What Is Dropshipping Exactly And How Does Drop Shipping Work?

July 17, 2020
What Is Dropshipping Exactly And How Does Drop Shipping Work?

What is dropshipping? E-commerce is now in bloom and will continue to grow in the future. The customers are getting more comfortable shopping online for various products starting from medicine to clothing.

Dropshipping is a digital business model for new-age entrepreneurs. These businessmen sell products to online shoppers without holding stocks. If you want to know more about what is dropshipping, please keep reading.

Independent merchants do not want to take too many risks. But they want more customers to visit their site for higher sales. For an online store to be successful, the site should hold hundreds of products of varying sizes, brands, colours, and more.

However, the cost of transporting and storing such a massive amount of inventory is very high. Apart from these, there are other associated costs, such as managing, auditing, safety, and more. You need not worry about holding an inventory or managing transportation if you know how dropshipping work.

  • Millennial and Gen Z dealers focusing on online sales can benefit from dropshipping 2020.
  • This highly accessible technique connects customers with in-demand products.
  • The online entrepreneur neither owns nor pays upfront for the new products. Store managers coordinate the orders with a third-party and directly ship to the customer.
  • It also serves as an excellent platform to create many more employment chances for small and medium enterprises.
  • Huge profit potential attracts many aspiring traders to this industry. Dropshipping requires minimum investment as there is no inventory stockpile. The product manufacturer need not worry about the hassles involved in managing the online store, brand reputation, payment processes, data storage, etc.

Value of supply chain 

Value of supply chain

The time and effort taken for the product to reach the customer from the manufacturer via online sales are enormous and complex.

These consumer goods reach customers because of efficient supply-chain. Industrial manufacturers produce various products from raw materials. Wholesalers buy large volumes of goods and stock them.

Retailers transact with wholesalers so they can sell items in small quantities. If the retailer does not have a product in hand, he needs to receive it from the wholesaler, store it in his warehouse, and then send it to the customer.

The confusing value chain stops with dropshipping products transportation model. It is a valuable service that gained traction due to digital connectivity. When a customer places an order in a portal, the information reaches the manufacturer or the wholesaler. The wholesaler or the manufacturer sends the product directly to the customer.

Order Processing

 How drop shipping work proceeds is very straightforward –

  • The online merchant receives an order for a specific product. For example, a customer orders five smartphone cases. The customer completes the checkout process and makes the payment.
  • The online trader receives an online or phone order, and he acknowledges the payment (or acknowledges the order, in case of COD) with an email.
  • The trader forwards the order to the concerned wholesaler.
  • The wholesaler or the manufacturer will deliver the product to the customer’s home on time.
  • The package will have drop shippers logo, name, address, and other details. 
  • The process of delivery is trackable online via the online trader’s portal. Any customer query goes to the dedicated customer service department of the portal.

How to start dropshipping?

After learning how to dropship, you too can become self-employed. But it is not a simple task as there are multiple influential factors. You have to decide on a business structure such as sole proprietorship, LLC, or corporation.

A local business license, along with knowledge of sales tax, is also essential. Consult a legal professional or clarify your doubts using informative online resources. 

All you require to start is knowledge to run an e-commerce platform. Connect with suppliers and wholesalers and create a catalogue for your site. To plan, implement and administer a dropshipping 2020 business, an individual requires these essential credentials-

  • Create an online store
Create an online store for drop shipping

Create a customer-friendly site with an extensive catalogue of top-selling items. Every item in your catalogue must be legit. You need a contract with wholesalers and manufacturers to honour the orders that arrive via your site.

  • Acquire customer

Spending valuable time on learning how dropshipping work can be profitable. It is essential to create a niche. There are numerous online stores on the internet. You need to create an identity for your business.

For instance, you can create an online portal for buying fresh flowers, fruits, and vegetables from local markets or an online dress shopping store.

If you are looking for a particular niche, you can sell pottery items, wooden toys, figurines, and so on. There are numerous customer acquisition methods and models. Choose the one that suits your vision, mission, and budget.

  • Data analysis
Data analysis

Investment is the key to any online or offline retail business. Invest small and grow the business with effort and confidence. Calculate metrics of your site and your customer traffic details, conversion history, and so on. Learn from the trend and try to optimize your website.

Effective operations

Identify the most profitable and in-demand dropshipping products. Work with reputable suppliers, wholesalers, and distributors. Starting a store after mastering how to drop ship is not sufficient.

As a fresh trader, you have to be alert and receptive. Gradually gain experience and use these tips to become a competent operator.

  • Be prepared for botched orders and out-of-stock items.
  • Select easy to implement solutions over complex operations.
  • Take the onus, manage customer relations, and learn from mistakes.
  • Properly handle the inventory across multiple suppliers.
  • Gather regular intelligence on stock availability from wholesalers.
  • Route the orders based on supplier, availability, price, and location.
  • Use a verification system to avoid security flaws and fraudulent orders.
  • Adopt a clear policy on returns, refunds, shipping, and order tracking.
  • Dropshipping 2020 is incomplete without a phone line and email support.

Top success tips

It is not enough to know what is dropshippingYou need to look at success factors. A strong foundation is essential to achieve profits in any business. Getting the fundamentals right is necessary, but not sufficient. You have to do thorough research and design a business plan to justify the investment.

But, learning all the intricate details on how to dropship can be overwhelming. Look at this shortlist to have a quick grasp of significant criteria.

  • Add value by displaying informative, insightful catalogues.
  • Invest in SEO and marketing to create a viable sales funnel.
  • Specialize in hard-to-find dropshipping products to create a niche.
  • Networking is essential. Your contacts with the wholesalers and suppliers are your asset.
  • Offer exceptional services without getting obsessed with the details.
  • The key to success lies in intelligent decisions and handling customer feedback.

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