Do you want to start a business, but only has a small budget? Have concerns about other business risks? Afraid of getting huge losses because you have no business experience before? Then dropshipping is the right business model for you to take first.

What is Dropshipping?

Dropshipping is not really a business model, but more of a fulfilment method in a retail business. If you are a retailer or a reseller, you need to have your own stock, manage your inventory, and do all fulfilment process & marketing part of your business, all by yourself.

Dropshipping allows you to focus more on marketing and building your business instead, because all the stock, all the delivery—in fact the whole fulfilment process is being taken care of by the supplier. Quite convenient, right?

First, you need to make contact with the official supplier or vendor, sometimes you need to be properly registered on their system (depends on their dropshipping policy). Once all paperwork is done, you can start selling the products in any marketing channels that you have (e.g. marketplaces, social media, websites, blogs, etc.).

When a customer buys from you, you calculate the total price (that includes taxes and delivery fees) and give it to your customer. Once your customer agreed & payment has been made, you forward the receipt & order details to your supplier, pay them, and they will handle the rest. 

How do Dropshippers Make Money?

Based on above example, you make money from commissions made from those transactions, usually will be transferred to you at the end of the month.

Another example is when the supplier allows you to set your own prices, then you can make money from the margin between your buying price from supplier, and selling price from your customers.

Your actual costs will only come from your internet service, electricity, and marketing (if you’re using paid ads), and/or customer supports, if you are providing one.

The Benefits of Dropshipping

Easy to start

Since you don’t require a physical store or warehouses to begin with, it’s quite easy to start a dropshipping business. No physical products, no employees to hire (yet), and no packing & shipping process. For example, if you have settled all requirements from a supplier today, you can start selling the products right away. That easy.

No inventory

If you have to keep your own stock, then you need a place to store them; a physical store, a warehouse, and probably some help to manage them. With dropshipping, all stock is managed by the supplier. 

Work from anywhere

Since you’ll be mostly dealing with customer support and marketing, you can literally work from anywhere. Working while vacationing? Why not! When you're running a dropshipping business you can have time, and freedom, to travel whenever you want.

Various products to sell

Dropshipping is all about curating products in your store. You can sell any products (the ones that are relevant with your brand, of course) from any suppliers who provide dropshipping features. 

Easy to test the market

When you have no retail business experience, it’s better to test first what products are in demand. Dropshipping allows you to try selling several products, and see which ones are actually in high demand & easily profitable for you.

The Drawbacks of Dropshipping

Low margin

This is the biggest disadvantage of becoming a dropshipper. Because it’s quite easy to do, a lot of people have been doing it; applying similar strategy, driving the price lower and lower. Some suppliers have policies to keep the bottom limit prices to prevent this and keep the dropshipping environment healthy, but some others don’t. 

To make your business profitable, you need to do the research first before deciding what product you want to sell, and from which suppliers you want to source the items.

Inventory issues

Since you are in no control of the inventory, you have no exact idea about the condition & the availability of the products. You have to keep asking updates to the supplier about this. Some suppliers have their own websites, so dropshippers can always check real time about the products’ availability, but some usually don’t.

What you can do to minimize the out-of-stock status and driving away your customers from you, is to check the items availability and inform your customers, before letting them make the payment. Avoid checking your stock availability after customer made the payment.

Shipping challenges

Again, you are in no control on the packaging and delivery process. Any issues on these matters (bad packaging, slow delivery, etc.) and some customers will hold you responsible for it, even though it’s not your fault at all. A good and resourceful customer support is needed to cover this part.

Rules to obey

A bit different from being a reseller; being a dropshipper usually means you still need to follow some ground rules arranged by the supplier. Topics like bottom price limits, marketing material, promotional offers; some suppliers still micro-manage these aspects even though a dropshipper is the one actually doing it. Some others don’t, and will allow dropshippers to freely manage their own sales and marketing. 

Conclusion

Dropshipping is not the most perfect or even the fastest way to build your business, but it’s surely one of the good ways to make a start; especially if you have no retail business experience. Dropshipping allows you to start your business small, grow it bit by bit, and offers flexibility for you to test the market and make experiments on how you market those products.

Can you be a successful dropshipper? Definitely. Dropshipping is all about curating and combining products, and also noticing opportunities. 

If you’re avoiding office work and really eager to start your own business, build your own brand, but need to learn how to do retail business first, then dropshipping is the way to go.