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What is dropshipping?

As an e-commerce player, you have probably heard the term dropshipping. The procedure is not new; dropshipping as a storage method has been around for a long time in various parts of the world, primarily between American websites and production in Asia. But in recent times, especially considering factors such as… the rise of Shopify and Oberlo, dropshipping has started to gain popularity.

The concept of dropshipping means that the store does not stock its inventory itself, but instead forwards incoming orders to the relevant distributor, who in turn sends the product directly to the customer.

As a result, the store’s role becomes limited to customer service and payment processing, and it avoids the cost of inventory storage and order packaging, which is the main advantage of this method.

How do I start with dropshipping?

As always, it’s good to conduct thorough research. What products should you sell? What does the market look like for your segment? What are the competitors doing? Search and compare different suppliers and their conditions for dropshipping. One tip is to specialize in the selection of products. The internet is full of websites trying to sell the same products to the same target audience. Below are some tips on how to get started with dropshipping:

1. Choose a supplier.

The choice of dropshipper is crucial for your business. They will be your closest partner, and it is of the utmost importance that you have confidence in them. Therefore, make sure that the supplier has a good reputation, and take the time to investigate how they handle different services.

2. Choose products/product range

Again, research is important here. Check out the competition and specialize in your area. The internet is full of websites trying to sell the same products at the best price to the same target audience. Price is difficult to compete with nowadays, so instead, think about branding and focus (an example of this is Daniel Wellington).

3. Choose a platform

Which platform is best for you and your dropshipping business? Depending on how much work you are willing to put in, there are different options available. Where in the world are your customers located? What platforms are your competitors using? Research, research, research. If you want to invest in your own brand and put in a lot of time, it may be a good idea to have your own website that you market. If the purpose is more like a side business/hobby, there are several well-established websites that may fit. For example:

  • Shopify
  • Ebay
  • Aliexpress
  • Salehoo
  • Dropified
  • Spocket

No, you don’t need to have inventory for dropshipping.

No, inventory is not required for dropshipping – that’s the big advantage. However, it may be useful to have a small buffer stock for handling returns. As a retailer for a wholesaler/dropshipper, it can be advantageous to collaborate with a good distribution partner that distributes and packs products in an appealing and professional manner. In the end, you are the sender of the package, and it is crucial for the customer how the product arrives and is presented. Here, at Exacta, we offer excellent choices for various types of transportation solutions. We always work with a delicate touch and have the ambition to add a touch of luxury to your everyday life.

Who is dropshipping suitable for?

Dropshipping is great for individuals who want to run an online store but may not have a lot of capital, are frequently traveling, and/or are an experienced serial entrepreneur who already has a business but wants a side project that may not require inventory and so on. You do not have your own inventory that costs money and needs to be inventoried. It is easy to start up, and you can choose the extent to which you want to invest.

Advantages of dropshipping.

Dropshipping is an accessible and affordable way to start a business. Here are some of the advantages of dropshipping:

  • No inventory risk – Since you do not have your own inventory that costs money and takes up space, this is one of the biggest USPs of dropshipping.
  • Easy to start – You don’t even need to have your own store/website. All that is required is time for research.
  • No logistics – The dropshipping method means that you do not have any contact with the delivery part of the business yourself, as this is handled by the dropshipping company.
  • No start-up capital – You do not need to stock up on product inventory, which also eliminates local costs.
  • It can be completely free (if you sell through platforms like eBay, for example).
  • Can offer a large range of products – You can choose the extent of your store and have the opportunity to invest in a large range of products without inventory costs.
  • Easy to scale up – If you feel that you want to ramp up your business with more products or markets.

Disadvantages of dropshipping

As with anything, there are also disadvantages to dropshipping. This includes, among other things:

  • Low margins – Make sure you have suppliers who provide quality products. If you have niche products with high quality, you have a greater chance of success.
  • Inventory issues – You yourself do not have any inventory that can have issues. But your brand is the sender of any problems that the dropshipping company may have.
  • Shipping issues – The same applies here, delayed deliveries are a likely scenario for which you need to take responsibility, but which are beyond your control.
  • You have to take the blame for things – since your brand/store is the sender, you will ultimately be responsible for the potential risks involved in dropshipping as a business model. This includes, for example, returns and handling them. Please feel free to read more about our service for return management if you are looking for a secure alternative that can handle that part for you in an efficient way.