What is a Drop Shipping Business? Reasons Why it’s Time to Start

What is a Drop Shipping Business

Want to know What is a Drop Shipping Business? Reasons Why it’s Time to Start: Certainly, it offers an opportunity for entrepreneurs to earn money. For one thing it supports a quick way for newbie and experienced entrepreneurs to make money. Of course, it can be a dream come true if you want to build a successful business online.

 

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What is a Drop Shipping Business? Reasons Why it’s Time to Start

Basically, in a Drop Shipping Business, you market and sell products but you:

  • Don’t have to carry an inventory
  • Don’t have to store products to sell
  • Don’t have to pack and ship the products yourself.

As a seller, you strike up a deal with a supplier who is a manufacturer or a wholesaler. In addition, this supplier fulfills orders to your customers.  That is to say, the supplier packs and ships the products straight to your customers whenever a sale is made.

 

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What is a Drop Shipping Business? Reasons Why it’s Time to Start

What is a Drop Shipping Business? Reasons Why it's Time to Start
What is a Drop Shipping Business? Reasons Why it’s Time to Start

In a Drop Shipping Business, you do a form of retail. To point out, you do not have a physical store with products, but an online store. Notably, you partner with a drop ship supplier who stocks the products you have listed on your website. Whenever customers make a purchase on your website, you forward the details to the supplier who ships the products directly to your customers.

Starting a Drop Shipping Business is a great idea for any online store. Indeed, it is quite easy to start and also budget friendly. As long as you have a laptop/desktop and the internet, you can get going with a small amount of money. In case you are stretched for funds, but want to sell products online, then you could do so with a Drop Shipping Business.

 

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Important Facts You Should Know

Assuredly, Drop Shipping is ideal for entrepreneurs who don’t want to deal with the “hands on” established way of running a traditional store. For sure, the easy way now is to build your website with an online store. Keep in mind though that you need to get traffic to your website. Traffic means customers and profit. Important to realize that for you to share in the profit, you need to mark up the price on products you sell.

To clarify, in a Drop Shipping Business:

  • A customer orders a product from your website
  • As a seller, you send the order to the supplier. Along with that, you also send the customer’s name and address.
  • Following this, the supplier handles the packing and shipping of the product. Of course, the order is sent straight to the customer.

In this case, you do not even see the product. Bear in mind that you do not have your own inventory. Of course, your customers do not realize that the products are not shipped by you.

 

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A Drop Ship Supplier Takes Care of Everything

Often times however, the drop shipping company ships the product in a way that looks like it is coming from you. For one thing, they line up the shipping details to your company. In this case, they put your information on the packing slip. For instance, your logo, the name of your company, and your contact details. To clarify, this is to give customers the impression that the product is coming specifically from you.

What is a Drop Shipping Business? Bear in mind that for this business, you develop a partnership with wholesalers and/or manufacturers. Once a sale is made from your website, you get a cut. In general, the supplier also deals with returns.

 

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Can You Earn From Home in Drop Shipping?

Assuming that you have a good niche website, you can certainly earn from a Drop Shipping Business. In general, your profit margin range is between 15% – 45%. Specifically, products like jewelry and electronics can return 100% revenue.

Henceforth, you need to find the right supplier with unique items. For the most part, you don’t really want a product that everyone is already selling in a super saturated market.

Watch this video for niche inspiration.

 

 

 

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Who can do a Drop Shipping Business?

Newbie Entrepreneurs: Undoubtedly, a Drop Shipping Business is an ideal opportunity for new entrepreneurs to start an online business. In particular, if you are on a stretched budget, this is a great opportunity to try.

Comparatively, when you look at other online business opportunities, drop shipping offers little risk. In fact, you don’t have to invest a lot of money to start a business.

Experienced Entrepreneurs: Considering that the investment in this business is minimal, experienced entrepreneurs with an online store can also benefit from this drop shipping opportunity. For instance, you can use it as a way to test the sales of specific products to add to your inventory. Of course, the sales indication will let you know whether to continue with these items.

 

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How to Source Products for a Drop Shipping Business

Manufacturers: For sure you can source products directly from drop ship manufacturers. They create and mass produce items. A key point to note here is that many manufacturers do not support the drop ship method. If you can partner with a manufacturer, that is better for your profit margins. For one thing, you eliminate a third party and you get the best prices for the products. This is truly a great deal for your drop ship business.

Wholesalers: On the other hand, wholesalers buy a preferred product in large quantities from the manufacturers. Drop ship wholesalers will pack and ship products to your customers. Bear in mind that you do pay a fee.

Aggregators: Different from the manufacturer and wholesaler is the drop ship aggregator. In this case, somebody purchases various items from several manufacturers. Forthwith, you have access to different products that you can sell.

Using an aggregator can cut out some problems that may arise with a drop shipping business. For instance, you can eliminate mistakes and delays when transferring several orders to suppliers. Additionally, you can avoid different shipping costs for multiple products. Notably, you pay for this service which means a cut into your earnings. Nevertheless, this eliminates some discouragement with the business.

 

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Pros of a Drop Shipping Business: Reasons Why it’s Time to Start

Start With Little Funds: There is no need for you to come up with a lot of money to start. Key point to note is that you do not have to carry any inventory. Unlike the traditional way of purchasing goods to sell, you don’t have to spend hundreds of dollars to buy products. As a matter of fact, you don’t have to pay for a product, unless you sell something and the customer pays for it.

