Start a dropshipping business with DeStudioIN
Open a dropshipping business without the hassle of managing inventory, packaging, or shipping.
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Dropshipping: Launch for less
Start your dropshipping business with minimal costs. Using a dropshipping supplier means saving on inventory space, and not paying for products until you’ve sold them.
What Is Dropshipping?
Want to start a dropshipping business? Here's everything you need to know to get started.
- 1. Defining dropshipping
- 2. Benefits of dropshipping
- 3. Disadvantages of dropshipping
- 4. Common questions about dropshipping
- 5. Is dropshipping worth the effort?
Dropshipping is a retail supply method where a store does not stock the products it sells. Instead, when a store sells a product using the dropshipping model, it purchases the item from a third party and sends it directly to the customer. As a result, the seller does not have to handle the product directly.
The biggest difference between dropshipping and the standard retail model is that the seller selling does not stock or own inventory. Instead, the seller purchases inventory as needed from a third party -- usually a wholesaler or manufacturer -- to fulfill the order.
Want to start early? Join our free hands-on training session and learn how to set up an online store step-by-step by using dropshipping to fulfill orders. You will learn how to find profitable products that you can start importing and selling quickly. Can't make it today? Register with us at email@example.com
Benefits of dropshipping
Dropshipping is a great business model for aspiring entrepreneurs because it is accessible. With dropshipping, you can quickly test out different business ideas with limited downside, so you can learn a lot about selecting and marketing products in demand. Here are some other reasons why dropshipping is such a popular model.
1. Less capital is required
Probably the biggest benefit of dropshipping is that it is possible to launch an eCommerce store without investing thousands of dollars in inventory. Traditionally, retailers have tied up large amounts of capital purchasing inventory.
With the dropshipping model, you don't have to buy the product unless you have already made a sale and paid for by the customer. Without significant up-front inventory investment, it is possible to start sourcing products and start a successful dropshipping business with very little money. And since you don't commit to selling through any inventory you bought in advance like in a traditional retail business, the risk involved in starting a dropshipping store is minimal.
2. Easy to get started
Running an eCommerce business is much easier when you don’t have to deal with physical products. With dropshipping, you don’t have to worry about:
- * Managing or paying for a warehouse
- * Packing and shipping your orders
- * Tracking inventory for accounting reasons
- * Handling returns and inbound shipments
- * Continually ordering products and managing stock level
3. Low overhead
Because you don't have to purchase inventory or manage a warehouse, your overhead expenses are significantly lower. In fact, many successful dropshipping stores are run as home-based businesses, requiring little more than a laptop to operate and few recurring expenses. These costs are likely to increase as you grow, but will still be lower than in traditional brick-and-mortar businesses.
4. Flexible location
A dropshipping business can be run from almost anywhere with an internet connection. As long as you can easily communicate with suppliers and customers, you can run and manage your business.
5. Wide selection of products to sell
Since you don't have to pre-purchase the item you're selling, you can offer your potential customers a variety of trending products. If suppliers stock an item, you can list it for sale on your online store at no additional cost.
6. Easier to test
Dropshipping is a useful fulfillment method for starting a new store and for business owners who want to test customers' appetite for additional product categories, such as accessories or entirely new product lines. The main advantage of dropshipping, again, is the ability to list and potentially sell products before committing to purchasing large amounts of inventory.
7. Easier to scale
With a traditional retail business, if you receive three times the number of orders, you’ll usually need to do three times as much work. By leveraging dropshipping suppliers, most of the work to process additional orders will be borne by the suppliers, allowing you to expand with fewer growing pains and less incremental work.
Sales growth will always bring additional work—especially related to customer support—but businesses that utilize dropshipping scale particularly well relative to traditional eCommerce businesses.
Disadvantages of dropshipping
All the benefits we mentioned make it a very attractive model for those just starting out with an online store or looking to expand their existing product offerings. But like all approaches, dropshipping also has its disadvantages. Generally speaking, convenience and flexibility come at a price. There are some drawbacks here to consider.
1. Low margins
Low margins are the biggest disadvantage to operating in a highly competitive dropshipping vertical. Because it's so easy to get started, and the overhead cost is so low, many competing stores will set up shop and sell items at rock-bottom prices in an effort to increase revenue. Since they have invested very little in starting the business, they can operate on a modest margin.
Typically, these vendors will have low-quality websites and poor (if any) customer service, which you can use to differentiate your business. But that won't stop customers from comparing their prices to yours. This increase in fierce competition will quickly hurt potential profit margins in a place. Fortunately, you can do a lot to reduce this problem by selecting the appropriate niche/vertical for dropshipping.
2. Inventory issues
If you stock all your products, it's relatively simple to track which items are in and out of stock. But when you're sourcing from multiple warehouses that are also fulfilling orders for other merchants, inventory can change on a daily basis. Luckily, these days, there are some apps that let you sync with suppliers. So drop shippers can "pass" the order to the supplier with a click or two and should be able to see in real-time how much inventory the supplier has.
