Dropshipping - A New and Viral Business Model

Starting a business is a very famous idea for earning money. You can meet a salaried person and he/she will tell you about his/her dream of starting a business and earning with no cap. There is no denial to the fact that money is a necessary requirement and everyone works to earn some money, some do a job and others are self-employed. However, in the real world, a business is a very popular way of earning among people. The reason could be watching multi-millionaires online and noticing that they all are businessmen. Also, a job is a fixed and tied-up income stream which makes the business the most lucrative income-generating activity out there.

Having said that business is popular, it is also to be mentioned that starting a business and sustaining it is not easy. It requires capital, skills and many more qualities. Thus, it is not anyone’s cup of tea. However, there are some people who try to hack systems to create businesses that do not even require them to get off the couch. This sounds imaginary, right? But it is true. The business that we are talking about is Dropshipping. This is a very modern and famous form of business that has grown so much in the past years. One of the reasons for the scope is TikTok trends but this form is really easy and doable business. This article talks about how this new form of business has covered the whole world.

What Is Dropshipping?
Dropshipping Business Model
Why Is Dropshipping So Famous and Viral?
Side Effects of Dropshipping
Shopify
Gymshark: A Case Study

What Is Dropshipping?

Dropshipping is nothing but another form of retail business. In a dropshipping business, the seller looks out for customer orders and accepts them as he/she has the stock but does not keep goods sold in stock. Dropshippers take direct orders from customers and then they contact sellers of that product and ask them to ship directly to the customer. Acting as an intermediary, they earn the difference that lies in between the transaction.

Dropshippers can be seen as an intermediary. The social media advertisements of products that you see on Facebook, TikTok, and Instagram are most of these sorts. These ads are run to get the attention of the potential customers who will place the orders. They take advantage of the mindlessness with which people scroll their smartphones and click anywhere and buy mindlessly. Some sellers even make millions of dollars from overseas dropshipping without touching the goods. While others use it as a  scheme of gambling scams that hurt legitimate businesses and humble customers.

Dropshipping Business Model

At the inception is a drop shipper who thinks to sell something online to someone without owning that product. He searches the web all over to find products that might be huge in demand and products which people will pay money for. After they figure out a product to sell, then it is time to set up a store just for that product. There are many services available online that can be used to set up online stores for free or with minimal payment. One of them is Shopify, and we will discuss the company a little later. Once a store is set up for a product, it is time to get to the most important part of the business. The most important part of the business, also known as the customers, but how to reach the customers?

In this technological world where people are more online than they are offline, gives a pretty good reason to reach people online and not offline. Not only are online methods very messy and can reach millions of people but they are cheap too. At this step, when a product is chosen and a shop is set for selling the product, the dropshipper now has to reach online customers who might be interested in the product. This is when advertising the product gets into the picture. This is the time when the dropshipper looks out for good advertising platforms. Most of the dropshippers look up to Instagram as they go to places for their advertisements. Others might also choose other social mediums like Facebook, or YouTube depending on their target audience and the sort of product that they are trying to sell.

Let us take the example of Instagram. Let's say a dropshipper chooses IG as their advertisement place and they set up advertisements on social media. The target is to run ads hoping that some person will look out for your product and buy it. Most of the time, these advertisements promotional giveaways are targeted to some specific sorts of people, as we can display and list our preferences according to our product. The hook or the trick here is to make the advertisement as catchy as possible. It can be hard for a person to stop scrolling and look at a specific post (Ad) and click on that and make an impulsive purchase. Thus, the dropshipper has to pay extra attention to this detail and has to set up some really smart hooks for the customers to get. The customer can come through two routes, one is to buy thoughtfully and another route is to buy the product impulsively.

Once a customer has clicked your link, or ad, and is taken to the online shop page of your product. That online shop that you created should work efficiently with the payment system. It should involve all the famous payment methods because the customer will be needing a speedy cash-out option when buying something online. Plus, the store should be believable so that the customer who is about to buy that product believes that it is authentic. Once they make the payment, you go and order that product from a big wholesaler who will give you a good discount on the deal just enter the address of the customer who purchased it from you. It is noted that most retailers are from China as it is the manufacturing hub of the world, and examples include Alibaba's online enterprises.

Why Is Dropshipping So Famous and Viral?

Dropshipping is one of the most viral business models and has amassed a lot of views and beliefs from audiences of all sorts. Especially on the short video platform, TikTok. People on TikTok use the social media platform to promote a product and then sell it online using an online shop.

One reason is that we all are always online, which lead to the success of huge social media apps like TikTok and Instagram. This reason, that the internet gets a lot of screen time, makes dropshipping a viable business option. One can operate very easily with this sort of business model. Dropshippers just need a computer with a stable working internet connection and can even work from home everywhere.

Another reason includes the easy set-up of an online business. It has become increasingly easy for a person to set up an online store and list an item or product to sell it. Interestingly, people can ship their products anywhere in the world now, due to advancements in tech and transport sectors.

