How Does Drop Shipping Work?In a nutshell, drop shipping works like this: You open up an online store and work with a dropshipper to deliver products directly to the consumer. What makes this an ingenious opportunity is that you don’t need to have a warehouse. You can sell all sorts of products without purchasing a single item upfront. You only pay when the customer pays. The drop shipping company also processes returns. Just make sure to inquire about what returns are acceptable. Now that you understand more about how does dropping work, let’s dive into the benefits.
Little to No Capital is NeededRight out the gate, the capital needed to start an e-commerce business is greatly reduced. And this is likely the prime benefit that draws entrepreneurs into the retail industry. It’s not uncommon for people to start their online store from their home. In the past, you needed a warehouse to purchase thousands of dollars worth of products and storage fees. However, there are various other reasons to get into the drop shipping game.
Access to a Bigger Selection of ProductsSince you don’t have to purchase products in advance, you can offer a wider selection of items to customers. All you have to do is partner with dropshippers that deliver the products you want to offer.
The Risk is MinimalWarehouses and storefronts are sometimes damaged by fires, bad weather, and vandalism. And when this happens, the amount of revenue lost can be substantial. This type of risk is reduced since you don’t have an inventory to protect. Then if your business doesn’t pan out, you won’t have thousands of products to get rid of.
Operate Your Store from AnywhereThere are no strings attached when you have an e-commerce store. This means you can operate it from anywhere in the world. All you need is an internet connection and reliable phones to run your business.
It Offers Flexible ScalabilityUnlike with warehouses and shops, you can easily scale your business up or down based on the demands of your customers. For example, during the holidays, you can easily scale up to meet high sale volumes.
What Are the Profit Margins for Drop shipping Businesses?Your profit margin will depend on the types of products you’re selling. If you decide to go with expensive electronics, then you can earn around 5% to 10%. However, for the lower-priced accessories, you can witness margins around the 100% range. On average, gross margins are around 10% to 15%.
Where Do You Find Customers?You can treat your drop shipping business just as you would a regular online store. For example, you can have a website created to advertise your products. It will look like a regular storefront, but your products will ship from elsewhere. Some places dropship businesses sell from include eBay and Amazon as well. The key is to increase your visibility by any means necessary. Even Facebook allows you to connect your store so followers can buy from your page. A shop button is also available which takes users to your online store. Just don’t overlook the value of having your own website so you have a dedicated spot where customers can shop.
Finding Drop Shipping CompaniesThere are various ways you can find dropship suppliers for your store. Let’s review some of them.
DirectoriesYou can subscribe to a directory for drop Shipping suppliers. Many of these are available online. However, keep in mind that these are typically lower quality entities that don’t provide much value. But you may find some gems in there, so it’s definitely worth checking out. Typically, you’ll find thousands of suppliers worldwide.
ManufacturersAnother option is to reach out directly to the manufacturer. If you have an idea of the product you want to sell, then find the contact details for its manufacturers. Then they can direct you to authorized distributors that may offer drop Shipping services.
Google SearchIt’s not easy finding wholesale dropshippers, since they don’t really market their services. You’ll likely end up sifting through pages and pages of before you find legitimate options. But don’t give up, you’ll eventually find suppliers for your e-commerce business.
What Are the Requirements for Working with Dropshippers?In America, you can’t do business with a dropshipper unless you’re an established business with an Employer Identification Number (EIN). This is free to apply for and acts as a social security number for your business. You use this to file your taxes. It’s not difficult to build a legal business structure. In most cases, you’ll only spend a few hundred dollars.
Are there Any Fees Associated with Drop Shipping Companies?How does drop shipping work when it comes to fees? There are various fee structures dropshippers offer.
Per Item FeeOne option is to pay a fee per order. This may range between $2 and $5 per item, which covers packaging and shipping. And it may be higher for products that are bigger or harder to process.
Monthly FeeAnother option some offer is a monthly fee. This is more ideal since it allows you to plan your budget better. However, in the beginning, you may not want to go this route until you start making sales. Beware of fake dropshippers that ask you for ongoing fees.
Purchasing MinimumsThen there are some dropshippers that have purchasing minimums, like wholesalers. In some cases, this is only for your first purchase. Other times, it’s on a monthly basis. When you don’t meet the sales threshold, then you’ll have to pay a fee.
I Know How Does Drop Shipping Work — Now What?In order to make any business idea work, you need a good plan. Once you gauge your audience, identify products you want and find dropshippers, it’s time to build your online store. This is all easier with the services offered at Dropified. Here, you can streamline the management of your Shopify drop shipping business. You can save time adding products to your online store, processing orders and researching products. It comes with all sorts of features as well, such as product price change alerts and auto scan for tracking numbers. Let’s not forget you can automate your Shopify store, so you continue earning as you sleep. You can connect various stores to your account, including Alibaba, eBay, Etsy and more. Contact Dropified today to learn more about how does drop shipping work and get your business started asap!
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