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What is Dropshipping: Everything you need to know about the profitable eCommerce model of 2021
In recent years, one of the most popular business models in the broader context of e-commerce is the so-called “dropshipping”. The basic idea lies in the release and separation of eShops from stocks and shipping procedures and in reducing their fixed costs through collaboration with appropriate suppliers.
Although at first it may seem a bit utopian, in most cases it turns out to be very profitable for every eShop.
What is dropshipping?
What are the pros and cons of dropshipping for my eShop?
Why is dropshipping good for a modern online store?
In the following article we will answer all the questions related to dropshipping and if you have not yet been informed about this new trend in the field of eCommerce, it is now time to discover the possibilities it offers.
Dropshipping: what is it and how exactly does it work?
We all now recognize the great power that eCommerce has, worldwide. With annual e-commerce revenue in Europe rising by 30% since last year and Europeans preferring to shop online on a daily basis, even the most skeptical can see the value that eCommerce can give to any business that utilizes its benefits.
But as long as eCommerce continues to evolve and constantly reveal the capabilities of eShops, a key problem still prevails and often complicates the operation and customer service of eShops.
What is the common problem faced by online businesses?
In a word: the stock. Warehousing, ordering, managing, packaging and sending products to customers are issues that constantly take time, increase the fixed operating costs of a business and often delay transactions.
Dropshipping is the most effective solution to the above issue.
Between the customer and the eShop, in terms of dropshipping, the supplier plays a crucial role as through their own stock, the customer will be able to get the products they purchased.
But first, let’s give a simple example, to better understand it.
- A Customer wishes to buy camping gear for his vacation this year. He performs the necessary google search and chooses to buy the tent, the sleeping bag and everything else he wants from a retail eShop with the camping items for sale.
- EShop accepts the order from the customer, and they forward it to the supplier’s shop paying at a wholesale price.
- The wholesale supplier receives this order, packages and sends the products directly to the customer, not with his own sender’s address, but that of the eShop.
- The customer quickly and easily receives the products he bought and enjoys his vacation.
- EShop has satisfied another customer and, at the same time, the company has “won” the difference between the reduced wholesale price and the retail price paid by the customer, without even having to deal with the time consuming and demanding inventory management procedures.
What is the difference between dropshipping and stock?
In fact, the main difference between stocking an eShop and dropshipping is the important reason that makes the latter stand out.
When a business starts operating, the most common option is to allocate a significant amount of money in order to acquire the products that it will then sell to its customers.
On the other hand, with dropshipping, each company, through its eShop, can simply present to the public a list of products available from the supplier, after synchronizing its eShop with the wholesale counterpart (knowing which product is available for sale and which is not, at any time).
When a customer orders a product, the order goes directly to the online store of the supplier and from there it gets sent directly to the customer, without the need for the retail company to buy the required stock.
What are the benefits of dropshipping for an eShop?
The above examples are typical of how exactly an online store can operate effectively utilizing dropshipping services. The advantages, of course, are many, thus the companies that enter the world of dropshipping are constantly growing.
But let’s look at them in detail.
Reduced corporate start-up costs
Without big start-up costs, without countless operating costs, without capital commitments, opening your business can now be done easier and cheaper than ever. It will cost you only the costs required to build a functional online store. Forget the extra inventory management costs. With dropshipping your eshop will be an attractive display case, buying products at wholesale prices directly when requested by the customer without the need to store them.
Immediate business start-up
Aside from the fact that the funds you will need for a new business are relatively small, another advantage of dropshipping is the ability to get started quickly and easily. Even if you do not yet have your own eShop to promote your products to the public, you can simply create a “store” on major e-commerce platforms (eBay, Amazon, Skroutz) making a start for your eshop’s development.
No inventory management responsibilities
With dropshipping, you no longer have to constantly deal with issues related to the stock of the products you provide to the consumer public. This way you will have more time to deal with your eShop, how functional and qualitative it is, the customer service, the digital advertising methods that you may want to apply.
At the same time, by entering into partnerships with more than one supplier, you will be able to offer your audience a wide variety of products, enhancing the chances of completing all their purchases exclusively through your own eShop.
Reduced business risk
In the same way, when you do not have to deal with the ways of total inventory management – storage, renting space, maintenance costs, fixed bills, packing and shipping procedures – the risk you take when starting a new business is significantly reduced.
There are a lot of future entrepreneurs who, while wanting to start their own eShop, often have second thoughts due to the undeniably high business risk they are called to take. With dropshipping, this problem is out of the way.
In the event that your business fails, you will be assured that there is no risk of losing funds from previous commitments.
What dropshipping issues should you look out for in your eShop?
As ideal as dropshipping may seem, to be completely fair, we must also mention the problems you may encounter.
Lack of control
In order for a new business to succeed with the dropshipping model, full transparency and excellent cooperation between all operating factors is required. Since you will not be in charge of the stock of products that must be delivered to each customer, you must find a reliable professional supplier, so that there is no problem in customer service, condemning your own eShop.
Restrictions on personalized marketing
One practice that has proven to be particularly effective in building relationships between an eShop and its customers, is to create a neat package, with a personalized message from each company.
With dropshipping, you may find it difficult to follow such a branding method, since the process of product packaging and shipping is undertaken by the suppliers’ company. However, if you choose a cooperative and experienced supplier, you will be able to follow such personalized marketing tactics in the context of dropshipping, without any problems.
Dropshipping: the eCommerce model of 2021
Being the most modern and efficient e-commerce model nowadays, dropshipping has managed to attract millions of companies that want to easily establish their brand in eCommerce. And this is definitely not something utopian.
The dropshipping business model is the ideal way to start your own eShop without the need for huge funds or big risks that many find difficult to take. Being one of the most profitable eCommerce models, no matter how competitive, with the right partners and the will to meet the wishes of customers, the opportunity for success is a given.
Freed from the responsibility of inventory management, focus on ways to attract new customers, your site traffic, SEO and marketing, and take your business profile to the next level with excellent and fully efficient customer service.
Our article doesn’t end here
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