Looking to set up a business with almost zero investment and without worrying about managing the product inventory? Yes, it is possible with the dropshipping business model.
Dropshipping isn’t a new business model. It has been around for a very long period. However, with the advent of technology and online platforms, the process has become simple and easy to implement. Today anyone can set up a dropshipping business without even worrying about the risk of investment.
Distance is no longer a hindrance for anyone who wishes to expand their business on an online medium. Dropshipping is one of the methods through which you can set up a cost-effective online business model.
What is Dropshipping? Is dropshipping a new concept for you? Here is all that you need to know.
What is Dropshipping?
Dropshipping is a valuable fulfillment model for retailers who wish to sell products online. In this model, retailers sell products on an eCommerce store on behalf of manufacturers/sellers but do not own the product. They are only focused on marketing to boost sales on their platform. The manufacturer manages other processes like product handling, inventory management, and shipment.
Dropshipping isn’t the same as traditional retailing. The main difference between conventional retailing and dropshipping is that the retailer does not keep stock of items or manage the inventory in the case of dropshipping. The supplier or the manufacturer directly ships the product.
Know how dropshipping works in these three simple steps:
Step 1: Customer places an order on the online store
Step 2: Order request is forwarded to the manufacturer
Step 3: The manufacturer ships products directly to the customer
How to Set up a Dropshipping Business?
While anyone can start a dropshipping business, not everyone can succeed in this business model. So before you even think of setting up a dropshipping model, you must learn essential skills to run the business successfully. Know what all skills are required to set up a dropshipping business here:
- Sales skills
- Creative skills
- Digital marketing
- SEO knowledge
- Communication skills
- Accounting and finance
In addition to the skills mentioned above, you must have a good understanding of eCommerce. You must also keep yourself updated with the latest trends in eCommerce.
Now that you know the skills that you must focus on to start a business, you can check the important steps to set up the dropshipping business:
1. Choose the Product to Sell Online
If you have decided to start a dropshipping business, the first step you must consider is choosing the right product to sell on an eCommerce website. For this, you must consider the following factors:
- Understand the customers’ requirements
- Conduct market research
- Learn what competitors are offering
- Analyze your short and long term goals
- Create a niche for your business
2. Connect with Dropshipping Supplier
Finding the right supplier is the key to the success of a dropshipping business. As retailers are completely dependent on suppliers for products and order fulfillment, connecting with a reliable and transparent supplier becomes increasingly important. Here is the strategy to choose the best dropshipping supplier for your business:
- Do intensive research to find the best supplier for the products you wish to sell online. Check reviews to confirm the reliability of their services.
- Look for suppliers who have a broad catalog of products.
- You can connect with more than one supplier to push sales of the same kind of product through your eCommerce store.
3. Maintain your eCommerce Store
Now that you decided to sell specific categories of products online, it’s time to build an eCommerce store. Choose from multiple eCommerce platforms like Shopify, WooCommerce, Wix, Weebly, BigCommerce, and more to create an online presence to sell products. Here are some of the essential points to consider while maintaining an online eCommerce store for business:
- Create a beautiful website that can grab customers’ attention.
- Focus on design and easy navigation through pages.
- Add unique product description.
- Integrate easy payment options.
4. Invest Time in Marketing
To enhance sales online, you need to invest time in marketing. The target customer must land on your eCommerce webpage, which requires specific online strategies and campaigning. Here is how to implement strategies for a dropshipping business model:
- Implement SEO for your website and content.
- Spend on advertising on social media platforms.
- Embrace email marketing.
5. Analyze your Growth
You must keep analyzing your growth based on previous sales, performance and customer satisfaction levels. These insights can help you optimize your business and maintain your eCommerce growth rate. Here are few things that you must cover:
- Traffic on eCommerce web page
- Sales through website
- Order fulfillment success rate
- Customer retention rate
- Customer satisfaction level
Also Read: Top Dropshipping Products to Sell in 2022
Advantages of Dropshipping
Is dropshipping a beneficial business model for you? Before you look at the benefits, you must first understand your vision for setting the dropshipping business. Try to figure out your short and long-term goals.
Here we have covered the benefits of the dropshipping business model at a superficial level:
1. Low Setup Cost
Retailers who wish to use the dropshipping model do not need to invest capital in maintaining inventory or setting up a physical store. The unnecessary load to manage resources and workforce are also eliminated in the dropshipping model.
It is an ideal business model for someone who does not have sufficient funds to start a traditional retail business.
2. Easy to Scale
It is easy for dropshipping retailers to scale their business as there is no dependency on managing inventory for bulk orders. The retailers need not worry about setting up offices or physical stores to run their business.
All they need to do is to make efforts to take their sales to the next level. Fulfilling bulk orders in a short period is easy using the dropshipping model.
