Drop shipping is gaining popularity since the last few years. This type of retail fulfillment method is great for entrepreneurs as it does not require stocking the products. The merchant doesn’t have to order inventory or fulfill orders. All this is taken care of by third-party suppliers. There’s no need to open brick-and-mortar store, hire employees, or pay overheads costs when you choose drop shipping. Despite all this, business owners can reap the lion’s share of profits.
Drop shipping isn’t a new business model. Millions of entrepreneurs prefer to choose drop shipping these days as it is a hassle-free option and does not require any investment. And the major benefit? – No need to maintain inventory – Just concentrate on bringing new customers and increasing sales.
- Zappos started drop shipping in 1999.
- Amazon and Sears have used drop shipping model too.
- 33% of the entire ecommerce industry uses drop shipping.
May be, you must have heard the term “drop shipping” floating around you, or may be you hear it for the first time. We’ll do a deep diving into what drop shipping is, what makes it popular, and what are the advantages and disadvantages of this ecommerce model.
What is Magento Drop shipping? How it works?
Drop shipping is a process that allows the merchants to sell products online without stocking the products. It is a model in which a merchant purchases products from a third party and the orders are directly shipped to customer. The merchant never handles the products personally. The retail partners packs and ships the orders to customers.
In simple terms, here’s how drop shipping works:
- Customer places an order online on retailer’s website.
- Retailer forwards the order and customer details to the drop ship supplier. This is done either automatically or manually.
- Dropship supplier packs and ships the order directly to the customer. The customer thinks that the order is shipped by retailer as in most of the cases, the retailers’ contact information is printed on the invoice.
What are the advantages and disadvantages of Drop shipping?
The dropshipping model has a number of advantages:
Easy to start
You do not need a lot of capital to start drop shipping business. It requires very little from you. As you do not need a warehouse to store products or a team to manage the orders, you can get started immediately and you do not have to worry about the stocking of products as they would be shipped by the sellers. You will not have to spend months in setting up your business. It can be done in a few hours. Using the right tools and resources, you can jumpstart your own drop shipping business.
No huge capital needed
When you choose drops hipping, you do not need to invest thousands of dollars for the inventory. You can get started with minimum capital. There’s no need to hire a large team for managing orders. You need to spend some efforts for sales and marketing to make your business grow. A small team can do all the activities. Some drop shipping owners do everything on their own.
Drops hipping business offers a lot of flexibility to the business owners. You can be your own boss and set your own rules for your business. You can also continue your existing career and choose drop shipping as your side business. You can easily add or remove the products you want to sell and also adjust your business strategies on the go. If you are planning to go on a long vacation, you can automate the processes and everything will run smoothly.
Wider product range
As you do not have to pre-purchase the items for selling, you can choose a large number of products. You can select products from different vendors and manufacturers and choose to sell them on different channels to your customers.
Without investing thousands of dollars for the inventory, there is no risk involved with drop shipping business model. If the products are not sold, you do not have any loss.
You don’t have to lose sleep over fulfillment or running a warehouse. You can run your drop shipping business from any location and sell products to the customers across the globe. All you need is a laptop or mobile with internet connection to manage your business online.
Are there any disadvantages of drop shipping?
You may have to expect low margins initially. You need to be aware of the lower margins in a few niches.
As there is no need to stock up inventory, more and more people are choosing drop ship business. So, the competition in the industry has increased.
Customer service may be challenging
If orders go wrong or damaged, it may be difficult for you to sort out the issues faced by the customers. You do not have much control over the shipment or delivery and so, providing great customer service can be a challenge.
Important Questions to ask a potential Drop shipping Partner
Once you have made up your mind to start your online venture with minimum risk, you can partner with a drop shipper. As you do not have to maintain inventory, you are at no risk of wasting money. You don’t need a physical retail store or a warehouse to ship the products to your customers. Everything will be taken care of by the drop shipping partners. It may sound easy and simple, but it is not so – You cannot just hand off the orders to anyone. If you work with a bad drop shipper, there are chances that it could sink your business before it takes off.
Here are some questions you should ask and clarify everything with the potential drop shipping partner. You may have to negotiate on the prices or terms and conditions also.
- Once the customer places the order, how long will it take to process and ship the order?
- What are the shipping methods used?
- Do they offer a tracking system so that customers can check the status of orders?
- Will my customers know that I am drop shipping?
- What about the quality risks?
- How do they deal with quality issues and lost shipments?
- Do they offer warranty/guarantee of the products?
- What kind of customer service do they provide?
Magento Drop Shipping Solutions
If you have made up your mind to start with the drop shipping business and want to start your business with Magento store, there are multiple ways of doing it. We’ve listed top 3 ways to start your Magento drop shipping business:
Manually Drop Ship the Orders:
Beginners or freshers can choose to drop ship the products manually. Whenever you receive an order, you will have to visit the supplier’s website and place the same order. You need to email them or contact over the call to provide them with special instructions. This prevents the investment into automated systems.
Drop Shipping Extensions:
Mid-level businesses can opt for this drop shipping model. If you have started selling a few products by drop shipping, you can consider automating the whole process. There are several Magento extensions available for Drop Shipping. You can choose the best Magento drop shipping extensions for your online store.
Drop Shipping for Multi-channel platforms
Large businesses wanting to sell their products on multiple platforms can select this method. This approach allows you to run multiple stores from one single place. You need to integrate and automate your system to make sure that your business runs smoothly.
Is drop shipping for you?
We have explained all the pros and cons of drop shipping business. You should analyze the advantages and disadvantages and then make the right decision. Choosing drop shipping as a side business can be a wise idea to generate some extra income. You do not have to sacrifice your existing job and you can work for this business as per your convenience.
Drop shipping business is an easier and faster way to make money in the eCommerce industry. You should adopt the best marketing strategies, create an attractive website, and offer the best customer service in today’s age of competitive times. Do some research in the market before starting your drop shipping business. Hire expert Magento developers to build an effective website for your business and get started.