Drop-shipping is a retail fulfillment method, but in this case, the store doesn’t keep the products for sale in stock. In drop-shipping, when a store sells a product, it purchases the product from a third party and ships it directly to the customer.
Meaning, the seller doesn’t have to handle the product directly, this will save you the risk of losing your products to thieves or fire hazards.
Benefits of Drop-shipping
Drop-shipping is exceptionally good for entrepreneurs to start up with because it is accessible. The benefits of Drop-shipping include:
1. Less capital is required: This is the major advantage of drop-shipping because you can launch an e-commerce store without investing thousands of dollars.
With drop shipping, you no longer need to purchase a product. You only need to purchase the product if you have made the sale and have been paid by your customers. You can source products and launch a successful drop-shipping business with little money.
This is because you are not obliged to sell through any inventory, there is less risk involved in starting a drop-ship store.
- It is easy to start: Owning and running an e-commerce business is easier because you don’t have to deal with products physically. Drop-shipping eliminates your problems in the following areas:
- Managing and paying for a warehouse
- Packing and shipping orders
- Handling the returns and inbound shipments
- Tracking inventory used for accounting reasons
- Ordering products and managing stock level
- Low overhead: Your overhead expenses become very low because you won’t have to worry about managing a warehouse or purchasing an inventory.
Many successful drop-shipping stores are even run as home-based businesses, requiring just a laptop and few expenses to operate. This cost will increase as your business grows.
- Flexible Location: A drop-shipping business does not need an office for its operation. Anywhere is your office as long as you have an internet connection. Once you can communicate with your suppliers and your customers, then you are good to go.
- Wide range of products to sell: You don’t need to pre-purchase your products before selling. You can offer a list of products that are trending to your potential customers.
- Easier to test: Drop-shipping is a very useful method when I comes to launching new stores to test the effectiveness of adding new product categories.
Example: online shops to buy dresses around me. The major advantage of drop-shipping is that it can list and sell products.
- It is easier to scale through: If you were operating a traditional retail business and received triple times your normal order, you would have to work three times harder. But drop-shipping gives you leverage, as you don’t need to do all the work of processing yourself.
The supplier bears the full responsibility for any additional orders, this allows you to expand your business and gives you time to do other things with your life.
- Expansion of your business will simultaneously increase your work, especially in terms of customer service and support. Just like other businesses, you can make money with drop shipping by calculating the difference between cost and revenue and leveraging on that.
- The difference with drop shipping is that you don’t need a physical store for stocking your products. Drop-shipping takes care of inventory and the fulfillment of your business.
- Example: If you drop ship perfumes, your supplier sells the perfume to you at $6 and you put the perfume on your website for $15. Marketing the product might cost you $5. Your profit will be $4.
Drop-shipping can help you make passive income
Just like freelancing, it is believed that drop shipping can help you generate a passive income. But it is wrong to think that since other people are selling for you then you don’t need to work.
Just like any other business, it still requires hard work. To get the results you want from your drop-shipping business, you must be ready and willing to put in your time and effort.
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