In recent years, the special e-commerce word “dropshipping” has gradually become familiar to the public, and millions of entrepreneurs have flocked to dropshipping’s business model. This article will analyze the emerging business model of Dropshipping for you, introduce its characteristics, and how to correctly use this model to open an online store:
To put it simply, Dropshipping is the retail implementation for online stores. In this business model, retailers do not need to store goods; when a customer places an order in your store, the seller transfers the customer’s order and shipping details to a third-party supplier, who sends the goods directly to the customer. As shown in the image above:
Advantages of dropshipping:
The dropshipping model, its advantages are outstanding:
1. It takes less money to start
In dropshipping mode, you only need to open and set up your e-commerce store without other capital expenses. In the traditional retail business, you not only need to spend some effort to find the location of the store but also need to invest a lot of capital to buy inventory, which requires high capital to start.
Using the dropshipping model, you can start purchasing products and carry out a successful Dropshipping business with little money without a large amount of upfront investment. Stores are less risky because they are not sold by selling any pre-purchased inventory as in traditional retailing.
2. Simple operation and low cost
In dropshipping mode, since your customer orders and shipping details are handled by third-party suppliers, you do not need to worry about inventory management, packaging, and transportation, and in some ways, relatively reduce storage costs. In this mode, you only need to pay some regular operating expenses of the online store. This overhead is nothing compared to the traditional physical business.
You can run the dropshipping business almost anywhere through the Internet and a computer; as long as you can communicate with suppliers and customers, you can operate and manage the business.
3 . A wide range of product choices
Because dropshipping’s model determines that you don’t have to buy what you sell in advance, you can offer a range of hot products to potential customers. As long as the supplier has the goods in stock, the shopkeeper can sell the goods in his online store without paying an extra fee.
After talking about the advantages of this model, we also need to introduce several disadvantages of this model:
Disadvantages of dropshipping:
1. Low-profit margin
Low profit is the biggest drawback in the highly competitive Dropshipping. Because it is easy to get started and the overhead is extremely low, many competitive stores open stores and sell goods at the lowest prices to increase revenue. Because they have invested very little money to start the business, they can operate at a meager profit.
2. Too little control
In the dropshipping model, we have too little control over the whole transaction process to grasp the product details: the customer’s order requirements and product packaging and transportation are handed over to the third-party supplier, we must rely on the supplier to do every detail of the process well and work seamlessly. It also means that when a problem arises, it can be tricky to solve.
3. Customer service is more challenging
In the dropshipping model, the product transaction process is not handled by our store. If the customer has related after-sales problems, even if it is the supplier’s problem, you, as a store owner, need to bear the relevant responsibility, on behalf of your supplier to take responsibility and absorb mistakes are part of the business model.
After understanding the basic concepts and pros and cons of dropshipping, what should we pay attention to when developing Dropshipping business?
Some notes on dropshipping
The first point: suppliers
In dropshipping’s business model, the supplier involves the most links, at the same time, he is also the most critical link in the transaction. Choosing a good supplier will not only make the whole transaction process very pleasant and smooth but also will be a win-win situation for shopkeepers, customers, and suppliers.
A high-quality supplier needs to consider the factors are: enterprise integrity, business scale, after-sales service, the quality of the products provided, and so on.
The second point： The choice of transport channels
In the transaction link of dropshipping, in addition to the product quality, the logistics channel chosen by the supplier is also a key factor to determine the transaction. Poor-quality express companies will cause a lot of follow-up problems, such as lost parts, goods damaged in the course of transportation, etc.; therefore, there is no doubt about the importance of choosing a good transportation channel. When it is sent to European countries, in the face of the problem of value-added tax, which transportation channel should be chosen; when it is sent to Brazil, in the face of customs clearance and customs duties, what mode of transport should be chosen; and so on, all these require detailed communication and choices between our stores and suppliers.
The third point： After-sales service
Under normal circumstances, as long as the product is not a too big problem, there will not be a lot of after-sales problems. But no matter how good the service is, it is inevitable that there will be times when a hundred things are out of touch. When customers have related problems, we still have to deal with them promptly. For customer feedback timely acceptance and investigation, where the problem occurs, timely find the corresponding responsible person to communicate, the first time to give a solution. Customers should be satisfied as much as possible, even if the transaction eventually leads to failure, but good after-sales service will leave a deep impression.
Concluding remarks
I believe that after reading the full text, you already have a general understanding of the business model of dropshipping. Dropshipping is a good business model for aspiring entrepreneurs because of its low barriers. With Dropshipping, you can quickly test different business models with limited losses and learn a lot about how to select and sell on-demand products.
