What is dropshipping?
Running an online store in an effective way is possible thanks to various modern tools and models of online sales. In this context, a term such as dropshipping is often used. What’s behind it?
Dropshipping is one of the logistics models used in online sales. It consists in transferring the goods delivery process to the supplier. If you are considering setting up an online store and implementing this solution, this article is for you. You will learn from it:
- How dropshipping works in practice
- Who is the most profitable to use the discussed model
- About the advantages and disadvantages of dropshipping
- How to earn money on dropshipping
How does dropshipping work?
The mechanism of dropshipping is simple. Your role as a seller is limited to collecting orders that you pass on to the supplier – wholesaler, manufacturer etc. The supplier is responsible for shipping goods purchased in your store. This is perfectly illustrated by the diagram below:
Advertising plays a significant role in the presented model. It is necessary to take steps to attract customers to the store. There are currently many possibilities in this regard:
- AdWords campaigns
- Price comparison websites
- Social media
- e-mail marketing
- Company blog
- Image ads on Google
- Cooperation with bloggers, vloggers and thematic websites.
It is in your interest to get as many customers as possible and generate a lot of traffic on the website, and you will find that running an online store based on the dropshipping model brings measurable benefits.
Dropshipping – for whom?
Dropshipping works great in many situations, especially if:
- You are taking your first steps in business and looking for savings
- You run a small e-shop selling goods in small quantities
- You trade on Allegro and other auction sites
- You want to earn money on an online store, but you have no idea what to sell
- You want to expand the current range of the store
- You sell large-size products, the shipping of which is not cheap and can be problematic.
Of course, in each of the above-mentioned cases, it is essential to have a registered business. You cannot avoid it, no matter what form of internet sales you choose. Dropshipping is a fairly universal sales model, but if you want to see the desired results, you must not forget to develop an appropriate business strategy.
On this occasion there is an important note: the choice of supplier is important. It should be a proven and reliable contractor, offering a wide range of products and attractive terms of cooperation.
Dropshipping – advantages and disadvantages
Dropshipping is a solution willingly chosen by online stores, which is due to its advantages. Among the most important are:
- Lowering the costs of running the store – the seller does not need to have a warehouse, the maintenance of which is an important item in the company’s budget
- No freezing of financial capital – capital freezing consists in investing in goods that are kept in the warehouse
- Low financial risk
- The possibility of starting e-business with limited capital
- Shortening the time of delivery of goods to the customer
- Ongoing access to the supplier’s current offer,
- Saving time – you have more time for other aspects of running the store.
The biggest disadvantage of dropshipping is that you are not sure if the supplier will meet the shipping obligation within the time specified on the store’s website. There are also cases when a customer orders a product and it turns out that the wholesaler does not have it in stock.
How to earn money with dropshipping?
A shop using the dropshipping model earns on the difference in the price of goods. When establishing cooperation with a supplier, he receives a discount from him – their amount depends on several factors. The seller lists the goods at retail or own prices. The greater the discount from the wholesaler, the better – during the cooperation its terms can be negotiated. Regular customers are in the most advantageous position as they receive the most attractive discounts.
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