Since the trend for online shopping has increased significantly, entrepreneurs are now shifting towards the e-commerce trend to launch low investment and high profit businesses and Drop shipping plays a key role in e-commerce.
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What is Drop Shipping?
Drop shipping is known to be a supply-chain management technique, where the seller does not keep any stock of goods, he instead shifts the orders of the customers and the shipment details to the wholesaler or manufacturer.
These wholesalers and manufacturers then directly ship the goods to the respective customers.
When using this technique, the retailer does not have to keep an inventory, which makes it an attractive choice for online traders.
When an order is placed for an online drop-shipped product, the order and payment are received by the retailer, who then contacts the manufacturer or wholesaler and issues a purchase order for the good whilst giving the instructions on how to deliver it directly to the customer.
The product is then shipped by the manufacturer or wholesaler while the retailer earns his profit.
Here is a diagram that visualise what we have explained just now:
The 3 Different Types of Drop Shipping
1. Drop shipping that caters to heavy items
If you deal in bulky and heavy items, this type of drop shipping will be a suitable idea for your business.
Since dealing with bulky and heavy items is not an easy task, it is always best to opt for drop shipping so you won’t have to handle any heavy goods.
This type of drop-shipping option is used most by entrepreneurs.
2.Drop shipping as an alternative to extra supply
Oftentimes retailers that own inventories do not have enough storage to store an item, so they opt for drop shipping as well to ensure an extra supply of the product.
Integrating the drop-shipping method allows them to supply the goods they are unable to store.
3.Drop Shipping for online businesses
Individuals looking to start their own online business will find this type of drop-shipping to be quite a useful option.
The drop shipping by ‘request’ technique gives them a chance to study the consumer behaviors and understand what types of products are liked more by the consumers.
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1. Low Investment and Less Risks
One of the biggest advantages of drop shipping is that you won’t have to invest thousands of dollars or spend a fortune to launch a store, as you won’t have to stock any inventory.
Retailers that have a physical location for their store need a huge amount of money to create and maintain the store and have to invest in building an inventory, which is a huge investment.
With the drop-shipping method, you will not have to purchase the goods until a consumer has placed an order. This indicates that the startup costs will be quite low and the risks will be much lower.
Moreover, the drop-shipping technique does not require any upfront investment to begin with, which is a huge plus for individuals that do not have much funds to start a business.
Retailers often take loans to stock up their inventory, and if their goods do not sell well, they might end up finding themselves in huge trouble.
2. Saves Time and Money
When you don’t own a physical store, it becomes quite easy to launch your own business. There is no need to look for a warehouse and get funds to manage it. Moreover, you won’t need to pack the goods and ship them.
Also, you won’t have to monitor the stock levels and maintain them. There will be no need to track the inventory or manage product returns.
All these things will enable you to save a lot of time and money in the long run. The retailer can then invest his time in actually selling the goods, which will benefit the company.
3. Flexible Options for Store Location
The options for choosing the location of the store are quite flexible when it comes to drop-shipping. Your store can be located anywhere - even at your own home.
ll you need to have is a good internet connection and strong relationships with your suppliers and you are good to go! You just need to demonstrate your communication skills when dealing with consumers.
Drop-shipping offers a lot of convenient options for its users.
4. Diverse Options
When you work as a retailer who owns an inventory, you have to buy large quantities of a small number of items, hence you cannot add more diverse options.
Drop-shipping, however, allows you to add a wide variety of diverse options and different items, as there are no stocking issues.
All you need to do is to list them on your site and you are good to go! Plus you will not encounter any extra costs, which is a huge plus!
This also gives you a chance to experiment with new product and see if it becomes a hit or a miss.
When working as a retailer who stocks goods, this could prove to be a huge risk. If the product does not sell well, the retailer will have to bear the losses. Plus, if it is a food item, its shelf-life will also be quite limited. This could lead to incredible losses for the owners.
Hence drop shipping allows you to test new products and introduce them to the market. Once you understand that a product is doing well, you can use this opportunity to increase your sales.
Drop-shipping reduces your workload, as most of it falls on the suppliers. You will have to put in your effort to make a sale, but when your business expands and grows, your workload will remain unaffected.
This means you won’t have to worry about increasing your working hours once your business expands.
Drop shipping is an excellent option for individuals that have limited funds to start and run their business, as the majority of the workload and burden falls on the manufacturers and wholesalers.
Moreover, it allows you to save heaps of time and money in the long run, as you won’t have to worry about stocking and distributing the items.
By launching into drop-shipping, you can forget all the problems related to the management of the stock produced and the transport of goods.
Everything will be taken care of by your wholesaler partner. By following the seven steps outlined in this article, you can quickly set up a flourishing business at minimum risk.
You'll save time (and money) that you can invest in promoting your products and improving your customer service.