Dropshipping has indeed been known as a significant first step in entrepreneurship, and one can introduce any business into this method.
The dropshipping method began in the 60s and 70s only, in which the mail-order companies had the leverage of mail-order catalogs.
The mail-order catalogs act as small booklets that the people in the mail and receive so that they can easily place an order directly from the phone and have the companies deliver it to the door.
The dropshipping business’s past might have given a slight idea about what it is, and now we will get you familiar with its works. In this article, we will be giving you an essential detail of the dropshipping method, how to start it, and how one markets the dropshipping business in the US & UK.
Let us begin
Dropshipping Business
The dropshipping business is known as a retail fulfillment method in which the store does not maintain an inventory and sells the product in stock. In fact, in the dropshipping model, the store sells a product by purchasing it from a third party. As a seller, you will only have to become a medium somewhat of handling the product and keeping it in stock.
This is the only difference between the dropshipping and the standard model; the selling merchant does not stock or maintain the inventory. They purchase it from a third party, and the involvement of a wholesaler or manufacturer in the loop can help to fulfill the orders.
The Working of the Dropshipping Business Model –
By now, you might be completely aware that there are three key players in the business model dropshipping model, and that is:
- The manufacturer
- The retailer and
- The customer
Each of them makes sure to fulfill the role. The manufacturer’s part in the loop is to create or produce products that carry inventory, exchange the defective products, and restock them. Further carrying the loop ahead, they will sell the products to the retailer (that means you ) at the wholesale pricing and with a risk of unsold inventory.
Moving the process ahead, the retailer ( that is, you) will be selling the manufacturer’s product on the website and, in fact, under your brand. The retailer would choose the products and will market them as their own. The retailer also holds the responsibility for the shipping and the shipping cost along with the setting prices, making a profit for the retailer.
At last, all you have to take care of is customer satisfaction. The dropshipping model enables the customer to buy the products directly from the retailer. If any complaint or question arises, they can contact the retailer directly and get it exchanged or get a refund.
As you are entirely aware of the dropshipping business model, let us focus on whether or not the dropshipping business model is profitable.
Is Dropshipping Business Model Profitable At All?
There have been some myths in which it is said that the dropshipping model is on the verge of being dead, and there are people who are still believing that we cannot use the dropshipping model in the upcoming years, yet it is not finished. Yes, it is as simple as that, and it will not be dead in the forthcoming years.
As we can see, the growth in the popularization of eCommerce, dropshipping has proven to be a convenient and attractive choice for several online businesses and those just starting.
According to current predictions, the worldwide retail and dropshipping business will be worth $500 billion by 2025, with an annual growth rate of 8%. Furthermore, dropshipping will become more prevalent internationally due to exponential population expansion in developing countries and rising smartphone usage. Again, the retail environment is shifting at a breakneck pace, altering how people do business. Dropshipping is also common in many areas, from technology to fashion, and it has numerous advantages.
The question arises whether it is worth it for the future years.
Yes, it is worth it as the very first thing that was noticed on the graph was that dropshipping is entirely worth it in the upcoming years and beyond. The exponential increase on the chart indicates that it is on the rise. Furthermore, as more consumers grasp the benefits of dumping things, this tendency is expected to continue in the coming years. Who wouldn’t want a second source of money that requires little effort? Making money through dropshipping online has become another alternative to consider as methods of earning cash have evolved. There’s no better time than now to start a dropshipping business. Early entry into dropshipping allows us to create our business empire and continue to expand from there.
Now let us look at the Dropshipping business stats and know whether or not the numbers add up.
Statistics Of The Dropshipping Model
As we cleared up the air around how the dropshipping model is beneficial, we have some numbers supporting it. We assure you that there is some limited information, but these numbers will bring peace to your mind.
- Around 33% of the online retailers have adopted the dropshipping business into their primary business model.
- It is also true that Amazon managed to sell over 34% of the products in the year 2011, and simplifying the numbers, we can see the demand of shipping $14.2 billion just by one source, from only one online marketplace.
- It has been forecasted that the dropshipping market will grow to USD 557.9 billion by 2025.
As you know, the Dropshipping business and its growth analytics, let us learn to start one.
How To Begin A Dropshipping Business
Step1 – Be Affirmative On Selecting A Dropshipping Niche
To begin a dropshipping business, you must first determine your specialty. A market niche is a subset of a larger market. Bluetooth speakers, for example, are a prominent niche in the home audio industry. Outdoor, waterproof BlueTooth speakers could even be considered a sub-niche of the Bluetooth speaker market. You get my drift. Your niche should be as specific as possible. The first step in launching a dropshipping business is deciding on a specialty. Because of the growing popularity of dropshipping, finding niches that aren’t already saturated is getting more difficult. However, new goods and niches emerge every week, so the possibilities are nearly limitless.
Step2- Analyzing Your Competitors
Once you are entirely aware of what you will sell, it is time to educate yourself with the competitors. Each niche already has a ruling against making each of us go GAGA over. It is time to do some research and analysis over your competitors about what exactly they sell, how they sell their products, and all you have to do is up-level the skill set. However, there are several ways to do so.
Step3- Find A Supplier
In view of the fact that partnering with the wrong supplier can be disastrous for your organisation, it’s critical that you take your time with this stage. Make sure you do your homework. Because the majority of drop shipping suppliers are based overseas, communication is critical, both in terms of reaction time and mutual understanding. If you have any doubts about a possible supplier’s ability to communicate, go on and continue your search. Alibaba has grown to become one of the most popular online platforms for finding and communicating with potential manufacturers and suppliers. In the event that your company expands rapidly, make sure to ask a lot of questions and learn about their manufacturing capabilities. You want to be sure they’ll be able to scale with you.
Step4 – Build Your eCommerce Website
Using a simple ecommerce platform like Shopify is the quickest method to establish a website that supports the dropshipping business model. You don’t need any technical knowledge to get started, and there are lots of apps to assist you in boosting sales. After you’ve established yourself and begun to generate cash, you can customize your website further. You can hire a Shopify web development company to construct a custom solution.
Step5 – Analyze First And Act Later
This step might be the last one, but it is essential. One has to track all the available data and algorithms to market their dropshipping business model. It includes the analysis of Google traffic and many more. You can scale what works and eliminate what doesn’t when you can track every single conversion and know where the consumer came from and what path they travelled on your website that eventually led to a sale.
There will never be a marketing or advertising solution that you can put in place and forget about. You must constantly test new opportunities and fine-tune existing campaigns in order to determine whether to optimise or adjust campaign spending.