What is Drop Shipping?
Is drop shipping really right for you? This simple guide will help you evaluate the pros and cons so you can make an informed decision.
How can drop shipping benefit you?
Drop shipping is not a ‘get-rich-quick’ scheme. So what is drop shipping?
Drop shipping is a type of order fulfillment business where you facilitate sales on behalf of a wholesaler or dropshipper such as Doba. Rather than purchasing and storing items, listing them for sale, and then shipping them to customers upon purchase, you simply list items offered by the dropshipper for sale. Once an item sells, you then collect the funds, place an order with the dropshipper at a wholesale rate, and keep the retail margin as your profit. The dropshipper then ships the item directly to your customer.
As with any business, success requires dedication and hard work. As you can imagine, one of the biggest advantages of dropshipping is the ability to sell merchandise without a personal investment. You actually pay the wholesaler with the customers’ funds. However, there are distinct benefits to using drop shipping in your online business:
- No Shipping—You don’t have to buy packaging materials and shipping labels, nor will you need a shipping account. The supplier handles all of this for you.
- No Inventory—Not only do you avoid the expense of purchasing inventory, you do not need to store, manage, or insure it - if the product doesn’t sell, you never have to buy it from the supplier.
- Low Risk—With a traditional retail model, every purchase you make is a risk. Imagine ordering 1,000 video game consoles only to sell 200 of them before the next big thing hits the market. Whether your market timing is wrong, competition is more intense than expected, or a product simply does not live up to its promise, you could be stuck with expensive, unwanted inventory. With dropshipping, there's no risk and no worry. If an item doesn’t sell, you don’t have to buy it. You can become a retailer without needing to invest large amounts of money. You can start a business and test the market with very little risk!
- No shipping hassles or costs—Since the dropshipper ships all orders, you do not need to deal with shipments and returns or incur shipping costs. Likewise, there’s no need to purchase boxes, packing tape, bubble wrap, and other shipping supplies.
- You keep the difference—You pay the dropshipper a wholesale rate and mark up the product as you see fit. You keep the difference between the retail price that your customers pay and the wholesale price that you pay.
- You can focus on marketing instead of inventory management and shipping—You can focus more time and resources on revenue-producing activities like marketing, advertising and product research instead of inventory management, packing and shipping. After all, there’s no need to hire someone to manage inventory or fulfill orders.
- Time savings—Dropshippers provide you with prewritten product descriptions and images, making it possible to quickly build your eCommerce store.
- Numerous eCommerce outlets—You can set up online storefronts on well-known marketplace websites such as Amazon, eBay, Facebook, and Yahoo. You can also host your own eCommerce store using an eCommerce platform such as BigCommerce or Shopify.
- You can build an eCommerce store around your interests—Love fishing, photography, cooking, or knitting? With dropshipping, you can build an eCommerce store around your favorite sport or hobby. If you’ve always wanted to build a business around your passion, a dropshipping business may be for you.
What are the drawbacks of drop shipping?
Many retailers get a lot of value from working with drop shipping suppliers, but it is by no means a perfect solution for everyone. Drop shipping comes with some drawbacks, including the following:
- Timing—You have less control over shipping times, packaging processes, and package branding with a drop shipping business. That said, you don’t have to ship or store items or invest in inventory that might not sell.
- Inventory—Your supplier could run out of products that you have listed for sale. When this happens, you may need to issue the customer a refund or find a way to resolve the issue.
- Fees—Drop shipping fees (a handling fee set by the supplier for each order) may increase your expenses.
- No Bulk Product Discounts—You can’t take advantage of discounts for buying in bulk up front. This is the trade-off for the supplier bearing the cost and risk of managing the inventory.
Choosing a dropshipper
When it comes to choosing a dropshipping supplier, you have many choices, and the options can be overwhelming. Fortunately, Doba understands both the advantages and tradeoffs of a dropshipping business and has created a service that allows you to leverage dropshipping to its fullest advantage while minimizing the potential disadvantages. With just a few mouse clicks, you can push product listings to your eCommerce store. A single catalog loaded with over two million products allows you to create a specialty store around your niche in a matter of minutes. Plus, Doba integrates seamlessly with over one hundred popular shopping carts and eCommerce platforms.
We offer solutions to common drop shipping pitfalls such as out-of-stock items. For example, our proactive inventory alerts let you know when an item you have listed for sale is running low on inventory or is out of stock. Thus, you can avoid selling out-of-stock items. Our lowest drop ship price guarantee ensures that you get the lowest drop ship price available - even lower than working directly with the supplier.
Will drop shipping save me time and money?
Starting a drop shipping business is a low-risk, low-cost way to explore the possibilities of eCommerce. Sign up for a free, 7–day Doba trial and start selling in just a few minutes. In Step 2, we’ve created a basic list of the time and cost factors to consider in evaluating the potential savings of using drop shipping versus a wholesale inventory model.FREE 7 Day Trial