Introduction
If you’ve considered opening your own online business, you might be concerned about how you’ll access a product inventory or where you’ll store it. In the conventional e-commerce business model, retailers are in charge of the ire order fulfillment process. This frequently entails renting out product storage facilities, managing the supply chain, and inventory, and controlling shipping expenses.
As a newbie just venturing into the huge e-commerce, dropshipping is your best bet to start with little resources, and scale as you gain experience. Dropshipping is an alternative business strategy for completing customer orders placed through an online retailer.
The dropshipping business model is frequently attractive to business owners looking for efficiency and cheap overhead. This article will define dropshipping and examine how this form of fulfillment operates. You will also learn how to start your own dropshipping business and how sourcing agents can greatly increase your business efficiency.
Contents
- What is dropshipping?
- How does the dropshipping business model work?
- How do you start dropshipping?
- Dropshipping on e-commerce platforms
- Pros and Cons of Dropshipping
- Dropshipping and Sourcing Agents
- Our Unique Offerings
- Final Words
What is dropshipping?
Dropshipping is an order fulfillment strategy where a business doesn’t hold inventory of the goods it sells. Instead, to fulfill orders, the seller buys inventory as required from a third party—typically a wholesaler or manufacturer.
The main difference between dropshipping and the conventional retail business model is that the online seller does not keep stock and only serves just as an intermediary between customer and supplier. In dropshipping, you take on the role of a middleman connecting clients with the finished goods. This indicates that you only get paid for the goods you sell and don’t have to touch the merchandise.
To do this, all you need is a supplier with the products, as well as an online store. You may occasionally purchase goods from well-known e-commerce sites like AliExpress and Shopify. On the other hand, you might occasionally purchase from other trustworthy dropshipping providers or businesses that are close by.
Making sure you choose the right supplier is essential. This may have a significant impact on how successful your business is in the future. The ideal provider will have the high-quality goods you require and guarantee the satisfaction of your clients. You don’t want a supplier who gives you unhappy customers by delaying product deliveries or producing poor-quality products.
How does the dropshipping business model work?
A dropshipping business concept entails the promotion of goods on an online storefront. You transmit the order to the dropshipper when a customer places an order, and then you let the customer know the things are on their way. You have no control over the remaining steps in the physical fulfillment procedure. While the dropshipping provider handles the physical items and fulfillment, some dropshipping agreements allow you to also handle customer care.
A dropshipping online store operates exactly like a typical e-commerce store. You select a product first and then look for a supplier of that product. The final step is to create an online storefront and start making sales.
When orders start coming in, provide the order details to your supplier, who will handle the rest. You will price the goods above the cost of sourcing in order to generate a profit.
Who are the key players in the dropshipping model?
- Seller of record: As the person listed as selling the product to the final customer, you are the seller of record (SoR). You determine the selling price, report the transaction as revenue, and take on the burden of paying the applicable sales tax. You are the seller of record because you own the goods before they are sent to the consumer, even if a third party inventories and transports the goods.
- Suppliers (Manufacturers): Products are created by manufacturers and sold to distributors and retailers. Although you can buy products directly from manufacturers, the large minimum orders they may have may make it difficult to launch or grow your firm. Some producers might provide dropshipping services.
- Wholesalers (Middlemen): Wholesalers typically purchase products from manufacturers and resell them to retailers at a small markup. They perform the role of middlemen; typically, they don’t sell to customers directly but they might offer dropshipping services to retailers.
How do you start dropshipping?
There areseveral things to take into account before starting dropshipping. That includes selecting the “ideal” product, determining the right store type, locating a supplier, and sustaining the business model.Tolaunch a dropshipping business, the following step willmake the process easier.
- Choose between a niche, general, or one product store.
Your store type will determine how your online business develops and how you want your marketing initiatives to appear. Before opening a dropshipping store, you should consider this crucial step.
You have three alternatives when determining what kind of store you wish to open: a standard store, a market niche, or a single-item store. Depending on your business strategy and strengths, you should select the best option.
- Conduct product research
Product research is one of the basic steps in starting up your dropshipping business. Logging on to websites like AliExpress is among the simplest ways to do product searches. As a result of the lack of marketing spending by the majority of vendors on the site, AliExpress is a fantastic option for product research.
In addition, there are more than 100 million products on the market that are available on the e-commerce platform. There is a good probability that you may discover a product on the marketplace that few people have ever seen or heard about.
Another way of finding the right, fast-moving products is through social media. Yes, it could be a little more work, but the chances of finding a successful product are higher. This is so that you may directly draw inspiration from the customers. Searching for products on social media using hashtags like #amazonfinds or #aliexpressfinds is the simplest method.
