Dropshipping is when a vendor or seller fulfills orders from a third party and has them ship directly to the customer. In other words, the vendors pass on the sales order to the supplier, who then fulfills the order. The vendor usually pays for the item at a discount by working directly with a manufacturer of the product or item or wholesaler of the item; their profit comes from the difference in the initial item cost and whatever price they sell it at. The vendor does not store their own inventories or ship items directly. Instead, they focus mostly on marketing, advertising, and managing their online presence via social media and other means.
Dropshipping is an order fulfillment method that does not require a business to keep items they deal in stock. Instead, the store sells the product and passes on the sales order to a third-party supplier, who then ships the order successfully to the customer. However, the unpopular opinion, dropshipping is not a get rich quick scheme. Sure, it seems like easy money — you sell other people’s goods and take a cut for yourself — but when you take into account all the drawbacks, obstacles, and day-to-day management, it’s far from easy.
However, if you approach it the right way, and use the proven strategies below, dropshipping can still help you build a successful business along with staying ahead of your competition in the market.
1. Market research.
Dropshipping works better as a means to an end, not the end in itself. Use dropshipping to mitigate or levitate some the risk in trying out new products and used for market research. Rather than raising your inventory costs by packing your warehouse with an unpredictable risky product, test it out with a trial period using dropshipping.
2. Protection from overselling.
Experienced e-commerce brands know that market fluctuations aren’t always predictable & can turn out to be quite a disaster. Rather than raising inventory costs by overstocking to meet unlikely maximums, having a dropshipping supplier as a backup saves your money without losing those sales. This method is especially useful for seasonal overflow.
3. Strategic shipping systems.
One unfortunate consequence of expanding your business is shipping difficulties. The farther out you get from your warehouse or inventory hubs, the more shipping fees you’ll have to incur. Dropshipping can be the perfect solution for some problematic locations that fall outside your profitable areas. Maybe shipping that far costs too much, or maybe storage prices are way too high to justify setting up a new inventory hub.
4. High-maintenance products.
Some items cost more to stock and ship than others. In certain circumstances, it may be more profitable for you to dropship them versus storing them. What are high-maintenance products? Any products that necessitate extra fees for storage or shipping, such as large, heavy & fragile products. Unless your entire company is specialized in these types of products, it doesn’t make sense to pay additional storage and shipping fees.
But you can still keep your customers happy & content by offering these products through dropshipping.