Drop shipping is a type of retail operation where the vendor accepts orders from customers without holding inventory on hand. Instead, the seller sends the orders and their shipping information to the manufacturer, a wholesaler, another retailer, or a fulfillment company, who then distributes the products directly to the buyer. This is a sort of supply chain management.
For instance, consider that you have a website where you offer supplies for dogs. You don’t have to acquire tens of thousands of collars or leashes in advance and keep them in your garage (or a rented warehouse) until you make a sale if you’re a dropshipper. Instead, you locate a third-party supplier with a warehouse where you can store your goods.
After a consumer makes a purchase from you, your supplier (or suppliers; there may be many of them) assumes control of the situation and sends the product right away to the buyer. You’ll never have to handle logistics! So basically, that’s how dropshipping works.
How does drop shipping work?
A brick and mortar store is not necessary for the drop shipping business model. It could either be completely done away with or merged with the drop-ship order fulfillment business model. A physical merchant may operate a website with information exclusively accessible online, keep possible drop-ship items on display, or provide information on mail-order items via a catalog. A website is all that a virtual merchant has.
Retailers who use drop shipping are not obligated to disclose the practice or, like any other merchant, the location of the products’ wholesale suppliers. This can be accomplished through “blind shipping” (shipping goods without a return address that corresponds to the seller), “private label shipping” (having goods shipped from the wholesaler with a return address customized to the retailer), or by making use of a fulfillment house. The person who fulfills the purchase in its entirety could also provide a personalized packing slip with the retailer’s name, logo, and contact information.
Drop shipping can happen in uncommon situations, such as when a small retailer—who generally sells in tiny amounts to the general public—receives a single, sizable order for a product. The store may arrange for the manufacturer or distributor to send the products straight to the client.
eBay Drop Shipping
eBay is one the biggest ecommerce platforms globally, with millions of active buyers from all around the globe. Drop shipping is another technique used by vendors on online auction sites like eBay to distribute goods without managing the stocking of the things sold. An item will be listed as new and shipped directly to the buyer by the seller from the wholesaler. The difference between the selling and wholesale prices, less any applicable selling, merchant, or shipping costs that are charged to the seller, is their profit.
However, many drop shipping strategies employed by merchants are prohibited by the eBay terms of service. Included in this are drop-shipping strategies, when a seller fills an order by acquiring the product from a different online market and having it shipped to the consumer. The adoption of this technique by sellers may result in eBay suspension.
A drop shipping store may list products as available when they are actually back-ordered with the wholesaler or the manufacturer. Even when knowing, a seller may not always disclose such prospective order fulfillment delays. They may also be prolonged for reasons beyond the seller’s control. Order fulfillment and delivery delays are also out of the seller’s control, but they might have a negative impact on the buyer’s happiness with the transaction overall. This emphasizes the importance of the seller providing timely and correct information to both parties of the transaction, both prior to and after it is completed.
Benefits of Drop Shipping
The following are some of the benefits of becoming a dropshipper.
Easy to Initiate
You may open your own dropshipping store in a few hours once you’ve found some high-quality products. The process is pretty simple. It’s quite simple to get things going, though you’ll need to constantly upgrade your store after you see how your customers interact with it. You can easily test new product concepts because you don’t need to pre-purchase inventory.
No Need of Big Investments
You can start your internet store without spending all of your savings thanks to dropshipping. The company concept does not call for upfront product purchases, inventory investments, or the rental of a facility to store your goods. A large portion of the typical expenses that traditional sellers must bear are eliminated by the dropshipping approach.
Shipping Responsibilities Handled by Others
The fact that you don’t have to bother about keeping and transporting your product is one of the major advantages of dropshipping. In a retail setting, you are not required to ever touch the products you are selling! The order is handled by your third-party provider as soon as your customer purchases a product from you.
Easier to Scale Drop Shipping Business
You won’t have to worry about more work if you start selling more because you won’t be packing and delivering the goods, so it’s a hands-off business. Your everyday activities won’t generally alter much as your firm expands, but you could wish to increase your marketing spending to generate even more sales.
Sell Anywhere You Like
Your location won’t be a barrier to you once you enter e-commerce. If the shipping charges are reasonable, dropshippers can sell their goods anywhere in the world. There is no geographical barrier to excel the business.
Delegation of Majority of Work to Apps
To launch an e-commerce company, you don’t need to hire a team of marketing experts or be a jack of all trades. You may automate your marketing process with the help of a number of Shopify apps. For instance, you can run Facebook ads automatically rather than trying to find out the best ways to use dynamic Facebook advertising for weeks on end. While you take care of the other aspects of your dropshipping business, you can let the applications handle the work.
Be Your Own Boss
Above all, dropshipping may grant you freedom. It may be accessed from anywhere, and nobody is directing your actions. Success won’t come quickly, that much is true. But the choice is yours! You get to set the rules rather than working in the traditional hierarchical framework. You can either grow your internet store into a full-fledged business or use it as a side hustle. Additionally, you get to enjoy all the benefits of your labor! You will have more cash in your account for every hour you work at selling.
Low Upfront Cost
The Drop Shipping business has a low entry barrier and no upfront costs. In this, dropshipper only incur the cost (purchase cost) of the products after generating the order. The cost of inventory handling, warehouse and shipping is not incurred by dropshipper.
Limitations of Drop Shipping
Shipping goods from independent vendors has inherent drawbacks, just like any other company strategy. They are as follows;
Complicated Cost Calculation of Shipping
Calculating the delivery expenses is simple if you just buy your products from one provider. Dropshippers typically employ multiple suppliers for various products, though. When multiple items from the same purchase have varying shipping rates, it becomes slightly more difficult to determine the delivery costs. Additionally, various vendors could use various billing methods.
Lack of Branding Activities
When you dropship things, there isn’t much you can do to customize them. Yes, you can have a website that is well-designed and has excellent product descriptions. If you want to take branding to the next level, you may even organize a professional photoshoot of your products. You can’t do anything about the packing or the instructions that come with the products you sell, like the majority of dropshippers.
Be Responsible for Customer Support
It’s fantastic that you don’t have to deal with inventory management until you receive a complaint from a disgruntled consumer. You are responsible for the suppliers’ failures to fulfill your requests. To prevent receiving unfavorable evaluations, be prepared to apologize profusely and to offer top-notch customer service.
Lower Profit Margins
You’ll probably face a lot of competition due to the low admission threshold. Hence, you’re bound to keep your prices as low as possible to stay alive until you establish a strong clientele.