Ever wondered how to start a dropshipping business? In this guide, we covered building and running dropshipping storage from start to finish.
Plus, we discuss whether a print-on-demand store is right for you, as well as other questions about the legality of dropshipping, how much you need, and more.
Read on to learn more about how to start dropshipping the right way to do business.
What is Dropshipping? How does it work?
Term dropshipping refers to an e-commerce fulfillment method in which a merchant works with a supplier who manufactures, stores, and ships the product. Therefore, the merchant (or retailer) is not directly responsible for the overall flow of inventory. In fact, both warehousing and shipping are done by the supplier.
The easiest way to see it is to list the steps the product moves as it goes through the dropshipping business model:
A supplier buys or produces product A.
The supplier stores Product A in its warehouse.
Merchants (you, the business owner) partner with suppliers through dropshipping relationships.
A merchant creates an online store to sell Product A.
Merchant sells product A.
A customer buys product A from a merchant's store.
Both merchants and suppliers were notified of the sale.
The supplier picks, packs, and ships Product A directly to the customer.
As you can see, the merchant (you, the store owner) doesn't actually see or touch the product dropshipping process throughout. This reduces your own overhead and allows merchants to spend more time and money on marketing, building a website, and expanding their business, rather than focusing on elements like warehousing, shipping, and packaging.
Other alternatives to e-commerce fulfillment include:
Self-fulfillment: You buy products from wholesalers, store them in your own warehouse, pack them when you sell them, and ship them.
3rd Party Logistics: You still buy products at wholesale prices and quantities, but you also work with 3rd party fulfillment companies. So you ship all your purchases to a fulfillment company and they store the items in their warehouse and then pack and ship them when they're sold.
Both of the above implementation methods are more traditional and have been around for longer than dropshipping. However, as you may have noticed, each of them has an additional cost to buy wholesale goods and therefore gives a premium due to the upfront cost. Your finances are under pressure. Dropshipping does not require wholesale purchases as all products are sent on demand. Additionally, self-fulfillment requires you to store inventory in your own home, office, or warehouse, while also figuring out the operations of picking, packing, and shipping. Third-party logistics email list options solve storage and shipping issues, but you still can't order wholesale products.
Overall, learning how to start a dropshipping business offers a lot of promise for those interested in eliminating the following problems:
A storage facility is required.
Need to buy wholesale goods.
Need to run pick and pack operations.
Products need to be shipped from your own location.
Sometimes also need to make your own products (depending on what you sell)
This all sounds great, right?
Yes, dropshipping has its advantages, allowing you to run a lean company without a lot of upfront costs. In fact, a kid from a college dorm can set up a dropshipping as long as they can demonstrate a payment processor's good credit history or sales history. However, dropshipping does have its limitations. So, take a look at the main pros and cons of dropshipping below to see if it's right for you.
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Pros and Cons of Dropshipping
What are the pros and cons of learning how to start a project? dropshipping business? Here are the main ones:
The product is already made for you: Suppliers who need to produce a wholesale batch of goods for your company need not wait. While some custom dropshipping is possible, you usually work with a supplier who already has the product. So if you invent a product, you don't ship it directly. Remember, print-on-demand vendors are a huge exception. You can design items like shirts, mugs, and canvas with partners like Printful . The original product is created, but then printed on it with your own design.
Very low upfront and overhead costs: Dropshipping has a low barrier to entry, even for those unfamiliar with startup capital. In fact, you can start a dropshipping with almost no money at all. This is a bit far-fetched, since you have to pay for an e-commerce platform and advertising, but a small amount of money is good for dropshipping. Also, consider cost savings by eliminating warehouses, shipping materials, warehouse staff, and various other elements that go into fulfillment logistics.
You can quickly monetize your dropshipping business when you learn how to get started: e-commerce platforms start at around $29 per month. Let's say you spend $100 on ads your first month. This means you only need to make a profit of $129 to break even. This is obviously a simplified view of it, but dropshipping costs are so low that advertising is often the highest expense.
You are protected from unpredictable sales trends: One of the main disadvantages of buying wholesale is that you buy a lot of products and wait for people to buy from you. Given that trends change and seasonality kicks in, you may find that inventory is overbought, which is a huge risk. Dropshipped products are shipped on demand, which means you don't face high up-front price tags that could destroy your business. Instead, you'll gradually increase your sales without worrying about inventory accumulating dust on the shelves.
You can spend most of your time and money on market research and sales: Resource dropshipping businesses are mostly used for advertising on Google, Facebook, and other social media sites like Instagram and TikTok. All your hard work and investment goes into it, making it a fairly simple, focused business model that many divi duals are suited to handle.
It's a flexible space: are you finding that your product is no longer selling? Just pick another product from the same industry (or a completely different product) and start selling. While the transition takes a little time and some investment, you don't have to worry about leftover inventory that has to be sold.
You don't have to store products or worry about inventory management: Dropshipping leaves storage of products to suppliers. This is the main premise behind dropshipping, which helps merchants by simplifying the logistics of their entire operation and reducing the cost of warehousing, inventory management software, and workers.
Packaging and shipping are left to the supplier: Not only is the product stored in the supplier's warehouse, but the product is also packaged and shipped for the merchant. Likewise, you (the merchant) now don’t have to pay warehouse workers or set up picking, packing, and shipping processes. You also save on any materials needed for shipping.
There are many platforms out there that can launch dropshipping to operate and work with suppliers in minutes: you can choose to contact the supplier directly to see if they will drop the product for you. However, some e-commerce platforms and third-party dropshipping software allow you to sign up for an account and choose from a large selection of products, all available for dropshipping. This allows you to access more suppliers in one place, and your products are the same as yours e-commerce platform synchronization.
You can now find dropshippers who ship to your customers within a reasonable timeframe: In the past, when dropshipped, it took weeks or even months for goods to reach their destination. That's because the vast majority of products come directly from China. This has changed, with many dropshipping platforms offering warehouses in multiple locations including the US, UK, Europe and Australia.
You can still make huge profits with the right products: Dropshipping has lower profit margins than usual, but it just means you have to do a lot of research to find a lucrative product. You'll find that some items aren't worth messing with, but there are still plenty of options available at low prices that consumers are willing to pay a premium for.
It is often easier to manage dropshipping for high-maintenance products: large, fragile or technical products require special storage facilities and shipping materials. So it makes sense for a supplier or manufacturer to keep these types of products and send them out instead of asking a second company (you) to handle all of this when the item is counterfeited
Less profitable than other fulfillment methods: Dropshipping reduces manufacturing, storage, and shipping. So you save money there. But that means bigger cuts are needed for suppliers because they're doing all the work for you. The advantage of buying wholesale is that you can buy 10,000 units for a very low price and then mark them for a decent profit. Dropshipped products are sold on demand and the supplier does most of the work, so your profit margins are significantly lower. Having said that, you shouldn't need such high profit margins anyway, since all you're doing is running an e-commerce site and marketing.