What is Dropshipping?
Dropshipping is an order fulfillment method where an e-commerce business does not need to manage an inventory or keep its products in stock. Instead, a seller or a drop shipper sells the products on behalf of the business and manages the inventory as well as the delivery of the products to its final destination or customers.
If put in simpler terms, the selling merchant or drop shipper merely acts as a middleman between the customer and the manufacturer. Dropshipping in e-commerce is particularly popular among small-scale businesses that want to invest less money in managing their stocks and would rather sell through a third party.
How Does Dropshipping Work?
Like any other sales strategy and business plan, drop shipping also involves a process with several key steps:
1. Choose a niche of products
The first step to drop shopping is choosing a niche of products you are interested in selling. Research and select products that are in demand and have the potential for profit.
2. Find a supplier
The next and most crucial step of drop shipping is finding a reliable supplier that offers the products you seek at the right quality and price.
3. If not one, find multiple suppliers
In another scenario, if you want to sell multiple products but don’t want to partner with one supplier for them, you can use an app that allows you to connect with thousands of drop shippers.
Pros & Cons of Dropshipping in E-commerce
| Pros of Drop Shipping | Cons of Drop Shipping | |
| Cuts out the costs and hassle of managing an inventory. | Profit margins are often low due to the seller’s commissions. | |
| Gives the opportunity to sell a wide range of products without worrying about the stock | Finding an appropriate and reliable seller to sell your products to. | |
| Dropshipping allows for location independence. You can operate your business from anywhere without worrying about whether you are in a market. | Lack of control over how your products are shipped and presented. This can affect your product’s value and | |
| It’s easier to test new products and markets without the risk of being stuck with unsold inventory. | Building a brand can be challenging when the products come from various suppliers and may lack consistent packaging. | |
| It is a low risk business model. Once the products are manufactured and sold to the sellers, your job is done. | Success is dependent on the reliability and efficiency of your suppliers. Issues with stock availability or delayed shipping can impact your business. |
What is an Example of Dropshipping?
One of the most popular examples of drop shipping in e-commerce is Ali Express. This popular online marketplace allows businesses to sell their products easily without having to worry about shipping and inventory management.
Many entrepreneurs and businesses engage in dropshipping using AliExpress as a source for their products. The differentiating factor for Ali Express is that it offers very competitive prices and majorly focuses on bulk purchases, making the products reach the right places and improving the average order value for businesses.
While dropshipping in e-commerce is not a new concept, many entrepreneurs are still doubtful about relying on this strategy. However, big businesses, like Ali Express, in the market make it easier for businesses to trust in the concept more.
Conclusion
In conclusion, dropshipping in e-commerce has come a long way from merely being a term in the bigger markets to now making it to all scales of businesses. Even regular consumers are more confident in making their purchases from vendors selling other merchants’ products.
This splurge and change in the shopping dynamics can also be attributed to the enhancements in technology that help the consumers to do their research and make informed purchasing decisions.
