What is Drop Shipping | How does Dropshipping work
Updated: Jan 15
Dropshipping is a form of retail sales where a store doesn't hold the inventory of a product. When a store is drop shipping a product, they take the order and then get the supplier to fulfill the order who will ship the item directly to the customer.
In a typical business, a retailer would hold the inventory, when an order is placed, the retailer would then manually post the item out directly to the customer.
History of Dropshipping
Drop shipping has been happening for longer then most people know, for example, in the 70's and 80's and early 90's, people used to receive mail order magazines. These mail order magazines were delivered door to door. A variety of products were displayed on these books all from different retailers. The magazine publisher would have agreements will all these retailers to sell their products, so when a customer placed an order with the publisher, the publisher would then forward that order to the retailer, the retailer would then deliver that item directly to the customer.
The retailer would benefit because the publisher has a big reach of customers, the publisher would benefit because they would put a small markup on each item and the customer would benefit because they have a big variety of item available to them with ease without having to shop around.
Dropshipping businesses are booming in the 21st century because of the internet. Internet marketers are creating websites and listing items from Chinese suppliers, when customer place an order, the website creator is then getting the Chinese supplier to fulfill orders. The marketers are spending money on Facebook adverts to market the website to drive in traffic and the profits made from sales, cover the cost of adverts as well as generating a healthy profit.
Another form of Drop Shipping is done on Ebay which is generating quicker returns because Ebay has millions of shoppers who come on to the platform to shop. This reduces the risk of spending money on Facebook adverts, also people on Ebay come to shop whereas people who go on Facebook generally go there to browse.
Have a look at the video below to see how Ebay Dropshipping UK works.
Chinese Suppliers vs Local Suppliers
Most drop shipping videos and information you find on Google and Youtube are based around the Shopify platform because the information you find across the internet is mostly US based. Although most of it is accurate, it does not reflect the worldwide market in the same way.
Most Chinese suppliers can deliver items to the world in 2-4 weeks.
Delivery is a key part of purchasing items online because people want the items delivered as quickly as possible most of the time in UK and US however this is not the same when looking at most other countries around the world.
Most new drop shippers, think like drop shippers but do not think like customers.
Just because they are used to fast shipping times, it does not mean billions of people around the world think the same way. You see, if you live in US or UK, you may be accustomed to fast shipping times because of Amazon Prime
Amazon has a huge database or products that they can deliver quickly but most of the world does not have access to this privilege. That is why when you sell products all over the world from Aliexpress. you are bringing a huge database of products to everyone around the world and if you put the right product in front of the right person at the right price, people do not mind waiting.
How much money can I make?
This is one of the most common questions asked. The truth is, there is no concrete figure, the more time you put into it, the more you can make. Some people are happy in making an extra 200-500 a month profit as a side income, because they are happy in their jobs and would not mind a little extra income to help with bills and a few treats.
There are others who are more serious about the business and would prefer to scale the business to replace their full time income, there are individuals who are making well in the excess of 3000+ a month profit and they are doing that from the comfort of their own home. Have a look at the video below to give you an example of how much money and how quickly you can potentially make.
PROS vs CONS
Very easy to start - Once you learn how to Drop Ship, you will find that it is a very simple business to run because you are not having to deal with physical products.
No storage required (Warehouse or Storage costs)
No Physical Labor (No packaging or posting yourself)
Stock Management (No need to keep a track of how many items you have left)
Low overhead - This is one of the most common reason why people start dropshipping, because of the overhead expenses. You do not need a big warehouse to store goods, you don't need to invest huge amount to buy expensive stock, you do not need a physical location. As a matter of fact, most drop shippers start their business in their bedroom. All they need is a computer/laptop and an internet connection.
Flexibility - A dropshipping business can be run from anywhere in the world as long as you have an internet connection. As long as you have access to the internet, you can fulfill order, answer customer service questions and place orders. Many people finance their travels by having a dropshipping business which they can manage from anywhere in the world and then they go travelling whilst running their business on their travel.
Product Selection - With hundreds of retailers to chose from, you will never run out of products to sell, there is always something new coming to the market, as a matter of fact, the more items you have on your store, the more opportunities you will be creating to get more sales
Scaling is Easy - With traditional businesses, if your sales increased, you will need to stock more items and send out more packages. However with Drop Shipping it is different because you are not stocking or sending out items yourself. The true way to scale the business is time, the more time you put in at the start, the more items you will have on your store, the more sales opportunities you will have created. Eventually it is possible to grow your store to such an extent where you will make enough profit to hire Virtual Assistants to run your business for you, they will list items, they will handle customer services and they will process orders so you can just sit back and enjoy the profits.
Low Profit Margins - You will find that when you dropship items, your profit margins will be low compared to buying stock in wholesale yourself. This is because you are working with retailers who are already working on their own profit margins. The idea is to sell as much as you can and list as much as you can to increase sales.
Inventory - If you hold your own stock, you know exactly how much of each item you hold. You know how many you can ship and when you need to bring in stock. With dropshipping you never have 100% control of this because inventory from suppliers changes daily or hourly depending on how many sales your supplier makes. There is software available to track your suppliers stock so if your supplier runs out of stock, it will put your item out of stock too.
Shipping - You are at your suppliers mercy when it comes to shipping items. As you are not shipping items yourself, you have to rely on them to dispatch the order. It is also important to understand that they are running a business too, so they don't want to deal with bad cases so it is in there interest to ship item as promised. Most suppliers provide you with tracking number so you are able to track the location of orders anyway.
Errors - On the rare occasion, your supplier may send out damaged or missing items, you will have to take responsibility for this action. This is easily solved because suppliers would want to ensure that items delivered in good condition so if you forward your customers concern to your suppliers, they will usually send a refund or replacement without problems.
How do I start a Dropshipping Business?
Most people do not know how to start or where to start. They float around the idea and get stuck in the planning process, they spend too much time on researching rather then taking action. This is because, it's a change to most people, they have no experience in business or they are afraid.
That is why there are online courses available that teach you how to start up certain businesses.
The Ebay Dropshipping Masterclass is a complete step by step guide on how to start an Ebay Dropshipping business in just 24 hours. The cprogram provides an over the shoulder guide on how to setup up the business, the suppliers to use, how to approach suppliers as well as listing tips on Ebay.
It teaches how to get your listings found better then your competitors as well as a step by step plan, teaching you from starting the business to scaling it successfully.
The program is so successful because it is specifically made for high profit returns. Although there are other courses out there, most are targeted for the US market.
The Best Ebay Dropshipping Course is for anyone who is looking to sell to customers all over the world, you also get access to an exclusive group for course members and a group chat so you will be able to post questions to others who are on the same journey as you.
For more details, click on the link below and get access to the course so you can get your business started in just 24 hours.