March 8, 2018

Does Dropshipping Work in 2018?

In 2018, entrepreneurs and marketers who have limited in time and capital can invest in the online business model called dropshipping. With dropshipping, you do not need to own the products you sell, which thereby enable you to concentrate on areas like Facebook Ads, influencer marketing, SEO, content marketing, and customer support.

    What is Dropshipping?

    Ecommerce stores market and sell products online. Dropshipping is a business model where the e-stores do not maintain the product inventory. Once they sell the product, they purchase it from the seller who ships it directly to the consumer. A dropshipping store owner does not handle, see or maintain the inventory and logistics.

    How Dropshipping Works?

    In a regular online retail business model, the stock maintenance and logistics ARE done by the online store. In the dropshipping business model, entrepreneurs do not have to spend on maintaining inventory and fulfill their order by purchasing from a third party. The packaging, shipping, and inventory update are all managed by suppliers.
    Pros and Cons of Dropshipping
    The dropshipping method does take way some burden from the entrepreneurs so that they can focus on important marketing issues, however, along with the benefits, this business model also has some drawbacks. Let us explore both aspects.

    Some pros of dropshipping:

    • Low investment
    With dropshipping, the biggest advantage is less capital requirement. You can install an online store of your own without having to invest in the purchase and maintenance of inventory worth large amounts of money. You purchase a product only after you sell it to the consumer.

    • Easy to start
    Since dropshipping business does not involve directly dealing with physical products, the setup and installation of the business are easy and relatively simpler than the traditional business model. We do not have to worry about the following constraints:

    · Product inventory
    · Warehouse maintenance and rents
    · Packaging and shipping
    · Continuous monitoring of stock and inventory level changes

    • Low overheads
    While dropshipping involves lesser capital investments for set up, the overheads are also low. The business does not have to manage the warehousing, packaging, and logistics, which greatly reduces the regular expenses. In fact, there are many dropshipping businesses that are managing their entire business from a single laptop, that too sitting at home. No office space, no warehouse, and no logistics or transport hassles, as in the case of brick-and-mortar businesses.

    • No physical office space required
    A huge amount of money is involved in paying monthly overheads in the physical office spaces occupied by businesses. For a dropshipping business, you need to have a laptop, Internet connection, and the communication skills to deal with consumers and suppliers.

    • A wide range of products
    Dropshipping merchants do not purchase the inventory, hence they are in a position to increase their list of products for sale, at no extra costs.

    • Scalability
    In a traditional business, additional orders and expansion mean greater investments and resources scaled in the same proportions. With dropshipping the increase in sales does increase the need for greater resources (esp. customer handling) but not at the same scale.
    Cons of dropshipping:

    • Low-profit margins
    In a dropshipping business, we do not manufacture/own the products and hence the profit margins also reduce. Moreover, it is easier to open an online store and get started. Hence many businesses install low-quality websites and sell substandard products. The competition is very tough and the businesses have to operate on a tight budget and hence they compromise on the quality. Here, I must say, marketers are at an advantage if the products offered are of the niche segment.

    • Supplier management
    The entrepreneur is the front-face dealing directly with the customers and of course answerable for every discrepancy that occurs even at supplier's end. He has to seamlessly manage all the marketing aspects of the business.
    Why Start a Dropshipping Business?
    So though dropshipping has its set of complexities, it is still a more convenient way of setting up a business with not much capital, labor, and inventory costs. So if you are looking to sell an exclusive line of product and you have done your market research on profitability, you should take the plunge with the dropshipping business.
    How to Start Dropshipping?
    The first step of setting up a dropshipping business involves finding a niche market segment. What if you start a business and then find out there is no market for it? Or maybe there is a lot of competition with giant companies. It is difficult for dropshipping companies to compete with the likes of Amazon. Do your research, brainstorm some ideas and collect statistics from family, friends, and related communities. Make a list of say, 10 business ideas and then put them to test using apps like the Google keyword search planner. Also, conduct searches on authority online portals like Amazon and research the social media platforms to find out the viability and demand for the product. Browse through 48 profitable niche ideas for 2018 for inspiration.

    Next, look for suppliers, and strike the best deals with them on Dropwow. Your suppliers will maintain the stock and will be responsible for the logistics. Now create your brand identity and finally set up your online store on ecommerce portals like Shopify. This is one of the best platforms to open a store and provides numerous themes and features keeping in mind the user experience of the consumer. Decide on the exact line of products, define the pricing, and start the marketing of your store.
    So the question is, will the dropshipping business model work in 2018?

    Entrepreneurs who plan well and execute their business model after complete market research and analysis, are sure to find success with the dropshipping framework. Set up your online store, register it at a robust ecommerce platform that attracts thousands of suppliers and automates dropshipping operations, and import trending products to succeed. In the coming times, this online business model is the most suitable due to the plethora of advantages that it stands to offer.
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    Content Creator at Dropwow
    Gulnur Ismailova
    Content Creator at Dropwow