When it comes to running an online business, one of the most common things you will hear is fulfillment options. It is an integral part of running a business as you want to take from the supplier/manufacturer to the warehouse and finally down to the customer.
The most promising fulfillment option is dropshipping, as it helps a new business avoid higher overheads and increase its efficiency at the start of the business. So, what is dropshipping? How does it work, and should you start it or not? Let’s answer these important questions in this article.
What is Dropshipping?
So, what is dropshipping? It is a form of fulfillment service where you outsource your logistic work to a 3rd party. This 3rd Party Logistics company, or 3PL, will take care of the rest. This fulfilment will involve procuring from the vendor/manufacturer/supplier and then storing it in the regional warehouse. From there, the company will deliver to the customer’s doorstep.
If you are a new business or running a startup, this model will appeal to you as you don’t pay any logistics overhead. Plus, you don’t worry about when and how to deliver as long as it is on time.
How Does Dropshipping Work?
If you want to know what is dropshipping, then you will be amazed that it has just five steps. Here are the key steps involved in dropshipping.
- Agreement – The seller or business owner will find and sign a dropshipper or a logistics company to handle the process.
- Online Order – One of your customers will visit your online store, place an order, and checkout.
- Order Receival—The 3PL company will receive notification to procure the product from the supplier/manufacturer, which it then brings and stores in its warehouse to pack and dispatch.
- Dispatch Notification—Once the order is packed and ready to be dispatched from the warehouse, both the customer and you, the seller, will receive a notification.
- Order Delivery – The 3PL will then deliver the product to the customer’s doorstep. Here, the customer signs off, which is then shared with the seller.
As a business, you only have to place an item on your e-commerce store and market it. The diligence of the 3PL company makes everything else automatic.
Pros and Cons of Dropshipping
Let’s look at the pros and cons of Dropshipping.
Pros of Dropshipping
- The seller has minimal overhead and investment as they are not storing or shipping the order. There is also no maintenance cost for this.
- If the order is damaged or lost, there is no cost; this is either insured or the responsibility of the 3PL.
- As a seller, you can use multiple channels to sell your catalog and don’t have to use one storefront.
- It doesn’t matter where you are, and all you need is an online store. The supply, warehouse, and dispatch aren’t dependent on your location.
Cons of Dropshipping
- If you use the dropshipping model, there will be a lot of competition, as many businesses use it due to minimal investment and overhead costs.
- You are stuck with the brands you chose, which many others are selling, so there isn’t much uniqueness involved.
- The business will find it difficult to generate sizable profits because many sellers are using the same product.
- If you utilize an inexperienced or low-quality 3PL, mistakes may cost you potential long-term customers.
Should You Start Dropshipping?
Now that you know some of the pros and cons of dropshipping, there are some questions you need to ask. Please read through these to make it easier for you when considering what is dropshipping and if it is the right model for you.
- How are you going to approach your branding? Due to the business model, you have little room to make it unique, and thus, there are more chances of customers not forgiving mistakes.
- How will you manage the quality? The biggest issue with dropshipping is that you are not constantly checking the quality of your products. If any items you dispatch are of lower quality or have a small error, you will get bad reviews.
- Will you be able to meet quick delivery deadlines? Many businesses compete with giants on the fastest delivery timing, which customers are used to now. So you need to have this taken care of by contracting a good 3PL company.
- What is the initial investment you want to make? Drop shipping’s biggest draw is its low cost of entry, which makes it easier for entrepreneurs to start up.
- How much do you want to earn? Because of the low cost of entry, many can join in, so with higher competition, you must compete in profits. This is unlike retail or other businesses that can increase their profits based on demand.
How to Start Your Dropshipping Business?
The first step is to understand what is dropshipping and how to start it. It is best if you have done it before, but if you haven’t and want a head start, here are the concise steps to do so.
- Niche: You have to know your niche, even though you can possibly sell everything. A niche product will attract customers who haven’t been catered to.
- Competitors: Research who are your competitors and how you can make yours unique. Plus, if you jump in, will you be able to make money?
- Dropshipper/3PL: The most important aspect is that you must choose a dropshipper who is affordable yet knows what they are doing. Furthermore, they also must have good ratings to be of help and not a nuisance.
- Store: Then, you must create an online store, preferably on a good storefront like Amazon, Shopify, etc.
- Marketing: Market your product through social media, news, friends and family, and more. To increase conversions, you need to attract clicks and impressions to your store.
- Analyze and Optimize: Most storefronts will provide enhanced information dashboards where you can see the analytics of your impressions, conversions, and sales. Learn to improve those metrics.
How to Find Dropshipping Suppliers in China?
Two of the most reliable and expansive places to search for suppliers are AliExpress and Alibaba. Once you have a start with a first-time supplier, you can take your time to find direct sources. You can do that by later searching Chinese wholesale websites or yellow books for your particular niche.
Dropshipping FAQs
What is Dropshipping?
It is a business model where the procurement, storing, packing, dispatching, and shipping are done by dropshipper or 3PL. The seller only manages the online store and markets their products through social media.
How Profitable is Dropshipping?
Following are a few key factors that can increase or decrease the profit you make by dropshipping:
- Your niche and how competitive it is.
- Are there customers who actually want to buy your products?
- How much do you want to spend on marketing your product?
- What will be the quality of your product, and will you be able to control and monitor it on a regular basis?
As a Beginner, Can I Start Dropshipping?
It is one of the best business models if you want lower costs of entry and overheads. However, you do have lower profit margins, but it comes with lower risks. So, consider these and some other pros and cons we shared in this article when considering this decision.
Dropship your Product from China with NextSmartShip
The core of dropshipping the 3PL partner you work with. While you are marketing your product and planning to enhance and manage your campaign, you can’t worry about the logistics. That’s why companies like NextSmartShip can take all that logistics work off your hands. No more worries about deadlines, no more warehousing overheads, etc. All you need to do is integrate your store with NextSmartShip and focus on what you need to do.
NextSmartShip is based in China, and its global warehouse options give it an edge over other 3PL companies. It has easy access to the best sources, which can boost its profits. Getting the best deals from the manufacturer directly can also boost profits.
Conclusion
you need the most streamlined process. So, when it comes to what is dropshipping and how to best utilize it, a good logistics partner is crucial.
That’s why we recommend partnering with NextSmartShip to get the best logistics support from them. Please contact an expert now to get the best deal.
