Dropshipping has been making news over the last few years. While the world saw a considerable increase in e-commerce during the pandemic, savvy entrepreneurs also saw the potential of dropshipping as more and more purchases went online. Whether you have an existing e-commerce business or are thinking about getting into it, dropshipping should interest you due to its immense potential.
Technology has optimized the way businesses approach everything from manufacturing to marketing. It has given access to entrepreneurs who now don’t need significant investments to start a profitable business. Dropshipping is one such business that any entrepreneur can start even if they have no previous experience running an offline or online business.
To make it easy for you, here’s a detailed guide to dropshipping in 2022 and how you can profit from it. But first, let’s understand the concept.
What is dropshipping?
With dropshipping, you can start an online business without stocking the products. In other words, you can start selling to customers without having to keep those products with you.
If you run a dropshipping store, you will buy the product from another seller and get it shipped to the customer. You will initiate the buying process from a manufacturer or third party to fulfil the orders you get.
Why dropshipping is important for entrepreneurs
The dropshipping business model is an innovative idea that empowers entrepreneurs. It’s important for the following reasons:
More access: Startups usually need a breakthrough idea and sufficient funding. If it’s in manufacturing, without the initial investments, it would be impossible to create a product and a go-to-market plan.
These barriers limit entrepreneurship. Dropshipping makes it easy for anyone to start a profitable business since there are no investments needed.
Low-risk approach: Risk is an inherent aspect of any business. Even with the best of ideas, teams, and funding, there’s no guarantee that you will find a market for your product or service.
Even if you were to find customers, it would be challenging to sell it at a price that would be profitable to you. Dropshipping doesn’t have these risks, which makes it easy for entrepreneurs.
Demand-led model: If you were to start a dropshipping business, all you have to do is find suppliers and customers. Once you zero in on a third party to deliver the product, the next step is to get customers for the product.
In other words, you will be focusing on demand generation rather than stocking inventory. Since this is directly tied to sales, you will have a steadier business model with dropshipping.
How does dropshipping work?
If it sounds like a business you might be interested in, the question then becomes how do you get started in dropshipping. There are primarily two ways to do it. The first is the manual method where you locate a supplier somewhere in the world that can reliably ship products when you ask them.
The second method is to go through an online marketplace that will connect your business to thousands of suppliers from around the world. There are several marketplaces that have suppliers who feature their products at the best prices. When you connect with them through an app, a customer will be able to buy your product and the supplier will be notified automatically.
In both methods, the product is shipped to the customer who would pay you directly. Your margin is what you have after you have paid your supplier.
7 benefits of dropshipping
Dropshipping offers several demonstrable advantages to aspiring entrepreneurs. Here are seven reasons why more and more people are starting their dropshipping businesses.
1. Little investments required
The biggest expense for most retailers is the initial investments in inventory that can be avoided with dropshipping. You can launch your e-commerce store without having to buy products worth thousands of dollars. You only have to buy a product once your customer has purchased it from you.
2. Easy to start
Without any physical products, you don’t have to rent a warehouse and pay for its management. You don’t have to worry about packing or shipping your products either. Keeping track of incoming supplies and handling returns are also tedious tasks that you don’t have to worry about in dropshipping. All of which makes the business easier to manage.
3. Low overheads
Since there is no inventory to manage and orders to track, you don’t need additional space or resources. You can start a dropshipping business from the comfort of your home. A laptop, internet connection, and a few other overheads are all you have to manage.
4. Remote operations
You are not bound to a retail store and its expensive rentals. You can run your dropshipping business from anywhere as long as you can be online and connect with suppliers and customers. You can even manage it when you are on holiday.
5. Wide range of products
If you run a retail or conventional online store, you will have to buy all the inventory you want to sell. In dropshipping, you don’t have to. This enables you to showcase a wide range with your audience. As long as you have a supplier, you can list the item.
6. Effortless to test
The secret to running a successful online or offline retail business is to sell products that customers want to buy. With dropshipping, you can test new products to find out which one gets customers excited. You can try out new categories and finally find the combination that will work for you.
7. Easy to scale
With dropshipping, you don’t have to make any additional investments to grow your business. You don’t have to purchase new inventory to meet the demand. Your suppliers will take care of that.
In short
Dropshipping is a viable and accessible model for entrepreneurs to start their businesses and build a customer base. This on-demand business model offers low-risk and consistent returns for those who can manage it well.