What Is Dropshipping? Definition, Strategies, Benefits, Drawbacks & Tips.

    Dropshipping is one of the best ways to make money online.

    According to grand view research, Dropshipping is a business that will be expected to CAGR (Compound Annual Growth Rate) of over 28% from 2019 to 2025.

    The Results show how dropshipping has become one of the popular eCommerce models for many people.

    With the popularity of dropshipping increasing, this means that more and more people are looking for this business.

    However, when you ask someone where to start dropshipping, they will not be able to give an answer which is useful.

    Most likely because they themselves do not know how to do drop shipping work without any hassle.

    So, we’ll go over the ins and outs of dropshipping in this blog post, including how to pick a vendor and what equipment you’ll need.

    We’ll also provide a detailed step-by-step tutorial on dropshipping in this blog article.

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    What Is Dropshipping?

    Dropshipping is a method of running your own business without storing any inventory.

    It has become popular due to the rise of AliExpress and entrepreneurs looking for easy ways to launch new businesses that require little start-up capital, but it’s been around since the early days of the internet.

    The more you spend on education and coaching, the more you see people having success with this business model.

    In fact, many people make a living from drop shipping.

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    Dropshipping is especially attractive to people who want to test a product idea without investing in inventory or worrying about logistics.

    It’s also great for anyone who wants to set their own hours and be their own boss.

    However, the biggest myth in e-commerce: “Dropshipping is not scalable!”

    This is the single most repeated phrase by small eCommerce store owners who failed at dropshipping.

    In reality, what people call “not scalable” is really just a lack of knowledge on how to scale up their business and that’s exactly why this article was written.


    How Does Dropshipping Work?

    How Dropshipping Works

    Dropshipping works through a retailer called a dropshipper, who stocks and ships products to customers from their own warehouse.

    Retailers who implement the dropshipping model into their e-commerce business sell their products through another company’s website at a marked-up price.

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    So when a customer makes an order from that retailer/marketer, they package it and ship it directly from the store to the customer.

    The marked-up price (or margin) is kept by the retailer as profit.

    The Three Parties Involved In The Dropshipping Process:

    Here is the list:

    1. Manufacturer Or Supplier.

    They have the products you want to sell and ship them directly to your customers.

    This is usually a much larger company, which holds a lot of clouts when negotiating terms with distributors.

    2. Dropshipper.

    Usually, an individual or small eCommerce business buys from manufacturers in bulk and sells on their own website using marketplaces such as Shopify, WooCommerce, etc.

    Some people own both the retailer and manufacturer roles at the same time, but this can get expensive if there are many orders.

    They also take on all the financial risk if they cannot fill an order since they’re responsible for shipping it to the end customer.

    3. Customer.

    As you can see, the dropshipping model does not require much start-up capital and risk since it is easy to set up.

    However, there are a few factors that determine your success or failure is to keep your customer satisfied.

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    Successful retailers must compete on price and differentiate their business through customer experience.

    Now that you understand which parties are involved in dropshipping, let’s understand how dropshipping works.

    This Is How Dropshipping Works:

    How Does Dropshipping Work

    Dropshipping steps:

    1. Drop shippers List Supplier Products On Their Website At A Higher Price.

    With Dropshipping you can sell products from different manufacturers.

    When a customer makes an order, you buy it from the supplier and have it shipped directly to your customer.

    You keep the difference between product cost and selling price as profit.

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    There are three main ways to find suppliers for your dropshipping business: Marketplaces, Google search, and Source Global’s Dropship Directory.

    Marketplaces such as AliExpress connect dropshippers with suppliers of various products across the world at wholesale prices (with minimum order quantity).

    Remember that you will need to do some research into what brands can ship items to each of these countries/states.

    2. Customers Come To Their Online Store And Place Orders.

    When the customer gets their product online they will place it.

    Before doing that they may find another store to check the price of a similar product and they will buy from you.

    After they have paid, the cash is transferred directly into your PayPal account or bank account which you provided when you created your store.

    3. The Dropshipper Places An Order To The Supplier With Customer Details.

    After finding a perfect product the customer places the order and the retailer receives the order from the supplier, packages it with necessary items, and ships it to them.

    With the delivery, the customers get it into their own hands.

    Often, customers are not aware that drop shipping is being used since you don’t need to show your supplier’s branding on the product.