Oberlo allows merchants to take automated actions when a supplier's stock drops to zero. For example, you can unpublish the product automatically when a product is not available, or publish it but automatically set the quantity to zero.
3. Shipping complexities
If you work with multiple suppliers – as most drop shippers do – the products on your online store will be received through several different drop shippers. This complicates your shipping costs.
Let's say a customer orders three items, all of which are only available from different suppliers. You'll need to pay three separate shipping charges for each item the customer sends, but it's probably not wise to pass this fee along to the customer. And even when it makes sense to include these charges, automating these calculations can be difficult.
4. Supplier errors
Have you ever been blamed for something that was not your fault, but still had to accept responsibility for the mistake?
Even the best dropshipping suppliers make mistakes in fulfilling orders - mistakes you'll have to take responsibility for and apologize for. And mediocre and low-quality suppliers will lead to endless frustrations with missing items, poor shipments, and low-quality packing, which can damage your business reputation.
5. Limited customization and branding
Unlike custom-made products or print on demand, dropshipping doesn't give you a lot of control over the product. Typically, the dropshipped product is designed and branded by the supplier.
Some suppliers can accommodate your business's product changes, but even then, the supplier has the most control over the product. Any changes or additions to the product usually require a minimum order quantity to make it viable and affordable for the manufacturer.
Common questions about dropshipping
In the rest of this book, we will cover all the necessary steps to start a profitable dropshipping business. But before we continue, let's answer some of the most common questions we get about dropshipping and how it works.
How much do I need to invest to start dropshipping?
Although it is difficult to estimate the exact cost for any individual business, there are a few things that every dropshipping business will need to spend money to get started. Here is a quick summary of the required costs.
Estimated cost: ~Rs. 2500/month ($29/month)
You will need to find an eCommerce platform or website builder to build and host your online store. We clearly recommend starting a Shopify store. You'll be able to easily sync to source products with the Oberlo Marketplace, and you'll have access to our full selection of themes and free branding tools so you can get your business up and running.
Estimated cost: ~ Rs. 400 - 1500/year ($5-20/year)
It's hard to build trust with customers without your own domain name. While there are many top-level domains available (for example, example.shop, example.co), we recommend looking for a .com that is a good fit for your brand, if one is available. Use a domain name generator to get started, or learn more about how to come up with an attractive business name.
Estimated cost: Varies
Although dropshipping lets you have minimal involvement with handling your overall product catalog, you should set aside money, as well as a little bit of time, to test out the products you plan to sell. If you don’t, you risk listing a product with too many shortcomings or defects, which will result in unhappy customers and a lot of time spent dealing with returns.
Estimated cost: Scales with your business; we recommend budgeting at least Rs. 4000 ($500) to get started
Every eCommerce business should be looking for ways to reduce their average cost to acquire customers through organic channels like content marketing, SEO and word of mouth. But to get started, advertising is usually an essential channel for most product-based businesses. The most common channels include search engine marketing (SEM), display advertising, social media advertising, and mobile advertising.
How do dropshippers make money?
Dropshipping businesses act as product curators, selecting the right mix of products for customers. Remember, marketing is a cost you incur in both time and money, helping potential customers find, evaluate, and buy the right product. You will also need to cover the cost of providing customer support whenever there is a product or shipping issue. Last but certainly not least is the original price for which your supplier sells the product.
Taking all these costs into account, dropshipping businesses mark up individual products in exchange for delivery. This is why suppliers are fine because drop shippers market their products for them - dropshipping stores drive additional sales that suppliers would otherwise have missed. To make a profit from your dropshipping business, it's a good idea to find out how much it costs you to "acquire" a customer, and price your products with that in mind.
Is dropshipping a legitimate business?
Dropshipping is just a fulfillment model, used by many global retailers, and is completely legal. Like any business, meeting customer expectations and building a brand that resonates with the right audience are still the keys to long-term success.
This question usually comes up because of a misunderstanding of how dropshipping works. Most of the retail stores you shop at are not selling products that they make personally. Dropshipping takes this curated approach and turns it into a fulfillment model for an online business.
Of course, there are more basic things you need to do to run your business legally. Consult a lawyer specializing in these matters to ensure you are doing business legally in your area/region.
How much do dropshippers make on an average?
The average income you earn in a month varies from place to place and is targeted from market to market. There are many factors like seasonal changes, market trends, your marketing strategy, etc which are also factors. Typically, drop shippers are able to make 10-40% profit per sale, making around Rs. 75000- Rs. 35,00,000 ($1000-$50,000) per month.
So, is dropshipping worth it in 2021?
As we mentioned, dropshipping isn't just a perfect, stress-free way to build a successful online business – starting a business always requires hard work. The model has certain advantages but comes with a number of inherent complications that you will need to address.
We'll examine these challenges, and how to best address them, in future lessons. The good news is that with some careful planning and thought, most of these obstacles can be solved and don't need to stop you from building a thriving, profitable dropshipping business.