Monday, June 3, 2019

How Does Dropshipping Work?

I am pretty sure that you have heard about dropshipping: what it does and why people are getting into the dropshipping business.  We also have an idea that dropshipping is a business method of making money online without putting off a large amount of money. And, you do not need an inventory, at all.  

In essence, we have an idea of how dropshipping works, but in the next post, we will talk about the details as to how drop shipping really works.

How does dropshipping work? The process of dropshipping involves customers, dropshipper and the supplier.  A customer will buy from the dropshippers’ online store. Once the order has been processed by dropshipper, the order will be sent to the supplier who will fulfill the order and will directly ship the products to the customer.

Step by step process of dropshipping:
Before we discuss the entire process of drop shipping, let us first understand the components and their roles in the process.

The supplier plays a very important role in dropshipping.  This is where the products are coming from. There are several suppliers available who is aware of how dropshipping works.  It is important that the suppliers are in agreement with you that you will be making the purchase to dropship items. Why? Because the supplier will be doing branding, packaging, and shipping.  

As a drop shipper, you will be buying the products from the supplier at a price of wholesale.  To make a profit, you will sell the products at a retail price. Let’s say, for example, you purchase a pet accessory for $2.50 in wholesale, then to gain margin, you sell it for $7.50.  Of course, you have to be aware of and check the competition. Also, there are times when the customer will shoulder the shipping. So you have to consider that, too.
The customer is your audience for the dropshipping business.  He is the one buying from your “store” make the payment and provides his shipping information.  Customers generally are after the convenience they get when drop shipping. A few things they consider would be the sellers’ rating, product description, checks and compares prices.  

This is the part where we come in.  Here, we set up a “store” where we post the products we want to sell.  In dropshipping, because you never do inventory, all the products you sell are posted on your website.  We will focus on the drop shipper part because this is most of the transactions are processed. Below are the things we manage as a drop shipper.

Finding a good product niche
As a drop shipper, you are responsible for choosing the right product niche for your business.  This is very important because this is the foundation of your business. A good niche will determine if you will get more orders and customers, too.

Setting up a Website.  
A website will be the store for your business.  Most of the transactions happen here. This is where your customers will shop and check out the products you sell.  Because dropshippers do not hold inventory, it is very important to have a website that could attract customers as well as suppliers.  Some suppliers check a dropshipping website to know if you are a legitimate drop shipper and also to gain confidence that you will be making good sales of their product.

Driving traffic to the sale
The website you put up will be hosting the service posting the items up for sale.  When the customer finds a product that he’s interested in and makes the purchase, the transaction will be processed on the website.  Once the payment was made, the order will be processed and the information will be sent to the supplier. The supplier will be processing the branding, packaging and shipping the products directly to the customer.
Why is dropshipping a trend?
At this generation, people are looking into convenience.  This is also happening in shopping. That is why, a huge number of customers are going for online shopping instead of the traditional shopping where you have to spend hours on the queue making the payment, or spending time traveling just to make that purchase at the malls.

This is an opportunity seen by entrepreneurs.  It has been studied that people will continuously make a purchase regardless of the situation they are in.  it could be purchasing for a need or a want, it does not matter. As long as there items on sale, people will decide to buy the products.

With this innovation, we have made a way to dropshipping. Compared with the traditional business model, dropshipping is advantageous to people who do not have enough capital to start a business.  Because it does not require an upfront cost, more and more dropshippers are attracted to the idea of making money online with minimal capital.

Due to the demands of dropshipping, the competition on drop shipping business is becoming even tighter.  You can see that there are items on sale on Shop A which is also the same item sold at Shop B. In this case, a drop shipper needs to be creative so that you can be competitive and still attract new customers, and also have repeat customers to shop in your “store”.  

Part of the competition we are looking into is the fact the there are drop shipping companies who fail to expand or succeed in this field.  Aside from being able to cater the customers in terms of sales, we want to sustain having this business to continuously make the profit and earn.  

One of the things we consider in starting a drop shipping is to first understand what drop shipping, and how it works.  Sure, many of us have an idea of the drop shipping framework, but in reality - there’s a lot more to know. In fact, in choosing the product niche along can be challenging for first-time dropshippers.  

To ensure that we go forward and succeed with the dropshipping business, we have to do a lot of research. Know how dropshipping works, and what are the things to expect when you start your own dropshipping.  

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