What is dropshipping and how does it work?

2 minutes reading

eduardo SEO Specialist and content production, I have worked in several renowned companies in Brazil and abroad. I write about money, technology and more!

Dropshipping is a new (maybe not so new) business model, at least in general. To not bring major spoilers before diving into the concept, we could say it works similarly to any e-commerce. However, as a seller, you don’t need an inventory to keep the products before sending them to your customers. This part goes to a third party, usually a wholesaler or a manufacturer.

In this article, let’s explore how dropshipping works, the pros and cons, and share tips about getting started. Are you ready for the next step? Keep on reading!

What is dropshipping?

Right to the point, dropshipping is an order fulfillment that works without handling products or investing in an inventory. It allows you, as a seller, to reach out to your customers (and vice versa) directly. In practice, it works like this. Whenever a client makes a purchase from your store, a third-party supplier will ship it. You receive the payment from this customer, pay the partner who dealt with the logistics and keep the rest as your profit.

Leaving the warehouse matter aside, you are responsible for building your own brand. It includes a website or marketplace, product curation, and a good marketing strategy. Choosing a supplier to be your business partner is also essential to keep the flow.

While the wholesaler or manufacturer takes care of shipping your products, all the costs involved are up to you. Establishing prices with the profit margin in sight is your responsibility too.

Let’s take a few examples to make it easy. AliExpress, Shopee, Wish, Shein, any of these names sound familiar to you? Well, all of them are digital platforms to sell and buy goods produced in China. If you are not a customer yourself, you probably know someone who is. There are others like Amazon, Walmart, eBay, etc.

In addition to bringing together audiences from different countries and making products more accessible, prices are low. Beyond the novelty, the offers are attractive based on their rock-bottom prices.

Pros of dropshipping

Here are some of the advantages of this business model:

  • The low initial investment, since you need neither an inventory nor to buy products unless you make the sale;
  • Easy to start — all you need is a computer, internet connection, an online platform, a mix of products from your supplier to offer, and an effective marketing strategy;
  • There is flexibility to work from anywhere, plus it’s easy to scale.

Cons of dropshipping

Here are the drawbacks of running this kind of business:

  • The easier, the more competitive. So low margins can be a reality when you are starting (it depends on how you set up your store and choose the products to sell);
  • Inventory issues can become a problem since you can’t keep track of what items are in and out of stock when dealing with multiple warehouses;
  • Customization is limited, while the products are designed and branded by the supplier, which can sometimes lack quality.

How can you start dropshipping?

Learning how to dropshipping puts you one step closer to the world of entrepreneurship while offering a chance for a sustainable source of income. The first move to establishing a partnership is building a website or creating a store through a marketplace. Take a look at the journey that awaits you:

  • As any other business, run market research, look for trending products, and think about the target buyers you want to attract;
  • Do competitive research (Google, SEMRush, social media, email) to learn with your competitors while you create an effective marketing plan;
  • Choose your supplier wisely based on the product curation you decided on;
  • Build your e-commerce store to showcase what you will sell;
  • Get your finances in order and keep an eye on your supplier’s inventory, if possible, to avoid lack of stock or any other issues;
  • Work on a marketing strategy to stand out and attract more customers. It can include paid ads, content marketing, mobile marketing, influencer marketing, communities;
  • Use analytic tools to learn what can be improved to bring more results. Check your sales performance, customer behavior, and profit margin.

Whether you are starting your business or running a store for a while, dropshipping can be highly competitive. It requires neither complex measures nor a high investment. Hopefully, this article will help you give the next steps into this world. It takes dedication to grow and stand out.

Meanwhile, if you need a reliable partner to deal with foreign currencies, count on Husky. Learn how we can help you!

eduardo SEO Specialist and content production, I have worked in several renowned companies in Brazil and abroad. I write about money, technology and more!