Online shopping is a part of daily life in modern society. As a shopper, you may have been in these situations: you can find the same product in different stores; or your package is not shipped from the store’s address. If you have these customer experiences before, you’ve become a part of dropshipping.
Certainly, this is not all about it. Drop shipping business model is now widespread in eCommerce. Many shopkeepers copy the mode of ‘Dropshipping suppliers + Online Store + Social Media’ to run their stores.
1. What is dropshipping?
To put it simply, dropshipping is an order fulfillment method. It helps online store shopkeepers to sell products without stock.
The word is getting hot. According to Google Trends and search engine results, the popularity of the term has increased remarkably since 2017. Though there is a drop this year causing by COVID-19, it only lasts two months and booms since March.
It’s not a new thing, however. Drop shipping business model emerged in 2006. It is generally known by people due to the developed ecommerce business and improved logistics. The growing number of online store websites raise more attention than ever.
2. Who are the participants?
Drop ship business model involves three participants in the fulfillment process – dropshipping suppliers, shopkeepers and customers.
Dropshipping suppliers are also known as the supply chain. They are in charge of storing inventory and shipping the product.
Shopkeepers are online business owners. They can get started selling with an ecommerce platform or build a website. But they don’t control drop shipping products.
Customers are the receiver of a variety of products. They place orders in the store and pay for it.
The three participants share a correlative relation in dropshipping businesses. Suppliers and shopkeepers are in partnership. The former provides a variety of products to sell online, and the shopkeeper places orders from them. A customer is the one being served. Supplier and shopkeeper are in charge of different work to fulfill customer orders and improve customer experiences. Shopkeepers play the role of the bridge. They connect customers with multiple suppliers, who are responsible for inventory management and delivery. The supplier will fulfill the order and ship products to the customer.
3. How does dropshipping work?
Dropshipping contains two parts of work – online store supply and product delivery. The supplier plays a leading role in it. As for online store supply, shopkeepers are the service target. And customers are the object of product delivery.
Starting a dropshipping business has these steps you can follow:
- Set up an online store, upload products you want to sell and find supply chain for the shop.
- The customer orders products in the store and makes payments.
- Shopkeeper sends the order info to the supplier.
- Drop shipper receives orders and packs products.
- Supplier delivers dropshipping products to the customer.
Customer service is crucial for ecommerce business. During the dropshipping process, packages are delivered directly by the drop shipper. Though, it has lower shipping costs, shopkeeper does not engage in the section of packaging and delivery. So, in the long term, take time to choose a reliable supplier. In the aspect of profit margins, product price is different for the shopkeeper and multiple suppliers. Drop shippers set a lower price. Shopkeepers reserve some profit margins when setting prices and earn from the gap.
If there is no idea of how to start, you don’t have to worry. Some platforms assist in dropshipping businesses, such as AliExpress, Amazon, eBay, Shopify, and WooCommerce. People can easily start an ecommerce business with help.
How does dropshipping work on Shopify and WooCommerce?
Shopify and WooCommerce are platforms to create online stores. The two platforms give convenience to build a store website. They make it easy for people to become shopkeepers and sell online.
People can create an account on the platforms. On the dashboard page, people can do a series of operations, such as product editing, order management, analytics, marketing, etc.
Shopify and WooCommerce also provide various applications for store management. The two platforms launch app store pages – Shopify App Store and WooCommerce Extensions Store. By installing Shopify dropshipping app or WooCommerce dropshipping plugin, you can easily get started selling products and fulfill orders with only one click.
Take EPROLO as an example. EPROLO is a dropshipping platform to help online business all around. It is available for ecommerce stores created by Shopify and WooCommerce. The platform provides drop shipping products for shopkeepers. Choose and add products you want to sell on the shop on the page inside. Besides, EPROLO offers an auto order fulfillment service. After a few click settings, the platform will process the orders, and ship packages to customers directly. Shopkeepers can save time for marketing and search engine ranking by using it. EPROLO also provides a branding service to encourage customer loyalty.
Shopkeepers can add a logo on POD products and white label products. And, they can customize package boxes and tapes for the store.
How does dropshipping work on AliExpress, Amazon, eBay?