You can also employ product research tools that provide consumer trends and insights into customer behaviors or preferences. All in all, do not settle for low-traffic products such as those that are too market-specific. Choose high-ticket and fast-moving products that are in high demand all year.
- Locate and select reliable Dropshipping suppliers
The most vital step in opening a dropshipping store is locating a reliable supplier. Prioritizing the product’s price when looking for a supplier is the largest error individuals make. Price is crucial, but it shouldn’t be your only consideration.
AliExpress is a good option if you’re seeking a supplier. The majority of AliExpress suppliers don’t have a minimum order quantity (MOQ) and accept customized invoicing. If you decide to use AliExpress sellers in this manner, you can filter them by their ratings, customer reviews, and shipment timeframes. Select the supplier who offers the greatest price while excelling in all three of the aforementioned qualities from your list.
You can also browse online and use Google searches to find suitable suppliers for your product. Most of the suppliers have their contact information online, through which you can reach them. Alternatively, reaching out to wholesalers is also a good idea. Manufacturers typically do not cooperate with dropshippers because they only do business in bulk. So, if you’re looking for less expensive goods, consider working with wholesale suppliers.
- Set up an online store
Before opening a dropshipping shop, there are several things to consider. This includes choosing a theme, choosing a domain name, buying hosting, and developing a logo. Depending on the store builder you select, some of these procedures might get simpler. For instance, you can avoid paying for hosting if you choose Shopify, as Shopify allows you to use custom themes for your store. There are other e-commerce platforms that you can use, such as Amazon, Etsy, and Wix.
- Promote your dropshipping store
The most crucial aspect of operating an online business is marketing, which, regrettably, most business owners find difficult to master. There are several ways to market an e-commerce company today. However, keep in mind that there is no certain method for increasing conversions. Before you find a truly effective method, effective marketing also involves a lot of trial and error.
Some ways to market your products include making interesting videos for dropshipping, running paid advertising campaigns, investing in social media advertising, and utilizing free traffic sources.
- Understand the complexities of the dropshipping business.
Managing your stock, getting logistics, choosing a shipping plan, and managing import duties and taxes are some of the complexities that you must learn and master to run your dropshipping business properly.
Dropshipping on e-commerce platforms
While major e-commerce platforms like Amazon and Shopify allow dropshipping, they do so with some strict guidelines that sellers must adhere to. For example, Amazon permits dropshipping as long as you are the seller of record and identify yourself as such. Different e-commerce platforms have different guidelines for dropshipping services, what to look out for in choosing an e-commerce platform and the processes of dropshipping on some of the most popular platforms are examined below:
Aliexpress
AliExpress dropshipping is one of the online e-commerce business concepts that has received widespread praise. AliExpress is one of the largest e-commerce sites and is owned by the Alibaba Group, a large international corporation. It brings together tens of thousands of suppliers and manufacturers who sell even more items and products.
The low cost of the goods on AliExpress is among its greatest benefits. By purchasing goods directly from the manufacturers, you may cut out the middleman and pay a fraction of what you would otherwise pay for them on other websites or at that store on the corner of your street.
Amazon
Dropshipping on Amazon entails marketing manufactured goods that are already in stock. To start dropshipping on Amazon, you have to understand the company’s dropshipping guidelines. The major guidelines include: on all invoices, packing slips, exterior packaging, and other documentation included with or delivered with the product, you must be acknowledged as the seller. Your source or manufacturer shouldn’t be mentioned, and you must be in charge of processing and accepting returns.
While dropshipping on Amazon is a great idea if you are just starting in the dropshipping business, there are some pros and cons of Amazon dropshipping that you must be aware of. Some of the benefits are that there is no need to place a product order in advance because dropshipping requires you to purchase the goods and ship them to Amazon. Dropshipping on Amazon is also more user-friendly for new online sellers, and you have a large selection to choose from, which means you can sell dozens of other products as well as test the best-selling products.
Some of the cons include a lack of control over product promotion; as a drop shipper, you will have less influence over the product’s marketing. In addition, there are slim profit margins since you are ordering the product from a supplier rather than the manufacturer when dropshipping, so the profit margin is smaller. You most likely have to manage customer support, which may take your time and resources.
Shopify
Using the Shopify platform, you can start an online store where you can sell goods and get paid. Even for a beginner, it is simple to use, and it also provides thorough training and support to assist you. If you want to launch an internet business but lack the knowledge, Shopify is a great place to start.
The dropshipping business model is supported by Shopify and can be used in a variety of ways on the website. This can make things easier if you decide to get involved with e-commerce. Some of the advantages of Shopify include numerous design features and the simple-to-use nature of the platform
To start dropshipping on Shopify, you need to understand the Shopify pricing system. Then you need to sign up on the platform, create a good design, set up your domain or web hosting, add your products, and market your store using various channels.
