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E-commerce Business has become the trend among online business owners nowadays. This is an answer to the increasing number of shoppers around the world who rely too much on online shops for the things, they need on a day-to-day basis. If you are aware of this current trend and possesses an entrepreneurial skill, you couldn't afford to let this opportunity pass.
A new term has emerged on the online business world, Drop Shipping. You might have already encountered this word as you constantly checked your Facebook profile or you may have encountered the term from other social media, but do not have a solid understanding of the word.
Drop Shipping, its Meaning
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Drop shipping is a retail fulfillment method where a store doesn't keep the products it sells in stock. Instead, when a store sells a product, it purchases the item from a third party and has it shipped directly to the customer. As a result, the merchant never sees or handles the product. Source
We usually think that when we started an online shop, we need to have a huge stock on our inventory which is should be the case in most instances. However, with a Drop Shipping retail method, we can now sell products even if we don't have the stocks on hand. We can sell the item and let the third party, usually a wholesaler or the manufacturer, ship the item to the end buyer.
In simple term, Drop Shipping is selling on retail without actually holding an inventory of the actual goods.
When Does Drop Shipping Started?
Drop Shipping is not a new thing. The concept has been around for a while. However, the actual occurrence of drop shipping online is still new. There are several sites offering drop shipping companies and one of the most popular sites that we can come across with is Shopify.
How Drop Shipping Differs from a Traditional Online Store
In a traditional online store, like the brick and mortar store, we should maintain a huge inventory of the items that we offer for sale. While we are doing the transactions online, still we should have the physical products in stock. You cannot sell something which is not available on hand.
On the other hand, Drop Shipping allow us to display the product. We can do this by creating a website with the list and images of products and when a buyer visits our site and choose a product, the partner company will be the one to ship the product to our buyer. Everything is done automatically.
This is how drop shipping differs from the traditional online store.
How Drop Shipping differs from Affiliate Marketing
Affiliate Marketing is the process of earning a commission by promoting another person’s (or company’s) product. Products exist in your target market right now (that people are probably already buying) and if you can become the resource that recommends those products, you can generate a commission as a result. Source.
While both drop shipping and affiliate marketing offer products owned by another person (or company), with affiliate marketing, we simply refer the buyer to the seller's website the selling transaction happens on that place. Meaning we do not close the deal. While with Drop Shipping method, the buyer visits our site, buy a product from there, we collect payment and let the manufacturer or wholesaler ships the item.
Moreover, in the case of affiliate marketing, anything that happens after the selling transaction, the buyer would run after the company who sold the product. It would be a different thing with Dropshipping. Since we are the one who closed the deal, the customer will run after us just in case problem arises after the selling transaction had taken place.
Who Is Dropshipping For
Drop Shipping is a good alternative for those business individuals who want to start a business without spending a large amount of money for the inventory. If you wanted to try the depth of the business without spending a lot of money, you can try drop shipping business. Though you have to spend on the website and other marketing applications this is simply would incur a lesser amount than going on with a traditional online store.
Benefits of Using Drop Shipping Method in Online Selling
Low Start-up Capital
One of the greatest benefits of Drop shipping is being able to start the business for a minimal amount. You only have to create a website to display the products. You can start selling a wide variety of products within a short preparation.
The risk involved is minimal since we don't have to put a big amount of capital.
One of the requirements for a traditional online store is the fact that we need to provide a storage area for our inventories. This thing is not needed for a Drop Shipping Method because we do not have to purchase stocks.
Cons of Drop Shipping
While it is true that drop shipping method has a low start-up and overhead cost, there are cons of the business arising from this set-up. Here are some of the cons that we need to take into consideration and probably could be given an attention before jumping on this method of e-commerce business.
Because you only rely on a third party for the supply, you cannot demand a price for a certain product considering that there are other competitors who might be selling the same product.
Lack of Control
Since the shipping of the product relies on the wholesaler, we have no direct control in ensuring that the items delivered are the quality as expected by the customers. Because of this, we might experience a return of goods which will incur additional cost on our part.
On the Final thought...
Drop Shipping is relatively new and may not be the best option for some. Though the start-up cost may be low compared to a traditional e-commerce business, we should take into consideration the other areas of the business.
Here is a video showing the process of drop shipping on eBay. Enjoy watching!
One of the things to consider is finding the best product for our drop shipping business which we will discuss in our next blog post. Stay tuned for more blog posts!
Thank you for reading!
DISCLAIMER: The views and opinions expressed in this blog post are that of the author and does not in any way represent the agency or department she currently belongs.
ADDITIONAL NOTE: The sites mentioned in this post are for information purposes only and links are provided for easy access. The author does not receive any remuneration from the said companies or sites.
Written for Bitlanders
by Sharon Lopez
Date: May 15, 2018
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