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What is drop shipping and how does it work?

What is Drop Shipping?

Drop shipping is a business format that involves using a third party to store and ship for you. When a customer orders an item from your store, you will pass it on to your supplier to fulfill. You do not have to store items yourself, deal with packaging, or shipping the products. It’s a lot easier business format with a lot less overhead. 

Just to give you an example, you reach an agreement with a supplier of clothing products. You list a shirt on your website. A customer orders one of the shirts on your site. When they pay for the shirt you send the order to your supplier, who will charge you the price of the shirt, the cost of shipping, and might also charge you a dropshipping fee. They will then pack and ship the shirt to your customer. You will charge more than what your supplier charged you for the shirt and shipping. Then you will keep the profit. 

What are the Benefits of Drop Shipping?

There are a few different benefits of drop shipping. Businesses use drop shipping because it saves them time and money. These benefits will free up resources for other areas of your business.

No Inventory

The biggest advantage of dropshipping is that you do not have to keep inventory on hand. You will not have to deal with finding a facility to keep your inventory. You also will not have the liability of keeping the inventory safe from damages. This will allow you to use that money on things like marketing and other resources to help grow your business.

No Shipping

You will not have to deal with shipping the product. It is possible that your supplier will charge you a drop shipping fee, but it is much cheaper than dealing with everything yourself. You will not need packaging, staff to package items and shipping facilities.

No Loss

Since you will not have to worry about the inventory you will not have losses. You will not have to worry about ordering items. This will prevent you from ordering too many or too few of an item. You buy the exact number of products from your supplier to cover all your orders, with no losses due to inventory issues. 

No Risk

You will not need to invest thousands of dollars into your products. Your supplier will have the products available to sale and you only buy the product when you sell one. No pre-orders are necessary. It’s a great way to try new products out as well. You can try a new product without any risks to your finances. 

 

Things to Avoid When Drop Shipping

Drop shipping may sound like all positives but there are a couple of things you try to avoid. To be successful in drop shipping you need to consider all the elements.

 

Drop shipping may sound like all positives but there are a couple of things you try to avoid. To be successful in drop shipping you need to consider all the elements. 

Saturated Market

Since drop shipping is very easy and takes little money to get started there are a lot of people doing it. The problem with this is that there may be a lot of websites selling the same items you are selling. You will want to research the market for your products. Choose unique items or items that are not on every website. Choose your items carefully. 

Low-Quality Products

Before you start using a supplier, you will want to test their products. Get a few items for yourself and test them out. The last thing you want is to start using a supplier and find out they are sending your customers bad products. Your customer is going to come to you to fix the problem, not the supplier, it is your reputation that is at stake. So, make sure you choose a supplier who has high-quality products. 

Slow Shipping

In today’s market, you need to have a fast shipping. The drawback of a lot of suppliers is that they might be located overseas. The shipping speed could be a problem for some suppliers. Make sure that you test shipping speeds and that you are comparable to other companies. 

Fees

The point of dropshipping is to make a profit. So, make sure that you know all the drop shipping fees. Include in the product price and any fees your suppliers charge. It is very important to price your items based on these fees. If you do not sell it for the right price you could end up not making a profit or worse losing money. 

Last but not least, when starting a business, it is important to make sure that your business is registered. The process is different in different countries and states. For example, if you are in South Carolina, you can form a South Carolina LLC.

Setting Up Your Drop Shipping

Now that you know the basics it’s easy to get started. Follow the drop shipping for dummies guide below:

  1. Choose where to list your items for sale. It can be an online marketplace like Amazon or eBay or even a platform like Shopify or WooCommerce, where you can fully customise your store. 
  2. Research a dropshipping supplier that can fit your needs. 
  3. Research the items you plan to sell and the market for them. 
  4. Start listing your items online. 
  5. Collect orders and send them to your supplier. 
  6. Automate your business.

If you follow all the advices of this guide of drop shipping, and market your products to the right audience, you can build a very successful business and become your own boss, while working from home at your own pace.


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