Side Effects of Dropshipping

Not every online store and product is not true to its customers. There are many cases of counterfeits and fake products being peddled in the market. They must be believable and true to the nature of the products. There are also a lot of fake and counterfeit sellers online that pose to be true but they are fake. Due to the high popularity of this model of business, people often fall prey to such mischief.  

“What happens is then a whole cascade of different events where you buy fake reviews to distinguish yourself. You buy fake ratings, fake upvotes, a lot of ads, marketing, but all that adds up,” said Saoud Khalifah, founder of consumer protection software company Fakespot.

Fakespot has a Chrome plug-in that alerts shoppers if a seller on Amazon, Walmart, Ebay, Best Buy or Sephora can’t be trusted. It recently added capabilities to detect untrustworthy stores on Shopify. “They made this a one-stop-shop for you to set up a store, and it’s just super easy for you to start selling online and a lot of these dropshippers know it,” Khalifah said.

This is a drawback of this model being super famous, there are people all over who try and convince you that online shopping is not authentic. In an analysis of more than 124,000 Shopify stores, the analysis agency, Fakespot found out that about 25,000 shops set up online are involved in counterfeit activity, data leaks and fake reviews mafia. Out of those twenty five thousand online shops and stores, almost about 72% showed traces of bad dropshipping tactics.

Shopify

Shopify is an online store creator which helps people to set up online stores for little or no fee. It is easy to sign up and set up an online store for a product. It has all the features enabled for a store, including payments, cart and delivery services. There is also fraud detection and consumer protection in the platform. On Shopify’s Help Center, there’s an entire section devoted to tips and strategies for dropshipping. This helps in regulating the online storage space.

The company makes money by charging transaction fees on sales made through its platform and offering paid add-ons and services such as custom themes, advanced shipping and payment options. Shopify earns revenue from its app store, where third-party developers can sell their tools and services to Shopify merchants. The platform caters to businesses of all sizes, from small, independent retailers to large enterprises.

Gymshark: A Case Study

Gymshark, which is a company dealing in the business of gym wear and athletic apparel, has a great influence. The company initially used influencers to promote their products and it used its power of audience to market its product. The effect of which was that the brand was able to generate a cult-like following all over the place. Be it the internet and offline spaces, the company was successful in creating a stir in the public.

The story does not end here, in fact, it is the beginning of dropshippers in context. The huge success that gym shark created for itself was also apparently used by dropshipping people all over the states. Yes, dropshippers actually started making that cash and capitalised on the company's success. Gymshark CCO Niran Chana said he’s seeing more and more copycat drop shippers selling knock-offs.

“Someone else is acting as the brand at that point. And we put a lot of investment into assets, content, etc. So for someone to come and almost copy that is frustrating,” Chana said.

“Where we could really do with their help and support is actually when people are abusing those brand rights and running away with a business model that is unsustainable for both themselves and/or Gymshark if they regulate that better. They have the right to be able to say we’re going to pull this site down or you guys are trading sort of uncompetitively,” Chana said.

Gymshark, for now, is working on building a legal team. The legal team will be at the front of safety and security to protect intellectual property, but Chana also called on Shopify to help.

This above example of Gym shark proves the fact that dropshipping can take the shape of something really ugly. People can try to tarnish the brand image of a company just by setting up individual shops which operate in an independent form. This is one of the many examples which shed light on the credibility of online shopping of any sort, it has to be hugely regulated nonetheless.

Conclusion

Dropshipping is a very famous model of business. It is not a surprising fact, as for a businessman it is easy to just order something that he does not own, and delivering it to the customer is rather easy. Another reason for the business to be a famous model of business is that the product can be marketed easily. It is easy to market products with platforms like TikTok and Instagram. You just have to create a trend or just stick to a trend and market the product that you are selling.

Stores like Shopify make it really easy to set up online stores for every product and it also comes with all the features of a full-fledged online store. From the payments interface, and cart features to the proper listing of products, everything is listed here and plain. The fact that this business model is easy to carry out, makes it prone to viruses. There are people of all sorts out there who are trying to sell counterfeit products online. They can sell fake products, they can come up with some really mischief tricks to trick customers online. There are however regulations and strict rules that try to minimise fake selling, and the number of originals is expected to go up. On the contrary, the business model has supported many people financially. No one can point out the general profitability but if you stick to a trend and create good marketing, the product will sell, even overseas.

FAQ

Is TikTok good for dropshipping?

TikTok live is a great dropshipping tool for all independent content creators, businesses, and brands, TikTok is a great platform to promote their work, products, personalities, and ideas in creative and entertaining ways to a global audience.

Is drop shipping still a good business model?

Yes. If you choose the right niche, implement a proper marketing strategy and constantly improve your customer support, dropshipping will be the most profitable business model to run.

Which social media is best for drop shipping?

Instagram is a top-rated social media platform for dropshipping businesses, primarily because it's so visual. So it's a great idea to use a few product photos and then mix these up with videos and images that complement what you're selling.

What is the weakness of drop shipping?

Dropshipping isn't simple. It has challenges like suppliers, order processing, returns, customer support, website maintenance, attracting online traffic, and tracking inventory changes and shipping prices with manufacturers, all requiring time.