Dropshipping! What is it and How Does It Work?

Dropshipping is one of the easiest businesses to start. You can launch a full-time or part-time dropshipping from home. It sets you free from inventory management.

As a dropshipping business, you only need to generate a sale and send that order to the supplier. The supplier handles inventory and delivery. This way the business owner can focus more on marketing and branding.

The best thing about dropshipping is that you do not need to own the product. For example; Uber does not own any cars, and Airbnb owns no hotels.

What Is Dropshipping And How Does It Work?

According to Amazon, dropshipping serves as the middleman, where you sell products to customers without managing inventory.

Various companies like Amazon and Shopify offer complete functionality from supplier connections to logistics tools.

It is the reason most of the dropshipping businesses are running on these two platforms.

Even if you are a newbie, this guide helps you to launch your dropshipping business.

What is DropShipping?

Dropshipping is a way of running an online store where a third party handles the inventory.

Your job is to find customers, generate sales, and send orders to the suppliers. It is a lucrative business with growth opportunities.

According to Statista, the value of Dropshipping will grow to $476.1 billion by 2026.

Instead of buying stock and selling it to customers, you use business connections.

Choose from a range of products from available suppliers to sell to your customers.
Set the markup. And you make the sales. Then, logistics companies pick up the products from your suppliers and ship them to your customers.
Never see the stock as it is never in your possession.
Don't pay for inventory management.

How Does Dropshipping Works?

Dropshipping businesses start when sellers connect with suppliers to sell products to the customers.

Here is the process to start a dropshipping business.

Agreement: The dropshipper and seller sign a contract to run the business efficiently.
Platform: Sellers display products on Shopify or Amazon. Customers place orders on the eCommerce website.
Order from Seller to Dropshipper: Seller sends the order to the dropshipper, and then the dropshipper sends the order to the customer.
Customer receives order: Order delivered at customer's address.

There is an exception to the 3rd point. In some cases, the seller itself sends the order to the customer's address.

Benefits of Dropshipping:

Low Maintenance Cost:

Dropshipping starts with a minimum cost. You save yourself from inventory management costs. You do not need a store to stock products. It is the best business idea for small businesses. All you need is to invest time to best your competition.

Trending Products:

Dropshipping is an ideal way to sell trending products. It is easier to manage multiple products and change the product catalog whenever you want. For example, during the holiday season you can sell travel tickets, but the rest of the year you have been selling travel bags.

Zero Product Cost:

You save yourself from heavy product research and development costs. You can use that money and resources on marketing and brand building.

Easy to Start:

Dropshipping is free from traditional eCommerce hurdles. You can start your own dropshipping eCommerce business without inventory, warehouse, shipping, tracking, and shipments. All you need is to establish customer satisfaction with marketing.

Test and Scale:

You can scale your dropshipping business on multiple platforms. It is easier to scale your eCommerce business with Amazon, Etsy, eBay, and Shopify.

Can I Make Money through Dropshipping?

Yes. Dropshipping is a profitable business model. It is best for small businesses. Dropshipping is not as profitable as eCommerce.

Yet it is a low-risk business where you do not need to own products.To make money with dropshipping, you need to choose the right niche, find the best suppliers, market your store, and ensure timely delivery.

Dropshipping Community:

Reddit's r/dropshipping community is the best place for beginners. It is the community of people engaging in dropshipping business. You can ask questions, get reviews, and find out the ways to promote your dropshipping business.