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    The important part of dropshipping is that The retailer or marketer has no upfront inventory costs or risks, reducing his risk to almost nothing.

    This means that if a product fails in your store, it doesn’t result in any direct loss for you as long as the least amount was paid for the order.

    4. Supplier Ships The Order To The Customer On The Drop Shipper’s Behalf.

    This is quite interesting when a dropshipping company ships an order on behalf of you, it will be much better.

    If you separate the order from the supplier it much reduces the risk for your business and the chance to lose a customer.

    Dropshippers have an advantage over traditional retailers because they eliminate the problem of storage space for customers, who have no need to grasp or deal with inventory costs.

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    So, The main goal of dropshipping is for you as a retail store owner to focus on a marketing strategy that will bring more customers and increase sales volume so that you can earn more profits from those transactions rather than worrying about buying products from suppliers, managing warehouses or shipping processes.

    We think drop shipping is perfect for all types of online businesses, especially E-commerce where there’s not enough time and money to maintain stock for their stores.


    What Are The Advantages Of Dropshipping?

    Advantages Of Drop shipping

    There are lots of benefits to doing dropshipping, the main one is that you don’t need to carry any inventory.

    This is a huge benefit for obvious reasons, but there are other benefits too:

    1. Less Capital Is Required.

    You need very little working capital to get started with drop shipping.

    This is great because it makes starting your business much easier and faster.

    You can start a legitimate online business with just $100, and in some cases even less than that.

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    This is because the drop shipper (the supplier) carries the inventory and the risk.

    You don’t need to put up any money in order to receive your products or stock up for any future orders.

    2. Easy To Start.

    Setting up a dropshipping store is an easy process.

    You can have your store ready in one day if you know what you are doing, even if you don’t have any technical knowledge or web design skills.

    Dropshipping stores require very little management and upkeep.

    Since the drop shipper deals with all of that for you, your time is mostly free to do other things that are more important to growing your business.

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    The only investment into your business after it has started would be marketing costs.

    Which will reduce as customers come in without outbound marketing efforts on your part.

    No need to maintain stock level, investigate supplier problems or manage shipping processes, this means more time for yourself to make your business perfect.

    3. Low Overhead And No Storage Are Needed.

    With drop shipping, you don’t need to keep any products in stock, manage the warehouse or ship them out.

    You simply receive an order from your customer, process it with the supplier, and wait for the delivery.

    There are many suppliers who offer drop shipping services already (Alibaba is not a bad place to start) so all you have to do is choose one that matches your product range and the location of your market.

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    The supplier ships the parcel directly to your customer on your behalf without revealing their branding on the package.

    This means that you can handle orders like a normal retailer would – taking payments, sending receipts/invoices, etc without having to reveal anything about yourself or even show that there is no physical store where customers can walk.

    So it requires no manual power to get started.

    4. Flexible.

    You can sell any product you want without worrying about whether it is in stock.

    Your supplier will always have the products that you need, and they should be able to ship them out within a day or two so there’s no waiting around if your sales start taking off.

    This also means that you don’t have to waste time sourcing for suppliers or investigating which is a pretty simple and flexible option for a drop shipper.

    5. Wide Selection Of Products To Sell.

    You can not only work with a single product but also work with a large section of products that can be dropped shipped.

    Also, you don’t need to search for suppliers because nearly every industry already has drop shippers.

    6. Easy To Manage.

    To the all online business model, if you talk about the physical product, then dropshipping is one of the simplest business models you ever find.

    Because in this business model, you don’t need to manage or maintain any inventory for your business.

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    You need not worry about the packaging and labeling, shipping of goods, refunds, and customer service.

    All these things are managed by your manufacturer.

    7. Easy To Scale.

    Since dropshipping is an eCommerce model, you can scale by simply adding the product to your store.

    You don’t need to source for more suppliers or hire workers who will manage inventory for you, which means that it is easy to scale when the time comes.


    What Are The Disadvantages Of Dropshipping?

    Disadvantages Of Drop shipping

    Here are some disadvantages of drop shipping.

    1. Low-Profit Margins.

    Today, large companies are looking for dropshipping suppliers in China because it is easy to launch an eCommerce store.

    But the problem with this method is that you have to sell your products at a low price because you have a wide range of competitors who sell at low cost.

    2. Highly Competitive.

    As you are dealing in a highly competitive market, there are many companies who are doing the same thing.

