What is Dropshipping?

1. What Is Dropshipping?

Dropshipping is a supply chain management model in which retailers don’t have to worry about managing their own inventory. They can easily promote the products of suppliers and earn handsome commission on arbitrage.

The dropshippers work as intermediaries suppliers and customers. They transfer the order information to the suppliers while keeping a certain amount as commission, who then dispatch the product from the warehouse to the customers.

2. Dropshipping Model

Dropshipping involves the supplier, the dropshipping store, and the customer. Customer orders a product from the dropshipping store. The dropshipping store transfers the details of the customer to the supplier. The supplier then ships the product to the customer. The dropshipping store makes a profit by selling the product at a higher price.

For example, if the price of the product on wholesale is $150, the dropshipping store can sell it for $200 to $250 making a commission of $50 or $100 easily.

Key Points

  • You set your own prices.

  • You can start wholesaling any product without partnering with the manufacturer using Aliexpress, eBay, and Amazon.

  • You earn through arbitrage.

3. Benefits of Dropshipping 

Dropshipping is a highly lucrative business opportunity for entrepreneurs. The good thing is that it doesn’t have a barrier to entry and anyone having little or no investment can easily enter the market. It is practical and convenient for anyone who would like to start their eCommerce store in 2019.

Here is a list of benefits of a dropshipping store.

i. Low Barrier to Entry

  • In dropshipping, you don’t have to pay upfront for the products. So, you will only pay for the hosting and domain charges.

  • As you have no excess inventory, hence your business is less prone to loss of revenue.

  • You can upsell your own products along with best-selling ones on your store.

ii. Convenience for Supplier and Dropshipping Store

  • With dropshipping, neither the dropshipping store has to worry about the shipping and packaging of the product nor the supplier has to worry about marketing and promotion of his products and both reap decent profits. 

  • Dropshippers can work with multiple wholesalers at once.

iii. Easier to Scale and Remodel

  • As dropshipping stores don’t require storage facility and are completely digital, they are easier to scale.

  • Even if one niche or product doesn’t sell well, dropshipping stores owner can easily move to a better selling product.

iv. Minimum Risk

  • A dropshipping store can be started for free. Just get a domain and hosting and you are good to go.

  • Even if you lose the store, not able to scale or profit from it, you can easily back out with no risk at all.

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