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Dropshipping School – What It Is and Why It Can Help Scale Your Business

*The following is the first in a two part series by Tiana Byers from ecomdash.

Dropshipping – now there’s a term any eCommerce retailer has heard buzzing around in online forums and amongst colleagues. While Dropshipping can be a profitable strategy to implement into your eCommerce business plan, if you’re unfamiliar with the process, the term can feel foreign and intimidating. What is Dropshipping, exactly? Essentially, Dropshipping is the act of selling products you don’t own. I know, that sounds like the start of a scam that you’d see on Dateline, but it’s perfectly legal. It can often feel like a complicated process as there is a lot to weigh and consider before diving in, but here’s a breakdown of how Dropshipping works:

  1. You find a supplier, dropshipper or manufacturer to work with. Preferably, you want to work directly with the manufacturer of the products you’re going to sell, and eliminate all middle-men.
  2. Without ever having these items in your possession, you list them for sale on your marketplaces and website.
  3. When an order comes in for one of the listed items, you send the sales order information to the supplier. They fulfill the order and ship it to the customer directly.

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The key differentiator between Dropshipping and seller handled order fulfillment is that the product never actually touches your hands. Given the low overhead and mitigated investment risks of purchasing bad product, Dropshipping can be a great way to bootstrap a business. It’s an effective eCommerce business model for a variety of reasons.

The Pros of Dropshipping

For starters, you don’t have to worry about storage. Since you never actually touch the product, sellers who dropship do not undergo the burden of finding space to stock products within their homes or pay storage fees at warehouses. Dropshipping allows you more space, less clutter and no storage fees.

There’s no major upfront investment. You are waiting until a customer purchases an item before sending the sales order information to the dropshipper or supplier, so you don’t have to make a big investment and purchase stockpiles of products, like sellers who fulfill their own orders. This also means –

No risks for underselling….at least, in terms of upfront investments. If a product you listed is not getting a lot of attention, then it’s not the end of the world. Find another item to replace it, or just stick to selling your hottest items. You haven’t purchased a stockpile of the underperforming item, so you’re safe – no major burdens on your wallet.

Since Dropshipping eliminates the risk of bad product investment and requires little upfront investment compared to what you would spend on ordering stockpiles of product, you have the capacity for accelerated growth. You will be able to add and test new products, and change your items as needed with the seasons. This method can allow you to scale and compete online against competitors who are restrained by trying to move stock they have purchased and must sell to make a profit or break even. However, there are still things to consider.

 

Preview of Dropshipping Part 2

Like any business endeavor, there are some risks involved with using Dropshipping to fulfill all of your eCommerce orders. As with any other strategy or business model you may implement, it’s important to understand the potential risks. When you have all the facts, you can make an educated decision regarding whether or not Dropshipping will work for your business. In part two of Dropshipping School, we will discuss a couple of thing you need to consider before Dropshipping.

About the Author

Tiana Byers is the Lead Content Creator for ecomdash, an award-winning multichannel inventory software for ecommerce retailers. Ecomdash offers sellers an end-to-end ecommerce software to complete workflow, including inventory and sales order management, product listing, Dropshipping and fulfillment management, reporting and more. Ecomdash helps customers save time and money, while they grow, scale and compete online.

Photo Credit

Angelica Valentine

Angelica Valentine is a Marketing Consultant with several years of expertise in the retail sector. Her work has appeared on VentureBeat, Business Insider, SAP, and more. She holds a BA from Barnard College of Columbia University.

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