Drop shipping is an increasing business model that many entrepreneurs have taken on in recent years, as it allows the freedom to work from anywhere and not have a physical warehouse to store all the inventory. This guide looks at what drop shipping is, the benefits of adopting this business model, some of the setbacks, and how dropshipping works across different platforms.
What Is Dropshipping?
Dropshipping is when an online retailer does not have the inventory on hand, however, they work with third parties such as manufacturers or other types of suppliers that have the goods available and ship them to the customer on behalf of the retailer. Customers do not make orders directly with the manufacturers or wholesalers and instead with the online retailer which sells their products.
A more basic way to look at the process is through the following five-step process:
- Customer places an order with an online retailer
- The order is reviewed by the retailer and forwarded to the manufacturer/ wholesaler
- The wholesale receives the order and packs it
- The order is delivered by the wholesaler
- The customer receives the order
What Are The Benefits Of Dropshipping?
Dropshipping is one of the most economical and efficient ways of starting an online retail store due to the low overhead costs. Some of the key advantages of adopting this business model are that your business does not need to cover the costs of packers/ shippers, nor purchase large stock amounts, which allows for vast inventory amounts and makes it a great startup option.
What Are The Challenges Of Dropshipping?
The reliability of the third-party manufacturer is one of the biggest challenges for drop shippers, as they depend on them to have high-quality products and the ability to ship in a timely manner. Furthermore, retailers might face issues when seeking customer support from manufacturers, which in turn will affect your company’s customer service. Lastly, due to the increase in dropshipping retailers, there is an incredible amount of competition which can make it hard to leave an impression on potential customers.
What Are The Best eCommerce Platforms For Dropshipping?
As dropshipping is a common business model for many e-commerce retailers there is a wide range of potential e-commerce platforms and it’s important to choose one that is easy to manage. Some of the most used platforms for dropshipping are Shopify, Wix, WooCommerce, Sprocket and BigCommerce.
How To Find A Trustworthy Wholesaler For Shopshipping?
As mentioned above, sourcing a trustworthy wholesaler should be a crucial part of your business plan since their reliability will be one of the bases of your company. Some actions that companies can take before deciding on a wholesaler for dropshipping are listed below:
- Sufficient Research
As you will already have your products in mind, you should find appropriate wholesalers that specialize in your specific niche and thoroughly check reviews and other testimonials.
- Get Samples
It is crucial that before deciding on your wholesaler and starting to advertise the product, you acquire samples of the products first. This will allow you to check the quality of the products so that you know that they are up to your standard.
- Maintain Good Communication
Ensuring that you have good communication with the wholesaler is an important part of maintaining a good working relationship with them so that if any issues arise, you know that they will be resolved efficiently.
How To Start Being A Shopshipper
There are multiple ways to approach starting a dropshipping business and all revolve around ensuring you have a clear business model that has sourced out trustworthy, high-quality products from a manufacturer that offers the service. Furthermore, it is important to know your tax obligations in the US when starting any online retail business as each state has specific rules and regulations.
How To Check Tax Obligations For Dropshipping In The US
To ensure that you are following good dropshipping practices, it is important that you determine your tax obligations which might mean registering with the states that you have created nexus with alongside collecting sales tax on your sales.