
• There is no need for a warehouse to maintain an inventory.
• The manufacturer or the supplier deals with shipping and processing.
• The manufacturers or the supplier also handles the returns.

Dropshipping is easy to grow

• It doesn’t require a lot of capital.
• Because there is no inventory maintained and there is no need to buy the stock upfront, it doesn’t need a massive sum of money.
• All it needs is a laptop and some domain and operational expenses (More on that later).

Offers Flexibility

You can be based out of anywhere with a requisite for an internet connection.

Since there is no ordeal for pre-purchasing the items, you can easily follow trends and fulfill your customers’ demands.

Disadvantages

Margins are slim

Initially, when diving into a niche, the prices you can offer are competitive. As multiple platforms are fighting for customers’ attention, you can’t always afford the profits you want.

However, to expand your profit margins, you can ultimately aim at getting supplies directly from the manufacturers. The less the number of intermediaries, the higher will be the profit margin.

Order processing can be challenging.

With the absence of control over shipping, you can walk into unseen problems. And especially if you’re sourcing products from multiple suppliers. Since the suppliers take care of the procession, there can be an increase in costs, and each supplier could offer a different structure. This can lead to confusion for you and your customers.

Lack of control over products

When the inventory is yours to maintain, you can control and keep a check on the availability and quality of a product. However, when it comes from varied places, it can be a pickle. The inventory of the manufactures can change irregularly, which can offer a challenge for you to reflect the same on your website. However, platforms like Oberlo have provided automated services to remedy this.

Absence of proper customer service channel

This is another challenge that stands upfront. Given that neither the product nor its fulfillment is under control, you have little to no choice to offer support to the customers.

Since you’re the storefront, the blame and the ordeal of dissatisfaction rests with you.

How to get started?

Choosing a Niche

What you choose to sell is what ultimately decides the course of your business. While they say that one should get into something they are passionate about, it is not always suitable for a business plan. A business idea is a perfect blend of passion and profit. Looking out for what sells and is trending can often lead to confusion, but everything of sale is not the solution.

Tapping into an evergreen niche and setting a proper tone for your website is the key to getting started. You can tune in and research the best drop shipping products.

Finding a Supplier

It constitutes one of the most crucial parts of your business plan. The sincerity of your supplier will go a long way in determining the success of your business.

When deciding on sourcing your product, you can either get in touch with a supplier or directly the manufacturers. While the manufacturer is responsible for the fashioning of the product, a distributor is a person who maintains an inventory for another company’s product.

Often, manufacturers don’t deal under a minimum value, which is not in line with the spirit of dropshipping. However, a manufacturer can still be helpful to recommend a viable distributor for you.

When deciding on a distributor, here are few things to keep in mind:

• The wholesale price offered: The vendor’s total price should be low enough for you to generate profit on further selling them to the market.
• The handling and delivery fee: Most of the time, your vendor will charge a picking, packing, processing price to you for dodging the cost of maintaining an inventory.
• Shipment of products: Most companies would use a service that has a broader reach and facilities. Asking your suppliers to include a tracking number in invoices and confirmation will help you be more accountable to your customers.
• Billing standards: You can have an active card where a supplier will charge you the agreed price when the order is placed with them, including the processing and delivery. Or you can have a monthly billing cycle and pay the total at the end of the month.
• Return policy of suppliers: Most manufacturers offer guarantees and warranty on their product and can help the customer on your behalf. Being careless with returns and replacement sticks you with bearing the cost of a defective product for your customers.

Building a Store

For building an online store, all you need is a laptop and an internet connection. What is also important is a domain name, a great and simple domain name is vital to a long-term business as it eventually builds your branding. A word that customers can easily remember.

Customer Acquisition Plan

Dropshipping is a popular model amongst the millennials and Get Z, and more and more people flock to it. This is because proper marketing of your prepositions outweighs the capital investment, which makes it rewarding.

Once your store is up and running, it’s time to bring it to the customers. It is needless to say that letting the audience know of your existence will bring you your first sale. Using Facebook and Instagram for targeting your audience is a great way to start.

When you invest in it right from the start, you give yourself more room to grow and scale faster.

Is Dropshipping worth the effort?

Like everything else in this world, dropshipping has its benefits and disadvantages, and still holds great opportunities for anyone who is willing to hustle. There is no fruit without work. While, there is considerably less hassle and capital commitment in this model of business, as compared to the traditional brick-and-mortar shop, it demands time and effort. The IdeaUsher Team can help you get started on your website.

And, overcoming the short-term hurdles and giving in time can result in a business that is gold.