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What you need to know about Dropshipping (2021)

The e-commerce world is growing drastically. Over the last couple of years, e-commerce sales have increased to around 15.5% of all retail sales worldwide. Since everyone is interested in buying stuff online, mainly due to the COVID pandemic, this gives an excellent opportunity to people to earn some extra cash, irrespective of their employment status. Dropshipping is one of the many ways you can make that happen. But what is Dropshipping anyway? Well, in this article, you will find out!

What is Dropshipping?

Dropshipping is a method of selling where the seller does not keep the products in-store. That is, when someone places an order with the seller, he/she purchases the product from a third party or a private vendor and gets it shipped directly to the customer’s address. Resultantly, in this model, the seller is just a middle party that operates digitally to get the customer their required product. Dropshipping has been popular for the last few years. In 2017, 23% of global online sales were through dropshipping. This number has significantly gone up due to the current pandemic, where everyone is reliant on online shopping for their necessities. 

Why should you go for Dropshipping?

Dropshipping model can be a great first step for budding entrepreneurs. It gives you the opportunity to test different business ideas and get acquainted with the market requirements and demands, without any major drawback. If you would like to have an online business, this is one of the most easily accessible online business forms besides Affiliate MarketingBelow we gathered a list that has the major benefits of Dropshipping.

Advantages

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  • Less Capital Investment

    One of the biggest advantages of dropshipping is its low capital investment requirements. Generally, retailers need to buy inventory before starting a store. However, you can first assess the market demand through dropshipping before you decide to go big and buy in bulk. Further, you buy the product only after you have already made a sale. This gives minimal room for losses, and since you do not have products in stock, it is less risky.

  • Low Overhead

    Since dropshipping is primarily operated digitally, there are little to no overhead costs. You do not have to buy a warehouse or invest in packaging equipment. Instead, all you have to do is sit at home and place orders on different websites. The only significant cost you would incur is laptop and internet management.

  • Easy to Start

    Dropshipping is extremely easy to get started with. Since you do not have to deal with physical products yourself, it takes away a lot of the hassle associated with online selling. If you are an aspiring entrepreneur with little capital, this can be a great option. You do not have to deal with packing, shipping, and tracking of the deliveries. Further, you also do not need products in stock, which works in your favor since there are no storage issues on your end.

  • Flexibility

    Another great advantage of dropshipping is its flexibility, both in terms of products to sell and location. To begin with, unlike a fully established business, you do not have to commit to one category of products. Instead, you can sell almost everything. Whatever your customer demands, you can offer. Further, there is no restriction on the physical location. You can be anywhere across the globe and still manage your dropshipping business without any hassle. As long as you have a stable internet connection and a laptop, you are good to go.

  • Easy to Scale

    Lastly, a dropshipping business is easy to scale. Since most pain points of online selling are directed towards the original seller, you can expand with less effort. As you do not have inventory to manage, you do not need a bigger space for more products. Instead, you will only have to expand your office space and hire a few workers to help in your business’s more efficient management.

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Sure, the picture would not be complete without discussing the other side as well. Therefore, we compiled a list of the major drawbacks too of dropshipping.

Disadvantages

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Dropshipping is undoubtedly a great entrepreneurship model to start your journey with. However, as we mentioned, there are some drawbacks as well. You will have to work on differentiating your business from its market competitors since most of them will be offering rock bottom prices. Despite its really low startup cost, still, you will have to make an initial investment for an effective website and social media presence to engage customers.

  • Inventory Issues

    One of the most significant drawbacks of dropshipping is inventory management. Since you are not dealing with the products directly, you have no idea about the inventory – which might be changing daily. This can pose an issue when you accept an order, but the product is out of stock in your supplier’s warehouse.

  • Supplier mishaps

    There are several supplier errors that you might encounter as well—for example, shipping the wrong item or sending a low-quality item. Sometimes – happened to us before – the supplier says they have shipped a product, while the truth is: they have not.
    While this all is not your fault, it can impact your sales, reviews and ratings. That is why choosing the right supplier is crucial.

  • Low Margins

    Since dropshipping is highly competitive, sometimes you are forced to operate at extremely low margins. You either have to make sure your prices are more appealing as compared to other stores or brand and marketing it better. If you use tight margins it will impact your revenue and profits. Further, you will also have to invest in a faster website and a customer service team to help improve your customer loyalty.

  • Shipping costs

    Sometimes you might incur extra shipping costs on your order if it is sourced through different dropshippers or third parties. For example, if someone orders four items, each of which has to be sourced from a different supplier, it can increase your shipping costs. However, since the customer pays a set amount, you will be at the receiving end of the damages. Again, choosing the right products and right suppliers are crucial to success.

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If you decide it is the right business model for you, there are several things to consider. There are different skills that need to be learned: digital marketing, website design, copywriting, just to name a few. Is it possible? Without a doubt. All you need is a good source where you can learn everything and put in the work. So lucky you! You are exactly where you ought to be! Amongst the resources provided here at noto9to5, you will find everything you need to succeed!

Conclusion

Overall, dropshipping is a great model to start your business. While some skills and capital are needed to begin, the cost is still way less than starting other businesses like brick and mortar. You can use it to try different options and test the waters to eventually decide the path you want to go with. The risks relating to dropshipping are minimal as opposed to other kinds of business. Thus, if you ever wanted to be an online business owner,  it can be an excellent starting point for you.

Have you tried Dropshipping yourself?

 

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