As we talk about dropshipping, it is important to talk about ecommerce. Electronic commerce, better known as ecommerce, is the buying and selling of a product or service online. Every year ecommerce is responsible for billions of dollars in sales and has shown constant growth year over year. As more and more consumers shop online running – an online store has never been so profitable. There are many different ways to engage in ecommerce and one of the most profitable is drop shipping.

What Is Dropshipping?

Drop shipping is when online retailers sell products but do not keep the product in stock. Instead, when a purchase is made on their website they send the customer’s order and shipping information to a manufacturer or wholesaler who then fulfills it. For example, you sell an item A on your website for $300. Someone comes and buys your item A and you get $300 deposited into your PayPal (or other payment processor) account. You then email/call the manufacturer of that item A and tell them where to ship it. The manufacturer then proceeds to charge you $200 for the product and shipping. You as the website profit $100 ($300-$200). Essentially, you are an intermediary between the customer and the manufacturer. Because of this, drop shipping is popular amongst many prominent internet marketers.

Why Drop Shipping Works?

Drop shipping works because manufacturers/distributors and the online retailers each bring a different skill set to the table. The former are experts in manufacturing, distributing, warehousing, supply chain management and so on. The online retailers on the other hand are experts in driving traffic and managing customers and so on. When you put these two together, you have a very good relationship that allows both sides to profit. Basically they focus on the product and you focus on the sales.

Pros and Cons of Dropshipping

Pros

1. Easy to Understand: There is nothing too complicated about creating an ecommerce store and selling products. You have a product and someone exchanges you money for that product. What’s so hard about that? You don’t have to be a programmer, a graphic designer or possess any highly technical skills.

2. Time Investment: Once your store is up and running, the time investment in it is relatively low. You can literally spend less than 2 hrs a day running multiple stores. If you just want to check emails and send off orders then so be it. Sending off orders to manufacturers takes only a few minutes.

3. Knowledge is Power: The true power of drop shipping is being able to run a successful store without knowing much about the niche.. This means you can quickly and easily get into niches you know nothing about. You don’t have to be a fitness expert to sell some sort of fitness product, or a physician to sell some sort of health product. You can get by with a very general understanding of that niche, and when a question arises that you are unable to answer, you can just ask the manufacturers who will be able to answer it for you. This allows you to have multiple stores in a wide variety of (sometimes obscure) niches.

4. Ability to Scale: By drop shipping, you have the ability to massively scale your stores. If you were to deal with shipping and returns and sourcing the products yourself, you simply wouldn’t have the time nor the expertise to launch multiple stores in multiple niches. However, when all you have to do is find those niches and build a site around them, scaling becomes easy. No matter what niche you are going into the processes will always be the same, only the products you are selling will be different.

5. Passive Income: Once you get your store up and running and you are making sales, things become passive. Some days you spend a few hours dealing with emails and phone calls but many days you are making sales by doing nothing! Nothing better than having a pure cash machine that works hands free.

6. Inexpensive To Start: The store is like your storefront on the street however the rent is like $10 a month. With a few hundred dollars, you can easily create a good looking store and start driving traffic.

7. More People Are Buying Online: More and more people are becoming confident purchasing online and are finding that it is easier than ever. Search a product, find a product, and then buy a product. The internet makes searching for that product almost too easy.

Cons

1. Less Control: One of the drawbacks of drop shipping is when you are selling someone else’s product, you ultimately have less control. Sometimes popular products will fall out of stock, sometimes a piece may be shipped broken or something may be missing. No matter what the issue, as far as the customer is concerned you are the one on the hook. In the beginning, dealing with these sometimes frustrating and new situations can be a hassle. But once you understand how to resolve them it is not a big deal.

2. Manufacturers: This goes hand in hand with less control mentioned above. In some niches manufacturers can be difficult to deal with. And when they make a mistake you as the store owner have to deal with the customer.

3. Lower Profit Margins: Because you are selling the product for someone else the margins will be lower. The manufacturer/distributor has to make a profit too and this means your margins will be lower. If you were to import or manufacture your products, the margins would be higher but then you would be dealing with everything involved in those processes. As mentioned above, not having to deal with these things makes it much easier for you to scale your stores and make more money with a more passive style income.

4. Customer Service: This can be a double sided coin. Many times you will get phone calls of people who are interested in your product and simply have a question before they purchase. These are great because you can sell them and have an opportunity to make money. Other times however, people would like to return a product, complain about a defect or are wondering when their product will arrive. These inquiries are more of a hassle as they are not generating you a profit and take away from your time. Once you start making money, you can outsource this but in the beginning you will have to do it yourself.

How To Get Started?

The beauty about creating a dropship business is that you don’t need much. You don’t need much money, much experience or technical knowledge and you can simply create an online store even if you only have a few hours a week to devote to it. But first things first, there are a few things that you will need and there is no way around it. You will need a:

  • Business License
  • Shopping Cart or Webstore
  • Business Bank Account
  • Resellers Account
  • Niche

Drop Shipping Overview

Drop shipping is one of the best ways to make money online but it is also one of the most overlooked ways to make money online. Remember, this is a real business and a real asset but it will also take real time and require real effort.