    If you are looking at dropshipping suppliers, then you will find hundreds of them which is difficult to choose the best one when it comes to price, product quality, and after-sales support.

    3. No Control Over The Supply Chain.

    The supply chain is one of the most important things to consider when you are looking for dropshipping suppliers.

    As your supplier is responsible for the whole supply chain, you won’t be able to control it.

    This might cause many problems like delayed shipping, broken or lost items, customer complaints, etc. You can’t do anything about these problems because all issues will cover the supplier.

    4. Shipping Complexities.

    Shipping is a vital factor when it comes to selling online.

    You have to worry about which courier will match your gateways and whether they have the required infrastructure to deliver goods, etc.

    In this model, you don’t own any inventory so it can become difficult for you to attach different services with various couriers.

    5. Limited Customization And Branding Options.

    Dropshipping suppliers offer standard product designs, and you won’t be able to brand or customize them as well.

    This is not what most people are looking for because customers want to buy unique items which will help in branding their websites.

    6. Challenging Customer Service.

    You will have to direct all your inquiries to the supplier which means that your customers won’t be able to contact you directly.

    This might cause many problems because people always expect instant support from customer service, and they are unlikely to wait for days until they get a reply from your supplier.

    7. Legal Liability Issues.

    If you are selling products that are regulated, then it can become difficult for you to source them because suppliers might not want the risk of legal liabilities.

    For example, if you are selling medical devices, then it is best to stay away from any supplier who isn’t authorized by the FDA (Food and Drug Administration).


    How To Start A Dropshipping Business?

    How To Start A Dropshipping Business

    To start drop shipping, you have to look for drop shipping suppliers who can deliver your order without any issues on time.

    You will then have to display that product on your website and redirect traffic from social media platforms, search engines, affiliate marketing networks, etc.

    So, let’s see how to start:

    Step 1: Choose Your Niche.

    Niche is an important factor to create your own brand because you have to focus on the benefits your customers want.

    For example, if you are looking for dropshipping suppliers in the USA to sell dresses online, then you should target teenagers because there are many websites that are already serving their needs.

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    Besides, targeting a niche will also help you in branding and marketing.

    If you can offer a unique product to your niche, then you will be able to stand out from the crowd.

    Step 2: Find Products To Promote.

    In every niche, there can be several products to promote and offer to your customers.

    If you are looking for dropshipping suppliers where to sell dresses online, then there will be hundreds of products like wedding dresses, jumpsuits, t-shirts, etc.

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    You can find this product by doing comprehensive research on Google and other platforms before deciding which supplier you should choose.

    If you’re not an expert to choose the product then you can hire a freelancer or a marketing expert to help you in the process.

    Step 3: Create A Dropship Website

    After finding niches and products, your next task is to create a website.

    To do this, you have to find the best platform that will offer all features for eCommerce including shopping carts, payment gateways, SEO optimization tools, etc.

    You also have the option of creating your own dropship-ready website using an online template.

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    This way is good if you are looking for cheap drop shipping product suppliers because it will cost less than $100 to buy and customize the theme of this website.

    However, it doesn’t give room for customization so most people prefer finding custom themes or building websites from scratch which will take some time but has more advantages than disadvantages.

    However, you can also create a website from Wix, Shopify, etc.

    Step 4: Drive Traffic To Your Website.

    After all, is set up, the next task is to drive traffic onto your website.

    This can be done by several methods including search engine optimization, pay-per-click ads, social media marketing, etc.

    Here are the ways to drive traffic to your online store:

    1. SEO (Search Engine Optimization).

    The most cost-effective approach to drive traffic from search engines.

    However, it can take a longer time to see good results as well as need some technical knowledge to handle it.

    If you understand the Search engine mechanism you will easily rank your website on any definite keyword with the top position.

    But if you can’t optimize your website yourself, you can hire a professional who will take care of it.

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    The benefit of search engine-based traffic is that it’s cheap and easy to start.

    For example, Google Adwords is a pay-per-click approach where you can get targeted traffic on your website for $1-$2 per visitor but in the SEO module, you don’t need to pay any fee.

    That is why Search Engine Optimization is a good option to start a dropshipping business.

    2. PPC (Pay-Per-Click) Ads.

    To create PPC ads, you have to choose popular keywords related to your product and target customers who are searching for those products.

    However, this is a time-consuming process because it takes time before getting the desired results.

