Drop shipping is a great way for entrepreneurs to make money and explore the world of ecommerce. However, not many people fully understand what drop shipping is or how it works. The truth is, anyone can start a drop shipping business if they’re prepared to manage an ecommerce business. So what is drop shipping, exactly?
Drop shipping is a retail fulfillment method where business owners don’t keep their own inventory, and work with partners to ship product when it’s ordered on their website. If you have a great idea for a product or a niche online store, drop shipping can be a great way for you to get off the ground. The best part is, running a drop shipping business is highly cost-effective. Here are five financial benefits of drop shipping:
Wide Variety of Low Cost Products
One of the biggest benefits of drop shipping is that you have access to a wide range of products from a wide range of merchants. Because of this, you’re able to create a versatile online store with dozens or hundreds of related products. If you were to design and manufacture your own product, you’d likely have to move very slowly, creating one product at a time and waiting to generate revenue to continue making product advancements. With drop shipping, you aren’t limited by these type of restrictions, and are free to take more creative risks.
No Upfront Investment
Without a doubt, the largest appeal of drop shipping is that there’s little to no upfront investments necessary. You don’t need to pay for a bulk purchase upfront, and sell from there. The only upfront investments that you’ll have are building your website, and paying for design, hosting, and of course, marketing. Because this upfront investment is so low, the risk as an entrepreneur is greatly diminished.
Before you throw any money into launching a drop shipping store, you should create a list of all your associated costs. This will help you map out everything you need, and allow you to be comfortable with each little investment. Here are some costs you should consider:
- Website design
- SEO assistance
- Admin help (you might want to hire a virtual assistant online)
- Customer service rep (if your store is doing well and you can’t handle all inquiries on your own)
- Premium drop shipping plugins and apps
- Marketing and paid advertising
No Need for Warehouse Space & Storage
With a traditional ecommerce business, you would eventually need to work with a third-party company like SteelPro for services like transportation, warehouse management, cross docking, and much more. During early stages of traditional ecommerce, you might be able to get away with housing all your product from your garage and shipping from your house, but if you’re planning to be successful in the future—and you should be—you’ll eventually need to scale to support a full commerce operation.
With drop shipping, these matters don’t fall into your hand. Rather than deal with warehouses and shipping, the company you partner with takes care of it for you. With this model, logistics are a thing of the past. This is perfect for entrepreneurs who simply don’t have the time or don’t want to get too involved in the behind-the-scenes aspects of getting a product from the manufacturer to the customer. Whenever a customer orders from your online store, the merchant handles packaging and shipping, and provides you and the purchaser with all necessary information for tracking.
In business, as is in life, time is money. With drop shipping, very little of your time is required, compared to traditional forms of ecommerce. As previously mentioned, you don’t have to deal with stacking, packing, storing, shipping, ordering, and many other tasks associated with running a product-based business. Once you have your website launched and all your product pages set up, you can sit back and let it happen, creating a passive income for yourself (of course, you’ll still need to work on marketing).
Because you’re able to add new products at the drop of a dime, your business can scale much quicker. For example, let’s say you have an online beauty store, and you dropship unique beauty products. As you spend time perusing different marketplaces, like Alibaba and AliExpress, you’re able to order new products to test for yourself. If you like them, it’s as easy as importing the product using an app extension like Oberlo. You don’t have to worry about ordering in bulk, nor do you have to worry about the product failing on the market. If you notice the product isn’t selling, you can simply remove it from your online store and test other products.