Whether you are on YouTube or Facebook, there are many people who advertise their services to help you succeed in dropshipping. There are also many of those who offer free tutorials to help you get started in this business.
But why is it popular? Is this even a scam as some people claim?
Let us review and take a look at the dropshipping business model, and then figure out together why it has become one of the most popular businesses in the online world.
What Is Dropshipping?
Dropshipping is a business partnership, but there is no written contract between the parties. In this business strategy, the seller looks for a supplier for a product, and most of the time, he does not even have to get to meet the supplier in person.
The seller only has to contact the supplier, and sometimes he does not even have to do this. There are many dropshipping websites where you can find suppliers like AliExpress. Also, you can register for membership in many companies that offer a database of suppliers in a country you choose, like Spocket.
The seller, once he has selected a supplier and product to sell, will sell this product online. He can do it on Amazon, eBay, Facebook, Instagram, or build his website where he can post the items.
The seller has to be good at marketing, and he must be responsive to customer inquiries. What this means is that the seller must know how the products work, if refunds and exchanges are possible, or how long it will take to ship.
Once a customer makes a purchase, then that is the only time that this entrepreneur will buy the item from the supplier, and then the supplier will ship the item to the customer.
The seller does not need to keep an inventory, and he also does not have to go to the shipping courier’s office like FedEx or DHL. It is the supplier who will do all this.
Once the seller places an order to the supplier, the seller will use the shipping address of the customer, not his address. The supplier will take note of this and ship the item to the customer, even if the customer is from another country.
However, international shipments will have customs duties.
How Does The Seller Make A Profit?
The seller makes a profit by selling the item for more than its original cost. If the seller buys the item for $15 plus $10 shipping, he will post his product and sell it for maybe $35. His capital is $25, and his overall markup is $10. He keeps the $10, and then the $25 that the customer paid goes to the supplier.
From the $10 gross profit, the seller has to subtract his expenses on his power consumption, salaries, internet subscription, advertising costs, and other business costs. Whatever remains is the net profit.
At a gross profit of $10 per product, and if the seller is selling 10 items per day, that is equivalent to 300 products in a month X $10 = $3,000.
This is no small achievement since $3,000 was earned with the seller spending roughly two to three hours per day managing this business.
Why Is Dropshipping So Popular?
As you can see from the business model description above, dropshipping is highly popular for several reasons. In a nutshell, it offers a lot of benefits for both the seller and the supplier.
Here are the reason why dropshipping is popular:
No inventory needed
You do not need to buy the items before you post them for sale. The only thing you need to do is to buy at least one, so you can sample the product. If it is of high quality, then it will be easy to sell them, and you will have little problems with unhappy customers.
Easy to manage
In dropshipping, you do not even have to monitor your own inventory or sales. There are many apps that will do this for you automatically. You do not need to change the prices on your website as the price form the supplier changes; the system will do it for you.
No logistic headaches
You do not need to print a shipping label. You do not need to pack the items and go to FedEx. The supplier will do this for you. All you need to do is to sell.
Small capital needed
Unlike many other businesses, you can start dropshipping for as little as $30. Since you do not need to buy inventory, the only capital you need is the payment for a website host. If you do not want to pay that, you can dropship via Amazon or eBay, and you can start your business for free.
No real estate required
You do not need to rent a warehouse to keep your stock because you will not maintain an inventory. You do not need a large office, too.
You can work from your living room or kitchen, or in a coffee shop if you want to. You can also hire freelancers to help you, and they will work from their homes.
Lots of products to choose from
There are millions of products from thousands of suppliers. You can pick hot-selling products or focus on a specific niche and find the right market for that product.
The world is your marketplace. Since you can find suppliers from all over the world like the UK, China, Australia, Us, and many more, you can sell your products to countries near the supplier for fast shipping times.
Easy to learn and set-up
You do not need to finish college to be a successful dropshipper. You just need the right attitude to learn it. Also, you do not need to build a website because there are many automated drag-and-drop web builders that you can use.
Suppliers are willing
Many suppliers love it when you sell their products because they can focus on manufacturing instead of focusing their efforts on selling. If a supplier has 100 people selling his products, he would be willing to reduce the price of his product and sell them to the sellers at wholesale prices, even if the dropship sellers are buying one piece at a time.
Dropshipping Statistics Showing Its Popularity
Here are some call statistics about dropshipping to help you further understand how it is competing against giant big brand businesses.
- 23% of all online sales globally are fulfilled through the dropshipping model, which is equal to roughly $85 billion, not million, dollars per year.
- 34% of Amazon sales are fulfilled by dropshippers who posted their products there.
- e-Commerce grows roughly by 17% year on year, and this includes sales from the dropshipping model.
- Suppliers earn 18.33% more profit if they sell to dropshippers compared to making their own sales from their online stores.
- Dropshippers can earn more than 50% profit than those who keep their own stock inventory.
Where Can You Learn Dropshipping?
There are thousands of dropshipping videos and a lot of trustworthy courses out there. The problem with free stuff is that you also do not get a lot of things to learn.
If you really want to learn how to dropship, you need to be ready to invest and consider it as formal business education.
Find a dropshipping course that covers the following:
- What is dropshipping
- How does it work
- What are the steps to start one
- How to find a winning product
- How to find a supplier
- How to build an online store
- How to do SEO on your online store
- How to use ads to find clients and use Facebook, Instagram, email, etc.
- How to build a profitable business plan
If these things are covered in the course, then you are in good hands.
How Do You Start Dropshipping?
The steps to follow to be able to build your online store is are simple. However, you must know that dropshipping is a serious business, and you need to invest time to really come up with a professional website and business.
These steps are:
- Choose a winning product and supplier
- Create a store that is professional with a way to process payments
- Plan a business process that includes proper pricing, refund policies, etc
- Market your products the right way
Dropshipping is popular because the seller, that is you, can earn a lot of money with very little capital. The truth is, your biggest investment here is your time. Since you will be starting this on your own, be prepared to spend many hours researching for good products and suppliers, making a perfect website, and learning how to market your products.
The key to success is getting things done. If you study on your own by watching tons of videos from different sources, you may get overwhelmed with different opinions. As a business, dropshipping has many techniques that may or may not recommend but all successful dropshippers.
To avoid this, focus on one course and master the techniques. After taking the course, start your dropship business and learn as you go along your online business journey.