What is Dropshipping?

Dropshipping is an order fulfillment method where a store doesn't keep the products it sells in stock. Instead, the store purchases the item from a third-party supplier and has it shipped to the customer. As a result, the seller doesn't have to handle the product directly. The biggest difference between dropshipping and the standard retail model is that the selling merchant doesn't stock or own inventory. Instead, the seller purchases inventory as needed from a third party—usually a wholesaler or manufacturer—to fulfill orders.

How does dropshipping work?

Participants in dropshipping

• Manufacturers: create products, usually not available to the public but to retailers in bulk.
• Retailers: sell products directly to the public at a markup.

Working principle

• The customer places an order with the retailer.
• The retailer reminds the agency partner (manufacturer) that they need to pack and ship the product to the customer.
• Agency transportation partners charge retailers for services, and retailers charge customers for services. Generally speaking, the shorter the supply chain, the greater the profit.

Pros and cons of dropshipping

Advantages

• Dropshipping can provide more flexibility when you start your business. It cuts many steps, such as transportation, packaging and storage. Therefore, you can spend time and money on other aspects of your business, such as marketing.
• There are many products to choose from when shipping on behalf of the company.
• The start-up cost is meager because you only need to pay for the website and advertising costs to cooperate with the supplier.
• The risk is much lower because you can switch to new products at any time, you don't need to invest in inventory, and you don't need to sign any contracts with suppliers.
• The product is cheaper for you because there is no need to store and deliver.
• You usually receive better shipping rates because suppliers often sign contracts with companies such as UPS and FedEx to get lower shipping prices.
• Logistics are straightforward. You link the website to the supplier's order management platform. After that, the supplier will handle everything from packaging to shipping.
• Dropshipping allows you to focus most of your time on quality customer service.

Shortcomings

• Dropshipping is highly competitive because you are also competing with non-dropshippers. Low overheads are great, but it means everyone is trying direct sales.
• Low-profit margins. Since the supplier handles most logistics, you only receive a small cut. In addition, you must consider the unit costs of advertising, marketing, and site management.

How to profit from Dropshipping

• Control costs and choose suppliers with free use or lower service fees.
• Access more online platforms. With the development of the direct selling industry, we are beginning to see the emergence of various applications that can automatically match you with suppliers and link you to their inventory.
• Choose suppliers with better quality and lower prices to increase repurchase.
• Provide excellent customer service.

HugePOD can provide high-quality products at low prices; click to learn more.

Use the HugePOD Dropshipping service.

Dropshipping is an increasingly important area of e-commerce. People have come to understand its great benefits and small costs. We feel that at HugePOD, we've mastered the process and offer the best service on the market. Come over and expand your print-on-demand business today >>>.