Dropshipping is an e-commerce retail model that allows stores to sell products without keeping any physical inventory.

In dropshipping, the retailer sells the product to the customer, then passes on the sales order to a third-party supplier, who then ships the order directly to the customer on behalf of the retailer. And nowadays drop shipping is very much in demand.

In this article, you will know how dropshipping works. Be it for a beginner or even if you are just interested in it. Read on to know everything about the drop shipping business.

How Dropshipping Business Work? 

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Dropshipping works through third-party suppliers, who manufacture products on a just-in-time basis for each order. When the retailer receives a sales order, they pass the specifications along to the supplier who creates the product.

Though many e-commerce retailers use dropshipping as the foundation of their business operations, dropshipping can be effectively used to supplement traditional, inventory-stocking retail models.

Since dropshipping does not produce any leftover excess inventory, it can be used for research purposes such as testing the waters, before committing to selling in a market.

To set up a dropshipping agreement with a supplier, a formal dropshipping contract should be drafted. The contract should clearly state the terms of the agreement before starting any business.

How Does Dropshipping Work? 

Drop-shipping is where a seller sets up a website and sells products that the seller does not keep in stock.

When an order is placed, the seller sends it to a third party which is the manufacturer, another retailer, or a wholesaler who ships the goods directly to the buyer.

It’s a fast-growing trend of online middlemen who keep the difference between the wholesale and retail prices and cost you extra money.

And while drop-shipping is not illegal, there is a lot of room for problems and abuse for buyers and sellers.

Many drop shippers are trained to trick customers about where a product is coming from.

The country of origin may not be disclosed, or the seller may post stolen photos of brick-and-mortar storefronts to make buyers think the company has a physical location or that the product is coming from a particular place.

Another risk is that the product you see online may not be the product that is ultimately shipped to you or you don’t receive the product at all.

How Do You Dropship as Beginners? 

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Drop shipping is not very tough even for beginners as the process is quite simple but it needs to be curated with immense details.

Drop shippers must rely on their suppliers for product quality and authenticity, fulfillment speed, and returns.

If there are issues, you may not know about them until you receive a drop-shipped package and realize where it came from, its quality, and how much you overpaid.

Before buying a product Research the product and the seller before you buy.

Do an online image search of the product and any other images the seller has posted to see where the product is coming from, how much it really costs, and who else is selling it.

Compare prices for the same or similar products from other sellers and then when you are sure of it go to the product.

Before you sell, do not go into drop-shipping thinking you will get rich quickly. There is a lot of competition and smaller businesses have to cut their profits to stay competitive.

You have no control over the supply chain, and you must depend on your supplier for product quality, authenticity, and delivery. Yet you will be the one dealing with the buyer when there is a problem.

Most companies offering to teach you how to become a successful drop shipper are making their money selling you and others their training programs.

Is Dropshipping Easy for Beginners? 

Drop shipping business is considerably easy for beginners as it does not need much capital to start with nor does it need a lot of manpower.

Due to the low overhead entry costs and simplicity of starting a dropshipping business, it has become a popular and convenient business model for e-commerce retailers, who can run profitable stores with easy setup and very little risk.

Dropshipping has been a contributor to the ubiquity of e-commerce, as it allowed many players to saturate markets with niche offerings.

Retailers that use drop shipping forfeit some control over the customer experience; therefore, having exceptional customer support is critical for buyer retention.

How Much money is Required for Dropshipping? 

To be very honest, drop shipping does not require a lot of money to start with. You can just use up a tiny portion of your savings and start your drop shipping business.

Dropshipping sellers do not need to invest in any product inventory, warehouse or storage space, and do not handle the fulfilment process.

Technically speaking, you can start dropshipping for less than $100 USD. With the right combination of free trials and starter plans and most importantly a willingness to look the other way and hope for the best when it comes to the quality of your products.

Just a bit of investing is all that stands between you and a dropshipping store.

Also Read: Is E-Commerce the Same as Drop Shipping?

Conclusion

Drop shipping does look easier on paper than it is to use in practicality. However, that does not mean that it is less profitable.

It needs time for any business to develop and so does drop shopping.

Few drop shippers actually make any profits and once a buyer realizes they overpaid for an item and they know where it came from, the buyer will return the item, then order it themselves directly from the manufacturer.

Hope you found this article informative enough. Do add your thoughts and comments below. Thank you!

Next Read: Is Buying an E-Commerce Business Worth It?

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