What is dropshipping? Is it really the best business model for eCommerce beginners?

Everyone would love to have their own business, be the boss or CEO. Managing a shop and selling products are complex, but it becomes easier and easier on the web in the modern era. Thanks to the latest technology, now we can leverage dropshipping!

You may come across an online business on Instagram or on websites. It is definitely simpler than having a physical store up and running, with less expense and more flexibility.

For any online store, the major costs are web hosting/account fee, advertising, staff, inventory, and product costs (plus packaging and shipping). So… have you heard of dropshipping? It may have saved you more on the upfront investment, on the last two above.

Running a shop as in the traditional business model

When running a shop in the traditional way, both physical and online, owners need to identify some products for sale. The next step is to acquire them from suppliers and place them on the shelves to sell. Of course, there are advertising and marketing to come…

In this case, you have to spend on inventory, i.e. warehouse rent and staff to manage stocks. When receiving orders from customers, it is time to package and ship them. They are costs of employees, along with packaging materials and shipment services.

Here comes the risk: Should the products not work out, you are going to suffer loss. Those non-so-popular items are simply stuck at your warehouse and occupy valuable space.

The size of dropshipping market around the world was estimated at US$128 billion in 2020, and it is expected to go up over 30% in the coming 5 years.

Save upfront and overhead costs with dropshipping

Dropshipping may have eased the nightmare above. It is basically a different supply chain from the traditional business models.

In dropshipping, you are in the role of an agent/a middleman. You promote and sell products from suppliers at your shop, and make a profit from marking up the prices. Once somebody purchases at your shop, you then order the item from the suppliers and they will send it directly to the customer.

No Inventory

So, here comes the best thing: You do not store the products at any time, so you can save the rent on the warehouse as well as some staff wages. No more stock checking and managing for accounting reasons!

Focus on Your Core Business

More, your suppliers also handle the packaging and shipping for you. Not only does it cost significantly less on the budget, but it can also save you plenty of time and effort.

No Upfront for Dropshipping

You do not pay your suppliers for a product until after receiving the order (and the payment goes through). This way, you can avoid spending upfront, and thus you can start a business with a minimal budget.

Better Cash Flow

Besides, as mentioned above, since you do not hold any products on your side at any given time, it reduces the risk of stockpiling bad-selling items. This is good news for any business owner and a bonus/relief for beginners.

Dropshippers to start an online shop

So, for a dropshipper, you need an online store to showcase products and receive orders from customers, like other e-shops.

There are various ways in acquiring products to sell. The most common way is to find suppliers from popular platforms, like AliExpress. There are plugins (for Shopify, WordPress, etc.) that help obtain information from your suppliers’ websites with a few clicks. No copy and paste is needed!

So, store owners can now focus more on interface design and establishing brands and reputations. Of course, there are marketing, advertising, and customer support to follow. (Yes, still plenty of work to do, but much better.)

In case a product does not perform as you wish, simply remove it from your store. Research for another potential winning product, place it in your shop, and test your taste and luck again…

In a more positive sense, you can always try new ideas at a low cost (maybe only the cost of advertising). This is a huge benefit for any business owners, who try to test for the right products and go in the right directions as soon as possible.

Should everything go well, you can expand your business at a cheaper cost than a traditional retail business. If you can establish a long-term partnership with the suppliers, you may negotiate a discount. This way, it lowers the cost even further, just like the Bulk Discount for combined orders at QP.

Shortcomings and risks in dropshipping

However, everything comes with certain disadvantages, and no exception in dropshipping. As it is so easy to get started, it could be highly competitive that resulting in a low-profit margin than years ago. Even though you may locate a winning product, the profit could drop within a short time, as competitors would follow the trend right away.

Shipping could be a concern, especially during a lockdown due to the COVID-19 pandemic. The worst should have passed, but if another wave occurs, some services may be affected or even temporarily suspended. The shipping cost could rise while it takes longer to reach your customers than usual. You may have to prepare to answer some angry inquiries…

The problem is that your suppliers handle the packaging and shipping for you. So, you basically have no knowledge of what may happen. However, responsibility is always on your side, as your customers only know they buy from you and will complain to you. Be careful not to damage your reputation after all the hard work! It is important to identify some reliable and responsible suppliers to work with.

Have your own designer products with Print on Demand (POD)

Dropshipping is not limited to selling products from wholesale shopping platforms, like AliExpress. You can sell products from a factory run by family and friends, or have them customized/created on-demand. Selling unique items of course can separate you from others.

This is a good idea for designers who are interested in having products with their own designs. Having your designed characters or arts on tote bags or other items has never been easier with services, like QPMN. They handle both print-on-demand and dropshipping. They print/produce the products, then package and ship them straight to the customers for you.

Your customers can also customize a message or anything on top, making it an ideal gift idea.

Summary

Previously, we have covered how the QPMN plugin can help designers sell products at their own websites/shops. So, even if you are not familiar with eCommerce, it is a quick way to start a business to build brands and fund creations.

Dropshippers can run their business at home or anywhere. All you need is a computer and a reliable internet connection. Like any business, in order to make it successful, you need dedication, determination, and patience. Good luck, future entrepreneur!