What is a drop shipping business?

Drop shipping is a popular business model that has gained a lot of attention in recent years, particularly among entrepreneurs looking to start an e-commerce store without the need to invest in inventory upfront. In this article, we’ll take a closer look at what a drop shipping business is and how it works.

What is Drop Shipping?

Drop shipping is a retail fulfillment method where a store doesn’t keep the products it sells in stock. Instead, when a store sells a product, it purchases the item from a third-party supplier and has it shipped directly to the customer. As a result, the seller doesn’t have to handle the product directly or worry about inventory management.

How Does Drop Shipping Work?

Here’s a step-by-step breakdown of how drop shipping works:

Choose a niche: The first step in setting up a drop shipping business is to choose a specific niche or market that you want to target.

Find suppliers: Once you’ve chosen your niche, you’ll need to find suppliers who can provide the products you want to sell. You can find suppliers by doing a Google search, attending trade shows, or using a drop shipping marketplace like AliExpress, SaleHoo, or Spocket.

Set up your store: Next, you’ll need to set up your e-commerce store on a platform like Shopify, WooCommerce, or BigCommerce. This includes creating a website, setting up your product pages, and choosing payment and shipping methods.

Promote your products: Once your store is set up and ready to go, it’s time to start promoting your products. You can use a variety of marketing channels like social media, email marketing, content marketing, and paid advertising to reach your target audience.

Process orders: When a customer places an order on your website, you’ll need to process the order with your supplier. This involves purchasing the product from the supplier and having it shipped directly to the customer.

Provide customer support: Finally, you’ll need to provide customer support and handle any issues that arise, such as returns or damaged products.

Benefits of Drop Shipping

There are several benefits to running a drop shipping business, including:

Low startup costs: With drop shipping, you don’t need to invest in inventory upfront, which means you can start a business with very little capital.

Flexibility: Since you don’t have to handle the products directly, you can work from anywhere and at any time. This makes it a great option for those who want to work from home or while traveling.

Wide range of products: With drop shipping, you can sell a wide range of products from different suppliers, which gives you more flexibility in terms of the products you offer.

Scalability: Since you don’t have to worry about inventory management, it’s easier to scale your business quickly as you don’t need to worry about the costs of warehousing and storage.

Challenges of Drop Shipping

While drop shipping can be an attractive business model, there are some challenges to be aware of, including:

Finding reliable suppliers: Finding reliable suppliers can be challenging, particularly if you’re using a drop shipping marketplace. You’ll need to research suppliers carefully to ensure they offer high-quality products and timely shipping.

Margins can be low: Since you don’t have control over the price of the products you sell, your profit margins can be lower compared to other business models.

Competition: Since drop shipping is a popular business model, there can be a lot of competition in certain niches, which can make it harder to stand out and make sales.

Shipping times and costs: Shipping times and costs can be a challenge with drop shipping, particularly if you’re sourcing products from overseas suppliers. You’ll need to manage customer expectations and make sure shipping times

For more information about drop shipping. Dropshipping 101

Andrew Parry, February 2023.