Term

What is Dropshipping?

2 MIN READ

Dropshipping

Dropshipping is an order fulfillment method where a merchant sells the goods that someone else has produced. Unlike other merchants, dropshippers do not need to purchase goods, rent a warehouse, and control delivery. Their job is to promote products and seek customers. The supplier does the rest: provides a storage space, organizes the manufacturing process, maintains the supply chain.

The dropshipping scheme for online stores is pretty simple. Firstly, you should choose a supplier and sign a contract with them. The second step is to choose products from this supplier and set a price for them in your online store. When a buyer places an order in your online store, you forward the order data to the supplier. The supplier sends the order to the buyer. You either pay to the supplier for the goods for which the buyer paid you, leaving yourself the difference between the purchase and retail prices; or the supplier independently accepts payment from the buyer and returns the commission to you.

Advantages of dropshipping

  • Minimum start-up capital 
  • The possibility to cooperate with several suppliers at once 
  • Low risks
  • More possibilities in product choice.

The disadvantages of dropshipping

  • There is no way to control the quality of goods 
  • It’s hard to balance delivery time and stock availability 
  • You can risk your store’s reputation 
  • The supplier can leverage your customer base 
  • The revenue may be lower than you expect (to get high profits with this type of work, you will need to sell more items than, for example, bulk purchases).

 

Despite the downsides, dropshipping is a good model for aspiring entrepreneurs with little capital, especially if you are good at marketing.

 

You may also like:

Types Of Ecommerce Businesses: What Model Is Right For Your Online Business

The Top 5 Best Shipping Software for Ecommerce According to Our Clients