Dropshipping is an order fulfillment method that does not require a business to keep products in stock. Instead, the store sells the product, and passes on the sales order to a third-party supplier, who then ships the order to the customer.
However, contrary to popular belief, 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 factor in 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…just not as quickly as you’d hoped.
Let’s put it this way: if you’re only doing dropshipping, it’ll be difficult to get your business off the ground; but, if you’re already established in ecommerce, you can use dropshipping to complement your existing services and improve your business.
In this guide, we walk through all the problems with dropshipping that aren’t as publicized as its perks. But despite its flaws, dropshipping can still be a powerful tool for ecommerce brands, as long as it’s used properly.
Dropshipping for Beginners: FAQs
- Here are some simple answers to frequently asked questions about dropshipping.
How exactly does Dropshipping work?
I mentioned this earlier but will go into a bit more detail.
Dropshipping is when a vendor fulfills orders from a third party and has them ship directly to the customer.
In other words, the vendors passes 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 or wholesaler; 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 inventory or ship items directly. Instead, they focus mostly on marketing, advertising, and managing their online presence.
- How do I incorporate dropshipping into my business?
As I explain above, we only recommend dropshipping as a complement to a traditional ecommerce business model.
Assuming you already have an online presence in one or more stores (or at least know how to set that up), incorporating dropshipping is similar to launching any other new product, with a few distinctions.
Here’s a quick step-by-step guide:
- Research what products would fit well with your strategy, market, and customer base.
- Research how your competitors are selling the product, namely pricing.
- Find the best supplier (see our checklist above).
- Finalize a fulfillment process that works for both of you and incorporate it into your system. Depending on your sales management software, this could be easy or require ironing out some wrinkles.
- List and promote your new product. Be sure to specify any special conditions, such as changes in shipping times or locations.
- Is dropshipping legal?
Yes, dropshipping is legal.
You may run into other legal issues depending on who your supplier is (as we discuss above), but dropshipping on its own is a perfectly legitimate method of order fulfillment.
Just remember to protect yourself with a Dropshipping Agreement Contract.
- How much does it cost to start a dropshipping business?
Truth is, it can range anywhere from $0 to about $1,100, depending how much sweat equity you want to put in.
- What are the benefits of dropshipping?
There are at least five good reasons that almost any ecommerce retailer should consider dropshipping.
- Minimizes startup risks
- Lowers product costs
- Lower storage and logistics costs
- A broad product offering
- Is dropshipping profitable?
Yes, dropshipping can be profitable to merchants. Dropshipping is a low-risk business model that allows you to sell products to your customers without incurring huge running costs like a wholesaler would have. Because of these lower costs, it is easier to become profitable with dropshipping a lot faster than other business models.
- Do I need to register a business entity to dropship?
Yes, you’ll need to register your business once you start to make sales, but there is no rush to do so until you start making them consistently. This is because the majority of payment providers require you to prove that your business has such credentials.
- Is dropshipping allowed on eBay?
Yes, dropshipping is allowed on eBay.
Dropshipping (which they sometimes refer to as “product sourcing”) is allowed, but the vendor is held accountable for a safe delivery in the time frame stated in the listing and for the customer’s satisfaction.
eBay even seems to encourage dropshipping. They say specifically that:
“you aren’t obliged to state in your listings that an item is coming directly from the supplier.”
- Is dropshipping allowed on Amazon?
Yes, dropshipping is allowed on Amazon.
However, the Amazon Seller Central page on the topic lists two exceptions:
Using another seller’s name or contact information on your packing slips, invoices, etc.
Purchasing the products from another online retailer and having them ship directly to the customer (meaning you can’t buy the product online and enter your customer’s name and address).
Amazon also states that the vendor must be the seller on record for all documentation and fulfill all the responsibilities that come with it, such as returns.
- What are some dropshipping product ideas?
If you’re interested in dropshipping but don’t know where to start, here’s a list of product ideas for inspiration. We tried to only list auxiliary items that could fit the product range of any industry.
- Tote bags supporting a cause or charity.
- Novelty t-shirts.
- Funny coffee mugs.
- Motivational bookmarks.
- Inexpensive watches or jewelry.
- Marketing merchandise (shirts, bags, mugs, pens, etc., with your logo).
Otherwise, see the section above on market research for a more personalized approach.
- Do dropshippers ship internationally?
This varies widely by dropshipper, so you’ll need to check.
International shipments can quickly get expensive, and getting accurate quotes regarding shipping fees, customs and duties for hundreds of countries is complex. It also takes a drop shipper significantly more time to process an international order as there is more paperwork involved. Some will charge an additional fee while others simply won’t bother.
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