A Beginner’s Guide to Dropshipping

Are you planning to start a business but don't have enough capital to cover operating costs? Why not consider getting into dropshipping? This is a method of retail fulfillment in which the seller doesn't store goods in stock. Instead, they only purchase inventory as needed from a third-party supplier — often a manufacturer or wholesaler — to fulfill orders made by buyers. Moreover, when an order for an item is placed, the seller buys the product from the supplier and has it directly shipped to the customer's doorstep. Thus, a dropshipping merchant can sell goods without seeing or handling them in person.

There are many advantages to entering this line of business. To help you decide, here are several examples of its benefits:

  • Lower Capital is Needed

With dropshipping, you can launch an online store without having to shell out hefty sums for up-front inventory. Unlike traditional sellers who buy goods and keep them in stock, you will only have to purchase an item when a customer buys it from you. 

  • Much Easier to Run

Not only is it less costly to launch, but the costs of running a dropshipping business is also much lower. Moreover, it's less labor-intensive to operate than a brick-and-mortar store. You don't have to manage or spend on warehousing, manually pack and ship orders, track inventory for accounting, and handle product returns and inbound shipments.

  • Wider Range of Products to Sell

Considering that you're not required to pre-purchase the products you sell, you can offer a more varied assortment of items to your prospective buyers. When your suppliers stock a product, you can list it up for sale on your e-commerce website. Thus, you won't be restricted to specific types of goods and commodities. Without any additional costs, you can work with a range of suppliers — from a home décor dropship wholesaler to manufacturers of home appliances or personal electronics.

  • Ideal for Remote Work

As you won't be dealing with physical products, you don't need a workplace. In fact, you can manage your e-commerce store right within the comfort of your home, as long as you have a computer and strong Internet connection. In addition, the flexibility of dropshipping allows you to easily handle business functions in any location, even when you're on vacation or traveling.

Tips for Beginners

Couple buying online together with a laptop on a desk at home

Of course, no business model is completely free of risks. When you're just starting out, you'll have to maneuver against threats such as fake suppliers or scammers, constant pricing competitions, and inaccuracies in product tracking. Here are some efficient methods to resolve these issues;

  • Be meticulous when looking for legitimate suppliers. Avoid suppliers who ask for subscription fees, don't communicate in a timely manner, or require advance bulk orders.

  • Only sell products who are protected under the minimum advertised price (MAP) policy. This way, you won't be forced to continually drop prices to compete with other retailers who sell the same item at lower price points. Such unhealthy competition can harm brands. By choosing to sell only MAP-protected goods, your pricing can't go below the amount threshold.

  • Utilize product tracking software to avoid issues with oversells and stock-outs. These savvy systems can scan websites and marketplaces you sell in and update the quantity of your inventory. Thus, when a product is sold out from your supplier, they will automatically mark it as unavailable in all of the channels you own.

Dropshipping is a convenient and cost-effective way to do business. If you're interested in establishing your own e-commerce store, do substantial research and be wary of questionable suppliers.