Maybe you have encountered the headlines, ‘how to make six figures selling products through dropshipping,’ and you are wondering how it really works. Dropshipping is a business model that allows you to lower your business costs and focus on what you do best: branding, marketing, and selling products. With dropshipping, you don’t need inventory.
You only need to establish a list of marketable products to sell, find a dropshipping supplier and market the products. The supplier ships the products to your clients who pay you the retail price, and you make your profits by paying for the products at wholesale price. However, dropshipping is not a get-rich-quick scheme. You have to put in the effort, select the right products and suppliers, and have a feasible business strategy in place.
How dropshipping works
The steps to starting a dropshipping business are not difficult as long as you have a strategy in place.
- First, conduct extensive research to identify products to dropship. You need to look for products with high market demand to meet specific consumer demand.
- Investigate the market process for the identified products to know if they are profitable. Note that a lower margin means you can sell more to make profits.
- Find a dropshipping supplier. This is the most meaningful step because you are forming a long-term relationship with your dropshipping supplier. So they need to have quality products and fast shipping times for the success of your business.
- Market your products- it is your role to market your drop ship products to find customers and sell more. Here you need to optimize your website, establish a good digital marketing strategy and organize compelling promotions.
The pros of dropshipping
There are many advantages of dropshipping over other business models. They include:
- Dropshipping comes with lower startup costs and risks since you don’t need to stock any products or have a warehouse. You don’t have to own or pay for inventory upfront, so that minimizes your business risks.
- Lower product storage costs and risks- with dropshipping, you don’t need to rent a warehouse to stock inventory, hire staff for managing inventory and shipping or invest in warehouse security. That significantly reduces your overhead costs, especially if you are selling products that require high maintenance, special handling, are valuable or fragile.
- Protection from overstock- with dropshipping, you don’t stock any products, so you are protected from overstock, which can leave you with expired products or dead stock. In simple words, the third-party supplier takes care of all unexpected demands.
The cons of dropshipping
Some of the disadvantages of drop shipping include:
- Low-profit margins due to high competition- today, thousands of entrepreneurs are in dropshipping because the business is easy to start, so the market is highly competitive. That is in addition to the point that drop shippers may not get exclusive deals with suppliers.
- Limited control over the supply chain- with dropshipping, the third-party supplier controls product quality, packaging, and shipping times. That means you may be dealing with disgruntled customers and not able to do anything about it.
Dropshipping is a profitable business model with the proper strategy and the right supplier.