Not Hard to Start: The fact that you don’t have to handle the products directly makes this drop shipping business one of the easiest ways to start selling online. Here are a few other things to note:

  • No need to pay for a storage place
  • No need to pack and ship products to customers
  • No need to update inventory
  • No need to handle returns

Minimal Overhead Cost: Assuredly, you can start your drop shipping business from home. With this intention, there is not much cost to your overhead. Important to realize that you may have a monthly fee to pay if you choose to sign up with Ecommerce platforms like Shopify for example.

 

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Work From Anywhere With Drop Shipping

Work From Anywhere: All things considered with good internet service, you can work from anywhere. Additionally, you will also need to have good contact with your customers and of course your suppliers.

List Many Products: Since you will not carry an inventory, you can list several items on your website. Keep in mind that you can list any product from your supplier. At the same time however, check to make sure that there is a high customer demand for the items you sell.

Easy to Manage: Given the fact that your suppliers take care of customer orders, this gives you more time to concentrate on developing your business. For sure, it is easier for you to focus on further development of your business.

 

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Cons of a Drop Shipping Business

Despite the fact that a drop shipping business seems ideal for those who want to start an online business, it has its setbacks. Here are a few caveats to keep in mind.

High Niche Competition: Undoubtedly, competition can be high especially with popular products. Hence, you have to weigh the pros and cons with the niche you choose. Then again, you also have to be careful with the pricing of the products. Obviously, if the price is low, your margins will also be low.

Inventory Glitches: Of course, there can be glitches with orders from the suppliers. Bear in mind that they have orders to fulfill for different merchants. At the same time, you do not have any control over the inventory, so you don’t know exactly what’s in stock. As a result, there can be changes to the inventory without you knowing.

 

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Shipping Charges: In case you are sourcing products from different suppliers, shipping charges may become an issue. For instance, a customer may purchase different products which are not from the same supplier. In reality, each product may have a different shipping cost.

Passing on these shipping cost to the consumer can be a sour way to go. As a matter of fact, this can turn off the customer and you may just miss out on sales. Additionally, it is difficult to set a fixed shipping cost.

Order Goes Wrong: No matter how careful suppliers are, there are times when errors are made with an order. For one thing, the supplier can ship the wrong product. On the other hand, a supplier can also ship a product that does not match the high quality you write about on your website. To put it another way, the product quality is inferior.

By the same token, packing and shipping a product may not be up to standard. Moreover the customer receives a damaged product. Needless to say, the backlash is on you the merchant. Accordingly, you have to make all the apologies, and arrange for product replacement.

 

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Concluding Thoughts

What is a Drop Shipping Business? Given the many positives, it may seem like the ideal business to start selling online. Even though there are a few negatives, you can work to overcome them, and still have a successful drop shipping business.

Most important is finding the ideal products and reliable suppliers. Rest assured that once you have this going, your business can grow. In case you are stretched financially and want to sell online without carrying an inventory, then you can try a Drop Shipping Business.

To emphasize, a Drop Shipping Business cancels the need for a physical store. To put it another way, it does not require a space to store products for sale. A key point to note here is that some physical store owners do use drop shipping for their products. No doubt it’s an ideal method to get some sales.

Hope you are happy with your experience at theworkathomebusiness.com. If you have any questions, concerns or suggestions please let us know. Feel free to share this page or leave a comment.

Carol

theworkathomebusiness.com

 

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8 Comments

  1. Hi Carol, Just took a look at your website. It was simple and to the point. Like anything we do keeping things simple is always the best formula. You covered everything like Drop shipping, making products from home and being an affiliate. Do you provide and one on one coaching for those who may way want to get started and would like a personal touch.
    Good Job!

    1. Hi Tony,

      Thanks for visiting. I do not offer coaching right now, but it’s something to think about for the near future. 

  2. I think of starting dropshipping in future. Right now I have a project which takes a lot of time. I wonder how should I choose the niche. Of course I want to start a profitable one which has low competition. Is starting a jewelry store good idea? How will be the profit margin?

    1. Hi Furkan,

      Drop Shipping is a great business, but you have to get it right to be successful at it. Here is an article from SaleHoo, one of my recommended drop shipping companies. It will help with your jewelry store idea and how to profit.

      Deciding What to Dropship

  3. Thank you for the information. I really like it and this information is very helpful. Actually I am interested in this type of article. Since this is a good idea for a new business. You have clearly explained everything. As you mentioned it is easy to start with a small amount of money. Really this article is very helpful for persons who are seeking new business ideas.

    1. Hi Samantha,

      A drop shipping business is definitely a great way to start a business. Like any other business, it does has its pros and cons. With the right product however, the possibility is certainly there for success.

  4. This concept of drop shipping is quite interesting. Is it similar to what Amazon does? Because I’ve noticed when I choose Amazon Prime for fast shipping, it literally comes in a few days, even if I live in Canada. I suppose someone has the item I want in stock at home.

    I like the idea that this business type requires no storage space to grow your inventory. I’d love to make some money that way. But how do you go on to find a reliable supplier?

    Thank you for making people aware of this business opportunity!

    Didi

    1. Hi Didi,

      Thanks for visiting.  Let me assure you that a drop shipping business is worth trying especially if you are pressed for storage space. Typically, shipment of products are not as fast as Amazon Prime, so that’s one drawback.  In case you are interested and want to start a drop shipping business, SaleHoo is great to find reliable suppliers.

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