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Dropshipping: What It Is and How It Works

by | Updated on: Mar 4, 2024 | Drop Shipping | 0 comments

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Dropshipping has become an increasingly popular retail fulfillment method over the past decade. Essentially, dropshipping allows you to sell products to customers without actually stocking any inventory. Instead, when you receive an order, you forward it along to a third-party supplier or manufacturer, who then ships the product directly to your customer.

As a drop shipper, you never have to handle the physical products yourself. You simply set up an online store, fill it with product listings usually sourced from dropshipping suppliers, and drive traffic to your store through Digital Marketing and advertising. This makes dropshipping appealing for those wanting to start an online retail business with limited startup capital. Since you don’t have to buy and store inventory, your overhead costs are much lower.

However, this fulfilment method isn’t as simple as just setting up an online store. Doing dropshipping successfully requires forming relationships with reliable suppliers, accurately depicting inventory and shipping times, and providing excellent customer service despite never actually seeing or touching the products you sell.

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Dropshipping: What It Is and How It Works 1

How Does the Dropshipping Order Process Work?

Here is the basic process when an order is placed in a dropshipping model:

  1. A customer places an order and payment on your online store.
  2. Your store receives the order information, including the customer’s shipping details.
  3. You forward this order information to your supplier and confirm they have the item(s) in stock.
  4. The supplier packages and ships the product directly to your customer.
  5. You keep the profit margin between the wholesale supplier price and your retail customer price.

The supplier does most of the order fulfilment work, while you simply facilitate the transactions between customer and supplier. Getting this fulfilment system working smoothly does require some additional steps, however, which we’ll cover next.

Key Steps to Setting Up a Dropshipping Business

If running an online store with minimal inventory overhead sounds appealing, follow these steps to get started with your dropshipping business:

  1. Choose a dropshipping niche.
    Evaluate potential niche markets aligned with current buyer demand and popular products readily available from suppliers. Conduct additional market research to validate your chosen niche before moving forward.
  2. Set up an online store.
    Choose a platform like Shopify or WooCommerce, connect your domain name, and design your storefront focused on your chosen niche. Pay close attention to page speed, mobile optimization, and seamless checkout.
  3. Source reliable suppliers.
    Thoroughly vet potential dropshipping suppliers on factors like product quality, fulfilment speed and accuracy, minimum order quantities, and wholesale pricing. Test ordering samples yourself before partnering with them.
  4. Upload products to your store.
    Add product listings to your store, being careful to accurately represent inventory count, product variants, shipping times, etc. Drive traffic via marketing channels like paid ads and influencer partnerships.
  5. Provide excellent customer support.
    Closely manage inquiries, returns, complaints – provide support as actual product experts even without handling inventory. Maintain positive reviews by ensuring smooth fulfillment.
  6. Automate order processing.
    Use inventory management software like Oberlo to seamlessly integrate orders between your store and suppliers. Automatic syncing removes manual work so you can scale.

This covers the essential steps to build out a complete dropshipping operation. As with any business, hard work scaling the operation is required for success – but dropshipping makes starting an online retail business much more accessible for new entrepreneurs.

How to Find Reliable Dropshipping Suppliers

Connecting with reliable suppliers is imperative for smooth order fulfillment – dissatisfied customers won’t return after receiving defective products or incorrect shipments. Here are tips for sourcing high-quality dropshipping suppliers:

  • Search industry trade shows and directories like SaleHoo to find wholesalers accepting dropship orders. Thoroughly investigate Potential suppliers, request references from existing customers.
  • Check for any complaints filed against them with the Better Business Bureau.
  • Review policies on minimum order quantities, product branding, average fulfillment speed, and shipment tracking to confirm reliability and organize info for your customers.
  • Order samples yourself to inspect product quality firsthand and photograph for your product listings if allowed.
  • Negotiate your wholesale pricing margin and confirm order processing systems integrate smoothly via API connections.

Be prepared to thoroughly vet suppliers, as many middlemen brokers advertise as manufacturers. Go directly to brand sources as much as possible to maximize profit margins.

Top Products to Consider for Dropshipping

While you can technically dropship any type of product, some item categories generally perform better than others. Factors like high demand, repetitive ordering, and impressive margins make for ideal dropshipping products.

Some top products fitting this criteria include:

  • Trend apparel like printed t-shirts and hoodies
  • Phone accessories like cases and chargers
  • Fitness equipment and athleisure wear
  • Beauty and wellness products
  • Trending toys and fidget items
  • Automotive accessories like floor mats
  • Gifts and customized décor items

Essentially, focus on goods aligned with popular buying trends that customers are likely to order repeatedly, rather than expensive one-time purchases. Regular ordering translates to recurring profits with minimal continual effort.

Additionally, products like wearables that lend themselves well to slight customization and personal branding create easy opportunities to increase order value.

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Dropshipping: What It Is and How It Works 2

Keys to Dropshipping Success

While dropshipping makes starting an ecommerce business accessible, simply setting up a generic storefront with untested suppliers is unlikely to bring success. Follow these tips that separate profitable dropshipping ventures from beginners just starting out:

  • Create a brand story and visual identity around your chosen niche to emotionally connect with your target customers rather than solely competing on price or selection.
  • Focus on supplying value through exceptional content and service instead of over promising unrealistic shipping times or inventory that may not align with supplier capabilities.
  • Master platforms like Facebook and Google advertising to cost effectively drive targeted traffic that converts to loyal customers.
  • Don’t rely solely on Oberlo or other plugins; build direct relationships with suppliers and negotiate for the very best pricing and terms the larger your order volumes grow.
  • Branch out into new marketing channels such as retail partnerships and brick-and-mortar consignment to expand your customer reach and establish your brand offline in local communities.

While success ultimately requires exceptional business sense and strategic scaling, dropshipping breaks down the traditional barriers to launching an independent online retail operation. By leveraging dropshipping suppliers for order fulfillment, even first-time entrepreneurs can access incredible opportunities to build the next hugely successful ecommerce brand.

Hopefully this overview gives you a deeper understanding of how the dropshipping retail model works as well as actionable first steps to getting your own dropshipping business off the ground! Let me know if you have any other dropshipping-related questions.

Author:- Deepan Paul is a Assistant Manager at Seven Boats. With a strong focus on digital marketing, Deepan has achieved notable recognition and awards for his expertise, including 7 LinkedIn Top Voice Awards in Search Engine Optimization, Organic Search, and Web Content Writing. He is also a member of the LinkedIn News India Partner Program and has had his articles featured by LinkedIn News India. Additionally, Deepan serves as a trainer for Seven Boats Academy, where he imparts his knowledge and skills to others. As an alumnus of Seven Boats, Deepan has successfully managed over 150+ projects, including international ones, and has a proven track record of driving traffic, generating leads, and boosting sales for businesses of all sizes.



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