What is Drop Shipping and How Does it Work in a Marketplace

Hi,

In this week’s blog post, we are going to talk about dropshipping. You probably have heard this term already. Anyone who has started or even done online business has probably come across the term “ drop shipping “

 

What is “ drop shipping”? 

This is a type of e-commerce business. It simply allows a merchandiser or a merchandising company to operate without purchasing inventory. They do not have to store, distribute or ship their products as that’s the “supplier’s” job. That’s why you have to choose a reliable supplier as over time many problems might occur due to the complexities of this process. 


How does it work?

Now, it is clear what does “ drop shipping “ means but the question is - How does it work? The retailer partners up with a dropship supplier that manufactures and packages the products, and also ships them directly to the client, on the merchandiser’s behalf. As a result, the merchandiser never sees or handles the product. Let’s see it step by step:

 

1. The client places an order for a particular product.

2. The merchandiser forwards the order and the client’s details to their supplier.

3. The supplier packages and ships the order directly to the client in the merchandiser’s name.

And that is how it works.


Pros and Cons of Dropshipping 

Let’s start with the Pros of running a dropshipping business. 


        It’s easy to get started

Running this type of e-commerce business is easier when you don’t have to deal with physical products, managing warehouses, or constantly ordering new products. To get started, you have to find a good supplier, set up your great-looking website, and start selling!

        Low risk

If your business isn’t working you aren’t losing any money. This means that If you aren’t selling, you also aren’t losing anything, so the pressure is less to none.

        Flexible Location

You can run your business from anywhere. You don’t have to think about an office place, a warehouse, or hiring employees. All you need is your laptop and Internet connection.

        Variety of products

Since you don’t have to pre-purchase the products that you sell, you can offer a variety of products to your clients.

 


Cons of drop shipping


        Lower profit margins

Depending on different elements like location or your niche, suppliers will probably charge you higher prices for dropshipping products. This will interfere with your profit margins.

        Level of competition

The level of competition is relatively high. The business model attracts many people which means more merchandisers in every niche.

        Liability

Be careful when it comes to choosing a supplier. If anything goes wrong with the purchase, even if it is the supplier’s fault you take full responsibility. After all, you are the face of merchandising.

      Keep track of the inventory

Unfortunately, it’s almost impossible to keep track of the inventory of your supplier. Be cautious because sometimes due to miscommunication you can lose clients or purchases which reflects your business. Remember, it will be easier to manage your inventory by using reliable software.

 

This business model has some advantages but it also comes with several complexities and problems that you will have to address. The good news is that with a clear strategy and some planning, most of these problems can be determined. You can build a profitable dropshipping business if you have the patience and if you are willing to put enough effort into achieving your goal. 

 

What companies do dropshipping?

Here, I listed a few examples of companies that do drop shipping.

· Dropshipper.com

· AliExpress. 

You probably have heard of AliExpress. This is another wholesale and dropshipping platform that connects drop shippers to suppliers and also to products.

· SaleHoo. 

 SaleHoo is a wholesale supplier directory. It connects drop shippers to suppliers.




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