What Is Dropshipping? A Guide To Retail Fulfillment

Dropshipping is a retail fulfillment method where a store doesn’t keep the products it sells in stock.

Instead, when a store sells a product using the dropshipping model, it purchases the item from a third party and has it shipped directly to the customer.

As a result, the seller doesn’t have to handle the product directly.

Background Overview on Dropshipping

Dropshipping has existed for decades, but it has gained significant popularity with the advent of e-commerce.

It’s a business model allowing entrepreneurs to start an online business and sell products to their buyers without stocking the items themselves.

Instead, when a dropshipping store sells a product, it purchases the item from a third party—usually a wholesaler or manufacturer—and has it shipped directly to the customer.

Benefits of Dropshipping

1. Low Startup Costs: You don’t need to invest heavily in inventory, so it’s possible to start dropshipping with limited funds.
2. Easy to Start: You don’t need to deal with physical products, making the process much more straightforward than traditional retail models.
3. Flexible Location: A dropshipping business can be run anywhere with an internet connection.
4. Wide Selection of Products: Since you don’t need to pre-purchase the items you sell, you can offer an array of products to your potential customers.

Features and Opportunities of Dropshipping

Dropshipping offers a range of features and opportunities, including:

1. Scalability: Test products and add new ones quickly without bearing the burden of ordering in bulk and having something fail (which equals lost money and space).
2. Increase Lifetime Value of Customers: By consistently adding new and expanded product selections, you can keep your existing customers engaged and returning to see what new items you’ve acquired.
3. Low Overhead: Your overhead expenses are pretty low because you don’t have to purchase inventory or manage a warehouse.

8 Ways to Use Dropshipping as Part of Your Digital Marketing Initiative

1. Social Media Advertising: Use platforms like Facebook and Instagram to reach your target audience and promote your products.
2. Content Marketing: Create valuable content around your products to attract and engage your audience.
3. Email Marketing: Email marketing informs customers about new products and deals.
4. SEO: Optimize your online store for search engines to drive organic traffic.
5. Influencer Marketing: Collaborate with influencers in your niche to reach a wider audience.
6. Affiliate Marketing: Set up an affiliate program where others get a commission for referring customers to your store.
7. Retargeting Ads: Use retargeting ads to reach people who have visited your store but have not purchased.
8. Video Marketing: Use platforms like YouTube to showcase your products in action.

Challenges with Dropshipping

Despite its many advantages, dropshipping isn’t without its challenges. For example:

1. Inventory Issues: If your supplier runs out of stock, you risk disappointing customers.
2. Shipping Complexities: If you work with multiple suppliers—as most drop shippers do—the products on your site will be sourced through several different drop shippers, complicating your shipping costs.
3. Low Margins: Because it’s so easy to start, many merchants will set up shop and sell items at rock-bottom prices to grow revenue. They’ve invested so little in starting the business so they can afford to operate on minuscule margins.

5 Step-by-Step Instructions on Getting Started with Dropshipping

1. Identify a Niche: Choose a specific category of products that interests you and has profitable potential.
2. Find a Supplier: Use platforms like Alibaba or work directly with dropshipping manufacturers.
3. Build an E-commerce Website: Use platforms like Shopify or WooCommerce to build your online store.
4. Create a Customer Acquisition Plan: Think about how you will attract customers. This could be through social media, SEO, or paid advertising.
5. Analyze and Optimize: Use analytics to track which strategies work and which don’t, and adjust your plan accordingly.

Pros and Cons of 5 Best Ecommerce Platforms for Dropshipping

Shopify

• Pros: User-friendly, great integrations, good customer support.
• Cons: It can be expensive, and transaction fees unless using Shopify Payments.

WooCommerce

• Pros: Highly customizable, large community, lots of plugins.
• Cons: It can be complex for beginners and requires good hosting.

BigCommerce

• Pros: Good for scaling, no transaction fees, great SEO features.
• Cons: It can be expensive and less intuitive than Shopify.

Magento

• Pros: Highly flexible, robust, and powerful.
• Cons: It requires development skills and is expensive for the enterprise version.

Wix

• Pros: Easy to use, suitable for small businesses, beautiful designs.
• Cons: Less powerful than other platforms, not specifically designed for e-commerce.

Conclusion

Dropshipping is a viable option for anyone looking to start an online business. It’s one of the least risky business models and straightforward to start.

However, like all businesses, it’s not without its challenges.

By understanding the benefits, features, sales opportunities, and challenges of dropshipping, you can decide whether this business model suits you.

Catherine Fitzgerald B.A. M.A. PGDip( Founder )

With 30+ years of training experience, I founded Oak Innovation (oakinnovation.com) in 1995. I help busy training professionals and business managers deliver better training courses in less time by giving them instant access to editable training course material. I received my Bachelor’s and Master’s degrees from University College Cork. I hold qualifications in Professional Development And Training from University College Galway. Clients include Apple, Time Warner, and Harvard University.