The dropshipping business model allows entrepreneurs to sell products to customers without stocking the items themselves. It was started in 1999 by Zappos, and has been used by Amazon and Sears for a while. Now, around 33% of ecommerce uses dropshipping for inventory. The benefit of not carrying inventory is that sellers can concentrate more on bringing in new customers. This article will explain what dropshipping is, and why business owners should care about it.

What is Dropshipping? How Dropshipping Works

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How does dropshipping work? Simply put, a dropshipper sells a product, which they then buy from a supplier, who ships it directly to the customer. This business model has the advantages of:

  • Controlling margins: sellers aren’t bound to a suggested retail price (MSRP) and can decide retail prices for themselves.
  • Not needing to be an established business entity before getting started with a store. (Sellers will need one as they grow, however)
  • Having access to a catalogue of millions of products to add to a store through Oberlo.

What is Dropshipping? Dropshipping FAQS

1. How to start a dropship business: can you dropship products easily?

Products can be easily dropshipped through tools like Oberlo.

2. Will my customers know if I am dropshipping?

Using Oberlo Suppliers or Verified Suppliers to source products ensures that customers won’t be aware that items are being dropshipped. This is because these suppliers won’t include any promotional material or invoices in the packages shipped to customers. AliExpress suppliers, however, do not know that sellers are dropshipping, so there is no guarantee there.

3. Why should someone buy from my store instead of the supplier?

Because the store is better: better marketing execution, which reached the perspective customer first. Branding, which drives people to buy from a specific seller. Creating a store that people trust, even if it is based only on location. Value offered by providing extra services or content. Technology that allows customers to shop more easily.

Don’t worry about price competition or trying to be the cheapest, but charge a comfortable price.

4. Shipping takes too long, will my customers wait?

The seller’s task is to define the shipping policy, and display it on the store’s website in order to set clear customer expectations. The commonly favored ePacket delivery option takes only 7-14 days to reach the US, and is available across 29 countries around the world. Also, some suppliers keep their most popular products in US warehouse, so delivery is even quicker. Finally, sellers can opt to source products from Oberlo Suppliers or Oberlo Verified Suppliers instead. They have a proven track record of fast shipment, which is not guaranteed with AliExpress.

5. What about quality risk and copyright infringements?

Everyone has heard stories of the ridiculously bad quality of Chinese products. Some of them are true, but there are always two sides to a story. There are bad suppliers no matter where they are in the world. Sellers must be cautious when choosing dropshipping suppliers, and it is recommended to source products from Oberlo Verified Suppliers or Oberlo Suppliers.

6. Do suppliers speak English?

While Chinese suppliers’ English isn’t always perfect, sellers can contact them in advance to get a sense of their proficiency before doing business. Larger suppliers are typically quite responsive and have sales teams to manage orders and can answer questions via live chat or email.

7. Is AliExpress dropshipping favored by PayPal?

Many entrepreneurs want to use PayPal as it is one of the most well-known and widely used payment gateways. Think this over before integrating PayPal too deeply into a business. PayPal is great from a customer’s perspective as it tends to favor customers over merchants. If there is a payment dispute or a customer wants a refund, PayPal will take the customer’s word. This is to protect the millions of people who use PayPal daily.

To create a more stable and secure experience for customers, PayPal has set some precautions that can make it hard to use as a payment gateway. PayPal puts limitations on money in a seller’s account in advance based on business history, track record, ability to provide proof of delivery on time (via tracking numbers), the business’s physical location, and other factors. Holds on funds can last for months which can be a problem when trying to grow a business.

As dropshipping becomes more mainstream, PayPal is adapting its policies to make it friendlier for ecommerce entrepreneurs who dropship. It is still recommended to explore other payment gateways, including Stripe, 2Checkout, and Shopify Payments. Shopify Payments is great if the shop is hosted on Shopify, as it eliminates the need for a third party gateway. Shopify Payments is not available in every country, however.

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8. How can established businesses benefit from dropshipping?

Learning by doing works best when it comes to dropshipping. It is the ideal model for first-time entrepreneurs. An established business wouldn’t change its order fulfillment model and adapt to dropshipping, but it’s worth considering. This is because dropshipping is a great model that can be used quickly to test new product ideas. Sellers can also add new product categories within a few days, and if the item is successful the seller can stock the product in their warehouse. This reduces the risk of stocking inventory before knowing what sells, and increases business flexibility.

Conclusion

To become adept at dropshipping requires times, careful research, and planning. It’s an easy way to kick off an online business and it’s great for testing new product ideas. It requires low starting capital so sellers are able to try ecommerce with limited risks.

There are a lot of helpful apps and services available to use with dropshipping, including Oberlo and Shopify. These can facilitate and automate more complicated aspects of dropshipping, as well as elimiate some of the pitfalls mentioned in the article.

These tools allow sellers to devote time to maximizing profits by developing the right marketing techniques and solidifying the brand. Sellers do not have to concern themselves with storing inventory and can further accelerate the formation of a successful business.