If you have not heard of dropshipping, you must have been living under a rock. However, despite the name of the business model being well known, many still do not understand how it works. Furthermore, with dropshipping saturating the online marketplace in recent years, many people believe it is no longer relevant in 2021. Is that true? Let’s take a closer look.
How does dropshipping work?
Dropshipping is an order fulfillment method that does not require you to store any products. Instead, you sell products through an online store. The order is passed on to your chosen third-party supplier, which then ships the order to the customer directly. The supplier takes a cut from the sale and you gain a profit. With the supplier handling the order fulfillment, your main task is to market your business and grow your brand. Furthermore, you can streamline the process by using helpful eCommerce API integrations. You will find companies providing a variety of products, such as consumer electronics, power sports equipment, and Halloween costumes.
Is dropshipping dead?
According to research posted by researchandmarkets.com, the market value of drop shipping was $162.44 billion in 2019 and it is expected to reach $ 591.77 billion by 2027. So, anyone who says dropshipping is dead is simply wrong. However, that does not mean it is easy to become a successful dropshipper. After all, there is a mountain of competition out there. If you think dropshipping is a get-rich-quick scheme, you are sorely mistaken. With low-profit margins and a highly competitive marketplace, it is difficult to get your company noticed and generate high profits. However, when you sell the right products at the right price point, grow your brand, connect with customers, and put in the time and effort, you could still generate a healthy enough profit and take your share of those billions of dollars that dropshipping is generating.
Potential Problems
In addition to low-profit margins and high competition, there are other cons that come with dropshipping, so you need to be aware of them. For instance, you have little control over the supply chain. With standard eCommerce businesses, if there is a customer issue like slow delivery or the need to return items, you handle such things yourself. With a dropshipping model, you are pretty much at the mercy of your supplier. It can also be difficult to communicate when you need to go back and forth between your supplier and your customer. When there are communication delays, you will not be able to provide customer satisfaction and you could end up losing customers.
Another potential problem is legal liability issues. While it is not a common issue, it is worth noting. Not all suppliers will be as legitimate as they look. Some may even sell products that infringe on another company’s intellectual property, such as using similar logos and slogans. Unfortunately, if the supplier has any form of illegal activity, you could automatically be complicit. Thankfully, there is an easy way to avoid legal liability issues. Simply ensure you choose a reputable supplier from the offset. Every business comes with challenges and problems, so dropshipping is no different. The important thing is that you are aware of the potential problems that could arise so you can avoid them or tackle them.
How to Make a Success of Dropshipping
Marketing is the key element of a successful dropshipping business. That does not mean solely placing ads on social media sites. First off, you need to discover who your target audience is. You can then discover which social media platforms your potential customers engage with the most and limit your ads and social media presence to those sites. You need to be active on social media to gain followers and get your brand known. The more you actively engage with people on social media and post regular interesting quality content, the more customers you will gain.
You also need to have multiple channels for selling your goods. You will want to get onto platforms like Shopify, but you should sell through multiple channels, including your own website. Speaking of websites, your site is another crucial component of your marketing strategy. Every successful brand has a great website that uses UX and UI design principles to engage visitors and ensure they spend time on the site. Also ensure your branding is consistent across your social media platforms, websites, and other sites.
Another crucial element of a successful dropshipping business is selling the right products. For instance, if you only sell Halloween or Christmas products, you will sell hardly any items throughout most months of the year. However, selling seasonal-friendly products can be a great way of generating custom. Just make sure you have other product strings to your dropshipping bow. Look at what products are trending and selling the most. If you are able to keep a step ahead of the latest trends, you will be able to sell your items more easily. Alternatively, you could choose to sell niche products. While you will have a limited audience, it will be easier to sell your products to that niche customer base and become a big fish in a small pond.
