What is Dropshipping?

Let’s take a quick look at how the drop shipping process works, starting with how to sell using just a single product as an example.

Let’s say you decide to drop ship fidget spinners. You choose a model you believe will be popular, and you create a simple web page for the product with a photo, description, basic information, and a link to buy.

When someone makes a purchase from your page, they pay you at the time of purchase. You then order the product from the supplier’s website, paying for it with the money the customer already paid you, and enter your customer’s shipping address instead of your own.

It’s a bit like making a gift purchase from a site like Amazon. You pay for the product, but you have it shipped directly to the buyer.

Okay, you probably have a whole bunch of questions running through your mind right now. We’ll get to most of them shortly. But yes, it really is that simple.

The first thing you’re probably asking is, “Why not just order the products from Amazon if it’s that simple?”

Well, there are two BIG problems with that.

First, you’d never make much of a profit doing that. Products on Amazon are being sold around retail price, so making a profit would be pretty difficult unless you somehow manage to get into a niche market with a lot of demand where you can charge a premium price and still have buyers.

Second, Amazon puts their own promotional material all over everything they send out. While you might get one order from a customer, once they realize the products came from Amazon, they’ll go there, discover the product was much cheaper there, and never order from you again.

It’s just not a smart way to build your own brand.

With drop shipping, most companies won’t put their materials or branding on or in the boxes, and some may even put your promotional material into the packages for you, if you ask!

Example: I’ve purchased coder stickers from a popular programmer online and while he’s transparent about the fact that he purchases the stickers from a drop-shipper in China, when the package arrived every sticker package had his branding and logo on the box! I would have never known it was a drop shipped package from China.

And that’s the point. You are selling products as though they come directly from you, even though you never have to bother shipping anything out or tracking packages. You simply receive payment, order the item, and let the company handle delivery.

Are you starting to understand why so many people love dropshipping?

Benefits Of Dropshipping

You don’t have to use drop shipping to be successful in ecommerce. You can find success with just one simple, inexpensive product with a relatively small upfront investment.

You can also find success investing a great deal upfront in stock and offering a wide variety of items. It’s totally up to you and your circumstances.

However, if you want to have a full e-commerce site, and you don’t have a lot of money to invest in the beginning, drop shipping is the perfect business model to help you get started. You can always invest in inventory later, once your business is profitable enough.

Keep in mind that drop shipping is not a perfect business model. There are a few issues you need to keep an eye out for, which we will address in the next chapter. But there are some big benefits, too.

Let’s take a look at some of the biggest benefits of drop shipping.

1. For one thing, you don’t have to invest a huge amount of money in the beginning to get started. All you need to get started is a domain, website, and the software to run your shop. In most cases, you can get started for less than a hundred bucks.

2. Also, you don’t have to spend as long sourcing products. One of the most time-consuming elements of e-commerce is finding the right products for your shop, and when you use drop shipping, you’ll often be able to source multiple products from the same supplier.

3. It’s also very easy to add inventory to your shop, because most major drop shipping suppliers either have a plugin you can use to automatically add inventory to your shop, or they have CSV files you can import into your software to control your stock. This is a huge time saver.

4. Another great thing about drop shipping is that there is much less risk involved. Since you aren’t investing in product upfront, you don’t have to worry about getting stuck with unsold inventory if you buy something that turns out to not be as popular as you anticipated.

5. It’s also very nice to not have to worry about having warehouse space, managing inventory, and sending out packages. These are all things that are expensive and time consuming, and they are completely avoided by using drop shipping.

These are just a few of the biggest benefits, and you can probably already see how great it can be for someone who’s just getting started!

Avoiding Potential Pitfalls

Let’s take a look at a few of the most common problems that might come along, and how you can minimize the potential of experiencing them.

Products Out Of Stock

One of the most common complaints you’ll get is when certain products are out of stock, especially if they are particularly popular and hard to find. This can happen to any store, even monolithic stores like Amazon. And it definitely upsets customers when it happens.

However, it’s important to keep track of stock to minimize the potential of upsetting customers, because they will be a lot unhappier if they think you have the product in stock and place an order only to find out the product was out of stock than they would be just being notified before they purchase that the product isn’t available.

For this reason, it’s a very good idea to use some sort of plugin that will automatically update your site whenever products are out of stock.

Product Returns

Every single company on the planet must deal with returns. Even if you have a strict no-returns policy, you will still have to deal with unhappy customers that attempt to get a refund. And telling them no will just result in very angry customers.

I know someone who purchased a lot of items from one very popular discount shopping app, found that the quality was terrible and the sizing was way off, and could not return them because the company had a no-returns policy. The customer was very upset, and left bad reviews for the company all over the place. And this person was far from the only person complaining about not being able to return items.

For this reason, it’s not a good idea to have a no-refunds policy on physical products. This will just lead to chargebacks, which could get your account with PayPal or any other billing company canceled. It’s not worth the chance. Plus, people who are unhappy with their purchase and cannot return it will spread bad reviews, which can have a negative impact on sales over the long run.

Always make sure your product descriptions are as accurate as possible, and make sure to have sizing charts and pictures to minimize returns.

If a product is under $20, you might just ship another item to the customer without requiring them to return the original. If the product is over that price, have the customer ship the return to you, and when it arrives, send them a new one as quickly as possible. If it is returned because it’s damaged or defective, return it to the supplier.

Otherwise, you might just send it out to the next customer that orders it, assuming it’s still in new condition.

Slow Shipping

Depending on the supplier, you may have unhappy customers because the shipping is a lot slower than they are used to. With the prevalence of free 2-day shipping with Amazon Prime and sites like Walmart, customers are used to getting their purchases very quickly.

Since drop shippers don’t have deals with shipping companies, and because some even ship directly from China, shipping can often take days, weeks, or even a month or two. Many customers won’t be happy waiting that long.

If you use drop shippers based in your home country, you will probably get faster shipping, however the prices you get will probably be higher, resulting in lower profit margins.

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