What is Dropshipping?
By David Oakes
What is a Dropshipping Business and How Does It Work? -
If you are thinking about becoming an e-commerce entrepreneur, one way to test whether you could be successful is to become a dropshipper.
Dropshipping is a retail fulfillment method whereby you take customer orders, and have a supplier package and deliver product shipments directly to customers. The term dropship has been used since the 1920s when catalog businesses were popular. The word drop means to deliver, and ship is to mail or convey to a location.
This form of retailing enables an e-commerce retailer to never handle the product directly and, instead, serves as a source to consumers for products they are interested in and enables manufacturers or suppliers to have another avenue to sell their products.
Who is involved in the dropshipping process?
• Manufacturers: The companies that create the products, and typically sell pallets of products to wholesalers and suppliers that stock a variety of products for sale to retailers. Manufacturers typically do not sell to consumers.
• Wholesalers: Companies that stock a variety of manufacturer products, and typically specialize in a particular type of product, such as home decor, pet supplies , consumer electronics or fashion accessories .
• Retailer: Companies that sell products directly to the consumer.
Rather than visiting a store in a shopping center, consumers visit your online retail store, search for and buy a product. When the order is placed, you alert the drop-ship partners, which can be a supplier or manufacturer, who packages and ships the product to the consumer. You never touch the product.
E-commerce dropshipping became popular in the 2000 with names that we are all familiar with - Amazon and eBay. Both companies allowed individuals to sell products through their platforms, while taking a fee for the service. About 10 years ago, the door to low-cost Chinese products opened with the creation of AliExpress, an online retail platform. This was soon followed by Shopify, which enabled a person to use their platform to open and customize an online store, as well as other online retail platforms that enabled branding and customization of e-commerce stores.
Benefits of Dropshipping
• Lower cost of entry: You do not need to invest in inventory or a place to store it. Manufacturers or wholesalers warehouse the products. Because you do not have storage costs, your overhead is relatively low, which increases your potential profits. Plus, you are not stuck with inventory that you cannot sell.
• Work from anywhere: If you have an Internet connection and a computer, you can manage your e-commerce site from anywhere in the world.
• No inventory: You can choose to specialize in particular product lines or offer a variety of products to customers. Not having inventory also means that you do not have to manage it, store it, itemize it, ship it and reorder it.
• Apps take care of most of the marketing: Some shopping platforms help to launch ad campaigns across various social media platforms to market and sell your products.
The Challenges of Dropshipping
The dropshipping business is highly competitive. There are millions of dropship websites worldwide. Differentiating your business from others takes time, focus, understanding of consumer trends to know what products to put on your site that will sell, and some knowledge of search engine optimization to help customers find your online store. But, most importantly, patience and persistence.
Some of the most common dropshipping issues:
• Unbranded packing slips: Consumers do not know the product is coming from you.
• The cost of mailing: Mailing costs can kill a sale at the online shopping cart if mailing costs are not properly calculated and are unreasonably high.
• Supplier reliability: Sometimes suppliers may not follow through with shipping, or goods arrived damaged and missing parts. It is on you to deal with consumer dissatisfaction and work with the supplier to resolve the problem.
• Making your online store look professional: Visit some traditional big-box retailer stores, or high-end consumer product e-commerce site and you'll understand that part of the reason why they are successful is visual appeal. They have a particular look and feel with pictures and colors that makes it comfortable to shop the store. It takes thought and creativity to build a distinctive online store brand.
• Low profit margins: Each time companies in the supply chain touch the product you are selling, they take a profit, which lowers your profitability.
In the past, dropshippers had to establish their own relationships with manufacturers and suppliers, negotiate prices, set up billing, and a host of other operations required for a successful dropshipping business. Integration programs such as Shopify, Etsy and BigCommerce provide the platforms for opening and managing an e-commerce site, and some provide links to manufacturers and wholesalers.
TopDawg's Differentiating Solutions
TopDawg has thoroughly studied the problems associated with dropshipping to develop robust solutions that help online retailers operate more efficiently and profitably.
Through TopDawg, you have:
• Your online WooCommerce, OpenCart, Amazon, eBay, Walmart and other stores seamlessly integrated with manufacturers and wholesalers offering more than 250,000 products, and who have agreed to sell their products to our customers at a fixed price through our company.
• The potential for higher profit margins - the average markup ranges from 35-85 percent, depending on your plan.
• Branded shipping labels - customers know that the products are from your store.
• Precise and exact shipping costs at lower rates that have been negotiated by TopDawg.
• Shipping integration and automated carrier selection - there is no longer a need to visit separate shipping sites to find the best mailing rates, we automatically find you the lowest-cost shipping rate.
• Carrier tracking after order processing - you and your customer know when the product was shipped and when it will be delivered.
• No minimum orders - you don't need to buy lots of 12 or 24, just that single item for your customer's order.
• No contracts - cancel at any time.
Launching your online retail store can start you on the path to a successful business. At TopDawg, we support your success with a growing number of dropshipping suppliers with wholesale products, powerful store integration, order automation and shipping tools, along with higher profit margins.