Have you ever ordered any products online? And have you noticed that the platform from which you ordered your product is not actually the product owners but only acts as the intermediaries between suppliers and you. Dropshipping can be a great way for small business owners to start an online store without any capital upfront. All they need is inventory space on a computer screen and they can do it all from home. In this article, we will explore the advantages of Dropshipping and why this business model is so popular today.
What is Dropshipping Model?
Dropshipping model is a business model where retailers do not keep goods in stock, but instead, act as intermediaries between suppliers and customers.
It is a business model in which e-commerce retailers do not keep goods in stock. They make agreements with wholesalers from whom they order the goods on a per-order basis, then customers buy these products on their website.
Dropshipping is popular because it enables entrepreneurs to start their own business without having to put any money into inventory or take any financial risk. It’s also an effective way for established retailers to expand their offerings worldwide without having to invest much money in infrastructure.
In this model, the retailer never pays upfront for the product and therefore does not have to worry about keeping enough stock of any given item to satisfy demand.
Dropshipping has been made popular with companies like AliExpress, SaleHoo, Shopify, etc.
How does a Dropshipping Model Work?
A dropshipping model is a process of selling products online without being an importer, manufacturer, or distributor. The business owner would first need to find a product that has enough demand and then contact a wholesaler or distributor to purchase the product. The business will then offer the products for sale on its website with retail prices. The business would have to pay upfront to purchase inventory from the wholesaler or distributor, but they would not have any risk of becoming overstocked because they are not holding any inventory themselves.
The customer can buy products at a retail price directly from the website and the business will bill the wholesaler or distributor for their customers’ items. The wholesaler or distributor will pay them for those items and all transactions happen online without cash ever exchanging hands between any parties involved.
Here’s an example of how you do you dropshipping through a website. You can be an intermediate between the suppliers and the customers through a website and sell the products taking profit from each product.
Advantages of Dropshipping
Dropshipping is the easiest way to get started with your own eCommerce business. Dropshippers can find products, market them online, and fulfill orders without ever having to handle the inventory. So here are some of the advantages of Dropshipping.
- It does not require a large investment.
- Buyers can buy items from anywhere in the world without paying extra fees or taxes because they are fulfilling orders from independent sellers rather than a central store location.
- Dropshipping also allows small businesses to compete against major retailers by offering niche products.
- Wide selection of products
Disadvantages of Dropshipping
- The supplier may not provide an adequate customer service or product warranty.
- Very much competative
- Inventory issues
- Totally dependent on suppliers
- Challanging to bring Brand Loyality and Marketing
Conclusion
Thus, Dropshipping is when you create an online store that doesn’t hold any inventory. When someone makes a purchase from your online store, you simply order the item for them from the supplier and have it shipped to the customer’s address. This is very appealing because it means that your overhead costs are lower since you don’t need to buy or warehouse any of the products!
