What is the meaning of dropshipping? How does it work? A world with only advantages?

Do you want to learn more about dropshipping or do you want to get started but want more information?

You are wondering if dropshipping is a world with only advantages.

You are just in the right place! Appvizer explains in this article everything about the meaning of dropshipping, how it works and its advantages and disadvantages.

Read to the bottom and you will get all the answers 😜

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What is the meaning of dropshipping and what is it for?

Dropshipping is a new sales model that has been developing in recent years. This sales model unlike the traditional one does not require a warehouse, so it is much easier to set up. The dropshipper does not have to stock or handle the goods directly. Sales take place on dropshipping sites.

How dropshipping works

Dropshipping is a supply chain model in which a product is shipped directly from the manufacturer's warehouse to the end customer.

This model therefore offers the dropshipperthe opportunity to focus solely on the sales and marketing aspect. The dropshipper therefore does not have to devote himself to managing the logistics aspects.

If you want to become a dropshipper, you need to know that your income is a commission for each product sold, you will have to transfer the information to the manufacturer who will send the goods and give you your commission.

Dropshipping has 3 main actors: the entrepreneur or dropshipper, the supplier and the customer.

• Entrepreneur or dropshipper: he is the one who runs the e-commerce, his role is to find a niche market where there are not yet many players and market the products. He must also choose one or more suppliers to work with and draw up a contract, in which the commission for each sale and the maximum shipping time are defined.

• Supplier: is the one who takes care of the warehouse management, the shipping of the products and their labelling and packaging.

• Customer: is the user who orders on the e-commerce platform. The entire sales process is aimed at delivering the product to the end customer.

What are the advantages of dropshipping?

Dropshipping is a business model suitable for those who want to start selling online but do not have a high budget. This model has numerous advantages:

• Allowing you to try out new business ideas: learning marketing techniques.

• No need to buy the goods: you can save on both the purchase of the goods and the cost of renting the warehouse where you would have to store the goods.

• Less risk:since you will not have to invest on the purchase of goods, you will not have to worry about having unsold products.

• Easy business to start and manage: you do not have to manage, buy or rent a warehouse, and you do not have to take care of order dispatch, but the supplier does.

• Handling returns: you will not have to handle returns, but the supplier will do that.

• Stock management: as you will not manage the warehouse, you will not have to worry about stock management

• Minimal expenses: you will not have to look for a place to work, but you will be able to work directly from your home. Although expenses may increase as sales increase, they will always be lower than in traditional sales.

• You can work from anywhere : even if you have a computer and an Internet connection, you can work from anywhere, as long as you can communicate with suppliers and customers.

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What are the disadvantages of dropshipping?

Dropshipping certainly has many advantages, but this does not exclude the presence of disadvantages:

• Low profit: certainly the start costs are relatively low, which makes the business easily accessible, but on the other hand the profit is also relatively low per product sold, especially when it comes to a highly competitive market.

• Difficult to identify product availability:since the products are in the supplier's warehouse and he is in charge of inventory management, it is difficult to know the quantity of goods available.

• Problems with shipping costs: in your store you will have several products each from a different supplier, so shipping costs can be very high, in most cases when shipping costs are high and in order not to make the customer appear to have a very high shipping price, you will have to pay a portion to alleviate the cost. In addition, it is difficult to negotiate with the supplier about the shipping costs as the supplier wants in most cases to secure its profit.

• Supplier errors : Sometimes suppliers make mistakes in shipping, or the products are damaged when they arrive at the customer's premises. If these problems recur, you will have to change the supplier to avoid losing customers and ruining your reputation. You also have to apologise to customers, as you have a direct relationship with them.

• You cannot customise articles: one of the limitations of dropshipping is that you cannot customise the products offered as you are limited to selling products already available in a supplier's warehouse. Even if you would like to improve a product or improve the quality, you cannot because only the supplier has control over the product.