Spocket
Spocket is another platform to start your dropshipping business. With Spocket, you may pick the top products to sell from the world’s thousands of dropshipping suppliers. With a variety of categories and dropshipping providers located all around the world, Spocket enables you to select the best products to dropship. You can try the products yourself, and you can organize and connect your online store with your suppliers and customers.
Pros and Cons of Dropshipping
Pros
- Modest Starting costs: Dropshipping can be used by business owners who want to launch a venture with little capital base because they don’t need to purchase equipment or other resources to fulfill orders.
- Low Overhead costs: Dropshipping offers the ability to reduce overhead expenditures, such as keeping a storage facility or transporting products to clients, because you don’t store or ship the products.
- Multi-channel selling: You can employ dropshipping for your business while marketing through social media, your own website, an online store like Amazon, or all of the above.
- Scalability: By utilizing suppliers, it may be possible to take more orders while keeping the same amount of inventory in stock for packing, shipping, and storage.
- Operating location: With dropshipping, you may complete orders from anywhere, giving you the flexibility to operate from home.
Cons
- Competition: Dropshipping is a very competitive industry because to the low startup costs and required capital.
- Slim Profit margins: If your product has little to no points of differentiation, your company may find itself engaging in more intense pricing competition. Low price points can reduce your profit margin.
- Timeline for fulfillment: When a dropshipping service handles fulfillment, you have no influence over order selection, packing, or delivery.
- Product quality: Because dropshipping decreases your involvement in the order fulfillment process, you have less control over the quality of the products you sell and are unable to guarantee their quality.
- Inventory management: It might not be possible to provide real-time updates on what is currently in stock. Customers may be discouraged from placing more orders and your brand may suffer if they place an order only to discover that the product is out of stock.
- Branding: You can find it difficult to set your product apart from identical goods made by other vendors since the things you sell might not be particularly distinctive or easy to differentiate from them.
- Range of offerings: Because you don’t handle order fulfillment, your ability to run promotions and special offers like bundling or free delivery may be constrained.
Dropshipping and Sourcing Agents
While you can go into the dropshipping business and hand over large parts of the business to your supplier, you can better improve your business operations by contracting a sourcing agents/agency, especially when you are sourcing from China.
Who is a Sourcing Agent?
A sourcing agent is an individual or company that specializes in helping you find suppliers for your products. A sourcing agent can help you find manufacturers or factories, negotiate prices and terms, check for quality control, and ship your products. Sourcing agents usually charge between 5 and 10% of the cost of goods.
A sourcing agent is a third party that helps you find the right supplier. A sourcing agent communicates and negotiates with suppliers, oversees the production, provides updates, performs quality inspections, arranges storage and shipping
Why Do You Need a Sourcing Agent?
A sourcing agent is an alternative to finding your supplier on AliExpress or other e-commerce platforms. It’s quite challenging to work with Chinese manufacturers. Language barriers, a lack of physical presence, and a lack of business understanding in China are some of these factors. Each of these factors might have a significant impact on the performance of your business when it comes to importing items. For their dropshipping businesses, people are searching for sourcing agents for this reason. The majority of dropshippers rely on a sourcing agent in China for assistance.
How to Find a Sourcing Agent
To find a suitable sourcing agent for your dropshipping business, follow the steps below:
- Define what you need
- Set your budget
- Search for sourcing agents
- Research and compare your shortlisted sourcing agents
- Explore the different offers and negotiate prices
- Document your agreement with the sourcing agent
Benefits of using Sourcing agents
- It Saves time
- It eliminates language barrier
- Quality control is guaranteed
- You can be sure of constant communication
- Some sourcing agents also handling fulfillment and shipping
Drawbacks of using sourcing agents
- Extra costs that may eat into profit margin
- Total dependability on sourcing agent and no direct access to manufacturers.
Our Unique Offerings
We are sourcing agency with comprehensive knowledge of the Chinese market, and an extensive network of suppliers. Our company also provides private dropshipping services to connect you with the best suppliers for your business, while keeping your customers happy.
- Free storage: We will provide free 30-day storage in our warehouse
- Free Product image: We will also provide you will 3 product images free of charge
- Supplemental Services: In addition to sourcing services, we also provide marketing campaign, website optimization, ocean freight and air freight services.
Final Words
For small businesses and those who want to start e-commerce with little risk, dropshipping is the best option. However, you must be very knowledgeable about the business and only work with trusted partners. This article has detailed everything you need to know to start your dropshipping journey, and we are here to help you all the way!
