Dropshipping is a business model that enables companies to sell products to customers without ever having to physically stock the items themselves. Reducing the overheads that come with having a large inventory, it allows independent businesses to test and trial new merchandise without the pressure of jeopardizing a large investment.
How Dropshipping Works
The first step is to seek out a supplier (which can be done independently), or through an integrated app, which has a database of thousands of suppliers. Once the desired product has been found it can then be uploaded onto your store. When purchased, the item will be sent directly from the supplier to the customer; all the business owner needs to do is check that the order details are all correct.
Why Dropshipping is Such a Valuable Resource
The benefits of dropshipping are multiple, especially for small to medium-sized businesses, since the model is accessible, fast-acting, and versatile. The list below outlines just some of the ways in which it is revolutionizing the e-Commerce marketplace.
Dropshipping reduces the costs of warehouse rental, as well as the investment of a large stock of inventory. The latter is particularly important as the effects of poor inventory management can have many detrimental consequences, from poor customer service, to impeding accurate planning and strategies. Businesses using dropshipping have increased freedom of movement since they are not tied to a physical stockpile; an owner can run their business from their kitchen table, providing there is a good internet connection.
In order for a business to grow it needs to continue to meet the demands of the market. However, this can be challenging since these demands are always in flux. As tastes and trends change, so must a company in order to maintain relevance and market share. Although small businesses have the largest potential for growth, many fail to scale, since scaling is traditionally a resource-draining enterprise. Leveraging dropshipping allows businesses to scale more freely as it reduces the risks that come with inventory investments.
Less Upfront Capital
Dropshipping allows businesses to sell products online with relatively small upfront costs, making it much more accessible. Since a company is not committed to selling any inventory upfront, there is little risk involved, making it possible to start a retail business without much capital.
It Makes the Perfect Testing Ground
With companies spending over $45 billion annually on market research, knowing what a customer wants has never been more important. Dropshipping does not have to make up the entire product range offered, rather, it can be used as a way of testing the potential interest customers would have in a new item or range. For example, a women’s clothing brand might use dropshipping to test the market for expanding into accessories.
From managing the warehouse to packing and shipping orders, dealing with returns, and staying on top of older stock, the daily management of an online store can be draining. Dropshipping allows business owners the time and resources necessary to focus on product development, business goals, and long-term growth.