Amazon, AliExpress, and eBay are representative eCommerce platforms. Being developed for decades, they have numerous businesses comprising manufacturers, wholesalers, distributors, and retailers. Those websites are a sea of sellers and resellers. People can join the platforms and find drop shippers for their shops.
To join the market, Amazon, AliExpress, and eBay have introduced services to support dropshipping business.
As for Amazon, the website teams up with Shopify. A shopkeeper can create an Amazon seller account and connect it with his Shopify store. He can make sales on the two platforms and enjoy FBA (Fulfilled by Amazon) service. Becoming a seller of Amazon, the shopkeeper can stock products in Amazon without paying warehouse costs. And Amazon takes the delivery work. It sends out the products for the shopkeeper.
As for AliExpress, the website provides hundreds of millions of products. The shopkeeper can import Ali products by installing the app on Shopify. When there is an order, the suppliers of products will ship the packages to customers.
As for eBay, the platform allows drop shipping the product but with some restrictions. In the long term, those limits may strike the initiative of joining the platform.
4. What is the difference between dropshipping and traditional retail business?
Dropshipping and retail are two distribution models in the ecommerce business. There is a similarity between them. That is, business owners are resellers, no matter dropshipping or retail business model they use. Both shopkeepers need a supply chain to provide products.
However, dropshipping shopkeepers are different from traditionally retailers in several aspects.
First, most of the dropshipping shopkeepers run an online store. And retailers may run both online and offline shops to sell products at the same time. Brick and mortar retail shops occur in shopping malls and streets, and some have a long history.
Second, dropshipping shopkeeper does not make inventory management and hand it over to the suppliers. But traditionally retailers stock products, which needs a lot of money. It is the most distinctive difference between the two models. Without storing inventory, dropshipping shopkeeper enjoys less overhead cost than a brick and mortar retailer. In addition, he has more time for marketing.
Third, a retailer needs a lot of capital to cover the storage, package and shipping costs while dropshipping shopkeeper doesn’t. The retailer controls the fulfillment process. In the drop ship business model, the suppliers handle the work.
5. What are the Pros and Cons of dropshipping business?
People who want to start a business may have heard about dropshipping. Lots of online stores prove that it works. But negative comments also exist. The pros and cons of dropshipping business stop people at the crossroads. Explore the issue can help to make the decision better.
Pros of dropshipping
Low Barrier to Entry
The eCommerce industry has developed for decades. Domestic or foreign markets provide possible conditions for dropshipping business. The two most critical factors – create online stores and find suppliers – are solved with the help of several platforms.
There is a pretty low barrier to entry, people even can start their dropshipping business at home. A computer and Internet are all it needs.
Low Start-up Cost
Dropshipping shopkeepers do not store. It cut down the overhead cost of inventory and warehouse fees. Thus, shopkeepers only pay for the store to platforms. For instance, a Shopify online store charges $29/month. Without a lot of capital needed, so starting a dropshipping business is more competitive than brick and mortar stores.
Low Cost of Inventory
Inventory management is a headache for all businesses. Unmarketable products could cause business owners to lose a lot of money. However, they don’t have to worry about this. With the order fulfillment method of dropshipping, shopkeepers sell products without holding stock. It is a strength that people can run a store at low risk.
Non-inventory brings time, as well. Suppliers are in charge of packing and arranging delivery. Shopkeepers are out of the process and have more time. People who have a major work can take dropshipping business as a sideline.
Cons of Dropshipping
Dropshipping business rockets because of easy entry and low cost. People rush into the market and raise competitions. Shopkeepers have to invest more to run the stores; otherwise, they will disappear.
Long Delivery Time
It could take a month to deliver a dropshipping package. Many factors account for the long shipping time. For instance, the selling product is out of stock; suppliers provide the product are in different locations; a poor shipping option; customs clearance; etc. It is an unfavorable drawback which increases complaints.
Out of Control on Quality
Shopkeepers do not participate in order fulfillment. The absence leads to a result that shopkeepers don’t control the product quality. They can not check the products before delivery, as well as the package. Since drop shippers deal with the whole order processing, returns and customer service, failure to choose a good one may cause devastating damage to the store.
A supplier can provide the same product to various shopkeepers. A store is less distinctive when customers have alternatives. And it makes the store less competitive and challenging to build up customer loyalty.