What Is Dropshipping And How Does It Really Work?
Updated: May 26, 2021
We are living in a world where there are so many ways to make money while working from home and the best part is that most of them don’t require you to have a degree or any kind of formal education. Today we will talk about one such way that is called Dropshipping.
In this post, we will learn about what is dropshipping, how it works, and how dropshipper (people who have a dropshipping business) make money?.
What is dropshipping?
Dropshipping is an online business model that allows people to start an online business and sell products to their customers without ever actually stocking the items themselves.
In other words, dropshipping is a retail fulfillment style where the store owner doesn’t keep the products it sells in stock. Instead, when the store sells a product using dropshipping, it purchases the item from third-party services that ship the products directly to the customer which means that the store owner doesn’t have to handle the product directly or care about the product stocking.
The major difference between a dropshipping business and a standard retail business is that the seller or store owner doesn’t stock or own inventory. Instead, the seller purchases inventory as needed from a third party like a wholesaler or manufacturer to fulfill orders of the customers.
How dropshipping works?
In simple words, dropshipping works like this: You open up an online store and add the products you want to sell from suppliers who want you to sell their products, while they fulfill the orders on your behalf. They store all inventory, package, ship, and send you the tracking information when you place your order. You only pay your supplier once your customer places their order and pays you the order amount as specified in your online store.
There are already many companies out there in the market which will help you in building your own online store, for example, WordPress, Wix, or Shopify, etc. Or if you are interested in building your own store by yourself, you can also do that but in my opinion, it will be overkill.
The most important thing apart from building your online store is to find reliable suppliers who want you to sell their products. Two of the most common approaches for finding reliable suppliers are to seek out a supplier located in your vicinity or anywhere else in the world, using supplier databases, or to seek out some kind of app that connects you and your store to thousands of suppliers. There are many apps in the market already which can help you in finding reliable and quality suppliers from all over the world, for example, Oberlo, Spocket, Dropified, etc. If you are interested in knowing more apps for finding suppliers, please check the best dropshipping companies.
Until now, we learned about what is dropshipping and how it works. Now let's get into the fun part of it, that's how dropshipper makes money.
How dropshippers make money?
As a dropshipper, the key aspect of success lies in your excellence as product curators, selecting the right mix of products to market to customers. Remember, nobody will come to your online store directly, you will need to market your store and find ways to bring traffic to your online store. The online store's marketing is a cost you will have to incur in both time and money. Apart from this, you will also need to help potential customers in finding, evaluating, and buying the right product plus provide good customer support whenever there is an issue. Finally, you also have to keep regular checks on the original price that your supplier sells the product for.
With all the cost and effort mentioned above, dropshipping marks up individual products in exchange for distribution which is why suppliers are happy with dropshippers marketing their products for them. The dropshipping business adds additional sales that the supplier might have missed. Hence, to make a decent profit out of your dropshipping business, you need to have a good understanding of your customer acquisition cost, what kind of competition is there in the market for the products you are selling, and price your products according to your price to that. If you can have a good grasp of the following things, we are pretty sure you will be able to turn in a good amount of profit while working from home.
Well, this is just the beginning of your journey into the world of dropshipping. There are many things yet to be explored and learned. But we hope, this article has created some curiosity in your mind about the dropshipping business.
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