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    In addition, you will have to spend more money on PPC ads as compared to the SEO approach so this can be an expensive choice if your website is new or has fewer visitors.

    This is why we only recommend opting for PPP ads if you already have experience running paid ads and know about their optimization and benefit.

    3. Social Media Marketing.

    Another way to drive traffic to your website is by using social media networks such as Facebook, Twitter, and Instagram.

    You can create a business profile of your store and market it online by uploading pictures, videos of products, and more.

    This will allow you to reach more people worldwide who are looking for items like yours.

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    However, this is the slowest way but if done correctly then it will also be an effective one because everyone wants to find and purchase affordable products online these days.

    There are many other ways that you can use to promote your website including email marketing, affiliate marketing, etc., but if you want quick results then search engine optimization, PPC ads, or social media marketing are the best options according to our perspective.

    Step 5: Convert Traffic Into Sales.

    The last and most important task is to drive traffic from your website to an eCommerce store and then convert those visitors into sales.

    In order to do that, you have to improve the conversion rate of your website which means how many people who visit a page will buy the product.

    The most effective way is by using a landing page because it’s designed especially with one goal so this is an easy way for potential customers to find what they are looking for fast and purchase it.

    This leads to increased conversions which can be up 100% or more than usual due to impactful designs.

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    But if you don’t know how to create a good landing page, use ready-made templates or hire someone who can create it for your business.

    In the end, the more product you sell the more profit you will generate.

    So, don’t forget to keep your website up-to-date with high quality, relevant and informative content related to the products so the visitors can have a better experience.

    This is essential for improving your rankings in search engines which will bring you more traffic flow from search engines and conversion.


    Some Tips To Help You Become A Successful Dropshipper.

    dropshipping tips

    Here are some tips:

    1. Do Some Market Research.

    Before you start your dropshipping business, you need to do some market research.

    Research about what kind of product the customer wants.

    Whether it is in demand or not. Whether the resellers selling that particular product or not?

    If you get these questions, then do research about what products are selling in the market, and how much is the average price for that particular product.

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    You can also do some competitive research to know who your competitors are.

    What is their marketing strategy?

    Which product they are selling and which niches they are targeting.

    2. Protection From Overselling.

    You must have come across this type of situation, you have 100 pieces of t-shirts in your inventory and now your supplier sends you 1000 pieces so now what are you going to do?

    Don’t worry, there is a solution for everything.

    You can try one of the apps which will tell if your customers already have that product, or you can create an up-sell page where customers can put their email IDs to be notified when the item becomes available.

    3. Strategic Shipping Systems.

    A strategic shipping system will give an upper hand to you and your competitor.

    When you design a strategic shipping system, it will not only increase your sales but also decrease the risk of overselling.

    For example: If you want to sell women’s hoodies then keep that product in such a way that it can be shipped throughout the year.

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    Meanwhile, if you are selling winter coats then inventory should be enough to cover winters and autumns too at least.

    This is because the sale is low during these months, but also try to keep some stock even after the end of the season so when a new shipment arrives, sell the last season’s products with a discount so they get sold quickly and restock with newer designs.

    4. High-Maintenance Products.

    It is not recommended to sell high-maintenance products.

    For example, if you are selling handmade jewelry then keep it in stock only if your supplier makes them or you design them yourself.

    Or else drop-ship them by connecting with a local designer who can make the jewelry on your behalf and ship it directly to the customer’s doorstep.

    5. Provide Customer Support.

    Whenever your customers face any issue regarding the product they ordered, provide them with customer support.

    This will not only increase the trust of your customers but also decrease the refund requests.

    For example: If you are selling leather jackets and if the size is not correct or it doesn’t fit then provide them with an easy return policy for that particular order.

    6. Focus On Marketing And Branding.

    Focus on marketing and branding your dropshipping business so customers can easily find the product they are looking for.

    Use social media platforms to promote your products, and add quality images of the products in your store so customers will become more interested in buying them.

    Also, add a blog section on your website where you can write some interesting facts or upcoming trends about the fashion industry.



    So these are the step-by-step guides that you need to follow when creating a dropshipping business.

    If you adhere to all points given above then it’s guaranteed that you will get the desired results soon.

    This blog post has shown you how easy and profitable dropshipping can be with an in-depth guide.

    So if this is something that interests you, what are you waiting for?

    Get started now.