Dropshipping has become the go-to business model for merchants all around the globe.
According to a study from Statista, the global dropshipping market is expected to reach $196.78 billion in 2022. By 2026, this figure is set to shoot all the way up to $476.1 billion.
So, what is dropshipping and why are so many merchants choosing to adopt this business model? In this blog, we’ll take you through everything you need to know to help you get started.
What is Dropshipping?
As a merchant, dropshipping means that you don’t stock or own the inventory, instead you act as a middleperson. Any production of goods, storage of inventory or shipping to your customers is managed by the suppliers of your choosing.
How does dropshipping work?
From order fulfilment to customer service, dropshipping involves the following:
Merchants:
- Choose the suppliers and products
- List the products online for customers
- Take care of customer service
Suppliers:
- Store inventory for the merchant
- Ship products to the merchant’s customers
Customers:
- Order products from the merchant’s online store
The Key Benefits of Dropshipping
1. It’s Easy to Start
One of the main reasons dropshipping is so popular is because of how easy it is to get started. All you’ll need is a computer, an online store and a dropshipping supplier that stocks the types of products you want to list on your store.
2. No Need to Create Your Own Products
There’s no need to worry about investing time, money or materials into creating your own products. Anything on the supply and manufacturing side will be taken care of for you, so you can focus on growing all of the other important areas of your business.
3. Low Starting Costs
The costs that came with storing, protecting and maintaining your stock can be expensive, especially if you’re trying to get a new business off the ground.
By using the dropshipping model you won’t have to deal with anything relating to inventory management.
Setting up a successful ecommerce business can be a challenge, which is why lowering your costs in the early stages can be crucial if you want to stand a chance.
Alternatively, if you decide to go with the traditional business model, you will need to:
- Pay for a warehouse or other storage facility
- Handle all packaging and shipping of orders from your customers
- Deal with any items your customers return
- Manage and monitor your order volumes and stock levels
Once you take into account all of the above opting for the dropshipping method seems like a no-brainer for anyone attempting to make their start in eCommerce.
4. You Set the Retail Price
When listing a product online, you’ll be in control of what price you set for your customers.
How much profit you wish to take home will depend on the difference between the price your customers pay versus the price that you will have to pay your suppliers.
Here’s how it works:
- Your customer pays the retail price listed on your store (eg. $100)
- You forward the order to your supplier and pay the wholesale price (eg. $70)
- You take the difference as profit ($100 – $70 = $30 profit)
5. It’s Easy to Scale Up
Dropshipping can make it much easier to expand your eCommerce business.
As a merchant, more orders won’t mean more work for you. This is because your supplier will be handling the order fulfilment process for you, allowing you to focus more on scaling up your marketing and customer support activity.
Want to Know More?
For more helpful hints on growing your eCommerce business, search #PixxlesPowerUps or visit our ‘News & Views’ page to read more useful blogs.
