Perhaps one of your business associates or friends mentioned their dropshipping company in the conversation. You’ve probably seen a case study or video on YouTube about how some people sell from X product Y to make Z numbers in a month. How is this done? Dropshipping, of course! There are many myths, scams, and true lies about this type of business, so we are here to explain the facts behind how to make money dropshipping and whether it is worth considering.
What Exactly is Dropshipping?
Dropshipping is a type of online retail sale where the retailer does not have to pay for products before selling them to customers.
Dropshipping serves as a type of third-party fulfillment method to keep prices very low for retailers, where suppliers or manufacturers store, package, and ship products, removing the burden from that seller.
In general, selling online, and from a brick-and-mortar store, typically requires a supplier, a retailer (the store that customers buy from,) and a customer.
Online retailers need to find a type of supplier to make their proprietary products or to get other items at wholesale cost. Then, the retailer needs to store, package, and ship those products once a sale has been made.
Over the years, third-party fulfillment has emerged as a more economical way to store, pack, and ship. Rather than the retailer paying for a distribution center, or putting away things in their homes, why not give the stock to a different organization to deal with that?
Many third-party shipping models are available. Many people take advantage of Amazon Fulfillment when they sell on Amazon. Other fulfillment brands include ShipBob, Red Stag Fulfillment, and ShipMonk. In general, they all provide good rates to fulfill orders.
Dropshipping is another form of third-party fulfillment. In short, the supplier never sends the products to retail to decide if they want to store the inventory elsewhere. Instead, suppliers handle the inventory and ship the orders upon their entry.
How Does a Dropshipping System Usually Work?
Dropshipping is one of the simplest methods of fulfillment because it requires minimal shipping, it’s cheap for online retailers, and you don’t have to spend a lot of time worrying about packaging or inventory management.
Dropshipping works like this:
An online retailer finds a supplier who is willing to start dropshipping.
The retailer lists the available products in their eCommerce store, spending most of their time and money marketing.
When a customer places an order, the supplier will get a notification to fulfill that order.
The supplier takes the inventory from storage, packages it, and sends it directly to the customer.
The main basis behind dropshipping is the inventory that never touches the hands of the actual online retailer.
You, the retailer, select products from the supplier’s inventory. You show items on your site to sell. They hold the rest.
Most dropshippers handle returns, but some dropshipping makes it easy for suppliers of items by also accepting returns in their warehouse.
Generally, the retailer does not have to worry about storage, packing, or shipping costs. Not to mention, there is no need to hire people to do these tasks or spend their own time managing a large operation.
There are pros and cons to dropshipping. Also, as a newer form of fulfillment, the internet is full of scams and fake case studies to gain hope about making a lot of money.
Dropshipping does work for some businesses. This is an amazing eCommerce business model that has reduced a lot of the cost of doing business. After all, the supplier already has a warehouse and packaging supplies, why don’t you ship the products as well?
The Difference Between Dropshipping and Affiliate Marketing
You might feel that an outsourcing site is equivalent to associate promoting. For both, the products are not managed by the site owner. Instead, the site owner acts as more of an intermediary between the customer and the supplier.
However, there are some distinct differences:
Outsourcing expects you to band together with a provider or maker.
Member showcasing should be possible by pursuing any retailer’s partner program.
About setting up:
Dropshipping usually involves the manufacture and management of retail in an online store. It works like a real eCommerce store.
Affiliate marketers only need links to quality products that they can recommend. There is no need to have an online store with shopping cart functionality. Many affiliate marketers choose blogs rather than online stores.
Cost differences:
Albeit economical, outsourcing frequently requires a total web-based store, weighty advertising, and examination costs.
Affiliate marketers don’t have much cost, other than starting a website. There is no charge to join an affiliate program. They may spend some time on research and marketing, but most of the traffic brought in is organic.
Control and process:
Dropshippers actually have command over a portion of the cycles. They also take risks and are seen as an integral part of the sales pipeline.
Affiliate marketers are removed completely in the production process. They are referrers. They get a commission once a reference is made.
Returns and customer support:
Dropshippers often handle returns. It’s also a good idea to have some sort of customer service via chat, email, and even phone.
Affiliate marketing does not require you to accept returns, ever. You do not carry, own, or handle the products. You are referring customers to another company. Nor is there a need for customer service. Usually, the company you refer to the business does not know you have.
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