3. No Geographical Constraints
Dropshipping model gives sellers the flexibility to operate a business from anywhere and sell products in the nook and corner of the world. The sale and distribution of products are handled remotely.
Retailers can invest time and money in optimizing products and services depending on the demand in the market and based on their own preferences.
4. Minimal Time and Effort
Dropshipping is a win-win situation for both retailers and manufacturers. It is the online retailers who manage an eCommerce store. Using this fulfillment model, the manufacturer need not spend time and effort in finding customers.
For retailers, it is easier to manage sales as they need not purchase items until and unless an order is placed. The product request is sent to the manufacturer only when a customer buys a product.
5. Less Risk
A dropshipping business model requires a small investment and there is no need to keep stock of items prior to sales. Hence, sellers have no risk of loss if the sales do not go as expected. Likewise, the manufacturer is not directly responsible for the sales of products hence they do not bear any loss.
Dropshipping Business in India
Dropshipping is a business model that can be started with zero investment. It is a convenient business model in India for someone who can use their marketing skills to sell products online on behalf of others.
If you wish to sell products in India without managing production and inventory, dropshipping can be an ideal business model. Here are some other reasons to start a dropshipping business model:
- Dropshipping is a cost-effective business model
- It is a low-risk business model because of less investment
- The retailer can connect directly with the local manufacturer and supplier to sell products
It is likely for people to get confused between wholesale trading and dropshipping business. To have a clear understanding between the two business models in India, find out the difference between the two:
Traditional Wholesale Trading
- The wholesaler sells products to sellers in bulk before customers make the product request
- The seller maintains stock of items
- Customer purchases products from sellers
- Customers pay to the seller
- Shipping request by the online seller is made only when customers make an order
- The seller receives the order and sends delivery information to the wholesaler for the product shipment
- Customer pays to the sellers and seller pays to the manufacturer
- The manufacturer directly ships the product to customers
- The seller need not maintain stock of products
How Does Drop Shipping Logistics Work?
Online retailers rely on wholesalers, suppliers, or manufacturers for inventory management and product shipment in dropshipping. To put it together, the dropshipping supplier handles the entire order fulfillment process.
Often the dropshipping business and drop shipping fulfillment is considered the same thing. But they are very different .
Dropshipping fulfillment is all about managing inventory and shipment of products to the end customers. The service provider need not be the manufacturer of the product.
In order to meet the order fulfillment requirements, suppliers in the dropshipping business model connect with a 3PL company. Outsourcing the fulfillment services helps businesses to easily and quickly ship their product with minimum difficulty.
Outsourcing logistics is beneficial for manufacturers with orders coming in bulk from the online platforms through the online retailers. Know the other reasons why drop shippers use 3PL logistics solutions for their business:
- 3PL companies have enough workforce strength and resources to manage products
- Most third-party logistics companies come with technology-driven solutions that are useful for manufacturers to keep track of orders in real-time.
- Outsourcing logistics solutions are helpful for manufacturers who have high volume order rates as companies offer them shipment at a low cost
Future of Dropshipping
In 2020, the global estimated value of the market for dropshipping was 128.6 billion U.S. From 2021 to 2026, the market value is estimated to grow to 476.1 billion U.S. dollars (source: Statista).
The above stats show that dropshipping is going to remain popular among online retailers in years to come.
In the world of the growing eCommerce market, a lot of manufacturers are either willing to sell products directly to customers or drop ship their products.
Hence, there is extensive scope for newcomers with innovative ideas to start a business through dropshipping. In India, people massively choose to go online shopping leading to a high scope for dropshipping .
Setting up a dropshipping business is quite convenient for any person. One can connect with vendors and help them boost their sales. There are so many vendors across the country who will be more than willing to connect with someone who can help them grow their business.
The dropshipping model is going to flourish in years to come, but one important aspect of this is marketing and campaigning. Those who are thinking of setting up a dropshipping business must be well versed in marketing strategies and be able to enhance their skills.
The other important aspect that the supplier needs to take care of is logistics. In the dropshipping business model, the manufacturer is the drop shipper.
Dropshipper is the supplier or manufacturer who manages inventory for the online retailers and ships products to customers. In order to ship products, the manufacturer will need logistics services. In case the order volume is high through the online stores, the drop shipper can connect with 3PL companies.
Pickrr is a SaaS-based company that helps businesses with their logistics needs. Any business, manufacturer or seller who needs delivery services can sign up with Pickrr to get a range of smart shipping solutions.
If you have a strategic plan to sell a specific category of the product without investing in the business then dropshipping is an ideal business idea for you. However, make sure to look at both the benefits and limitations of the dropshipping business model before you even plan to set up an eCommerce store to run the business.
Hope the above information is useful for you and helps you make an informed decision.
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