The retail E-commerce market (including dropship stores) in the U.S alone is pegged at $220 billion and it’s growing at about 17% each year - according to the eCommerce Drop Shipping Standards. By the end of this year (2017), the US online retail sales are expected to touch $370 billion.
As the folks at SparkPay helpfully point out, up to 33% of Internet Retailers adopt the “dropship” model as their primary method of order fulfilment.
You might not know this, but even Zappos and Wayfair have built their entire businesses around dropshipping.
So, what is the dropship model?
Dropshipping is essentially an arrangement between a “drop shipper” (that’s you) and a manufacturer, merchant, or supplier. You agree to create a storefront for showcasing or selling products, while your manufacturer/merchant/supplier agrees to fulfil orders. It's that simple.
Manufacturers, wholesalers, merchants, suppliers, and dealers essentially take care of product storage, warehousing, equipment, staff, and everything else that goes into managing inventory. You take care of the sales part of the equation.
You don’t pay a dime until you sell stock.
Here are 6 reasons why it’s a no brainer to adopt it as a potentially viable business model.
You Profit, Because You Save Cash
If you do your dropship store right, it’s a trinity of wins for everyone involved. You as a business, for the manufacturer or the supplier, and most importantly, for the customer.
Best of all, you’ll save because you won’t have money tied-up in inventory. This is achieved since you don’t pay for storage, warehousing, equipment, and staff. Not to mention you don’t have to invest money upfront to buy products in bulk.
To make things easy to digest, here’s a simple graphic that explains how dropshipping works.
Benefit from Less Hassle
If your dropship company is efficient, and if you have the right partners, nothing can stop you. No need to bother with the major time-costly tasks such as ordering in bulk, logistics, inventory management, and shipping.
You would also have the possibility of expanding your product catalog. You can add more products for sale with minimal effort, and provide your customers with a wider variety of products.
Having more products up for sale is good for you as a business and a great way to spoil your customers for choice.
The Dropship Code: Save time & Scale Up
Nova Inveiss of BigCommerce writes that as your business grows, fulfilling orders and shipping those products takes a lot of time and hustle. This frees up time to focus on what matters to your business: marketing.
With most of the operational, logistics, and inventory management out of your focus, you open to scale up as fast and as big as you’d like to.
Validate & Test product demand
No business is viable if it just crops up because you had an idea or a gut feeling. To succeed with your business, you’d need to know for sure that there’s demand for your products.
Imagine this: You came across a particular product on AliExpress. You thought it’d be great to sell on your store for customers in the U.S, but how do you know for sure?
Normally, retailers have to risk it all out by buying sample inventory, putting the products up for display and wait for orders to come in.
Instead, by choosing the dropship model, you can test out new products by including them for sale online. in a matter of minutes, you can expand into new markets, and test out demand for new products – all without stocking up on inventory.
Let Suppliers worry about orders, returns, and customer support
For an average retailer, it all comes down to fulfilling orders, managing returns well, and excellent customer support.
Managing all that by yourself when you are a small business or if you are just starting out takes mammoth effort.
As long as you can find a reliable drop shipper such as Printful, Doba, and AliExpress (to name a few), they’d handle returns, deal with damaged products shipped, process orders faster, negotiate better shipping rates and pick the right shipping partners, and manage customer support on their end.
Flexibility & Location Independence
Since you don’t worry about inventory, fulfilment, or warehousing you can practically run a dropship business from anywhere as long as you have a laptop and an internet connection.
The regular location independent or lifestyle businesses such as freelancing as a writer or a web designer are great options but these businesses are endless treadmills. You’d never hope for a true “business” as “dropshipping” provides, especially with the potential for scale, lesser risk, more practicality, and the possibility of automation.
Do you have more reasons you can think of as to why you should opt for the dropship business model? Tell us about it in comments below, or contact/check us out at Dropaship.com
Also published on Medium.