How Dropshipping Works? Should you Start Dropshipping in 2021

Q: Is Dropshipping a legitimate business?

Dropshipping is merely a fulfilment model, one used by many global retailers, and is perfectly legal. Like with any business, satisfying customer expectations and building a brand that resonates with the right audience is still key to long-term success.

Ecommerce 🛒

Parnas Ghosh

May 21, 2021 — 7 min read

Many of you must have heard the word “Dropshipping”. Your friends must have been telling you again and again. Many other people must be talking about it around you. But you have no idea what they were talking about. So let's face it.

According to a report 27% of online retailers have adopted dropshipping. We will tell you about dropshipping which can be an amazing business opportunity for you. If not, it will still be better to know about this term. Before getting directly to how dropshipping works, we will be knowing what it is.

What is Dropshipping Business?
How Dropshipping Works?
Why Customers Don’t Go Directly To “W”?
Benefits Of Running A Dropshipping Business
The Downside
Should You start Dropshipping in 2020?

What is Dropshipping Business?

Dropshipping is a supply chain management system. In dropshipping, the retailer does not necessarily keep the stock of the good every time. The product is delivered to the customer directly from the wholesaler. People say it is investment free and you can make so much money from it. Yes, it is true, but it cannot give long-term success. There are many apps and websites available which can let you earn for free. But, if they are free, then there must be a big crowd of people who are doing it. And very few unique niches left when there is that much competition. So, I would suggest you create a website and raise your own business to the sky.

How Dropshipping Works?

Dropshipping is not that tough to understand that you think you it is. Take an example of C (customer), R (retailer) and W (wholesaler). C visits the website of R, which is R.com. C sees an amazing watch for Rs. 1000 and he immediately click at the “buy now” option. After filling details, he gets an email that the watch will be shipped in the next 4 or 5 days. Now, let’s go to R. R receives the order and the payment. He just informs about it to W and pays him Rs. 600 for that watch. W gets to know about the order C just made. He prepares the watch to supply it to C. C gets his watch, R gets his profit and W gets his money too. Everyone is happy. Do you see? R is making money out of nothing. He just took C’s money and bought the watch from W and made a profit. This is what Dropshipping is. But remember, it is not that simple as it seems in the example above. You have to work your butts off in making the strategy to make a profit.

Why Customers Don’t Go Directly To “W”?

I know you must be thinking how stupid that customer is. Customers can directly go to wholesalers' websites and order directly from there and get an amazing discount. But just imagine, you are in a Facebook group of around 6,00,000 people. Many people post good reviews of the products the admin posts in the group or on his website. Will you go for this man? Or will you directly go to some Chinese wholesaler website and buy from it. You know nothing about that Chinese company. So definitely, it will be so insane to buy from that website. However, on the other hand, you buy that product from that group’s admin. In case, there is something wrong, you can contact him or post in the group at least. But there will be no one to hear you out on that wholesaler's website. That is why people buy from the retailers rather than buying directly from the wholesaler.

Benefits Of Running A Dropshipping Business

There are many advantages to the dropshipping business. Some main of them are:

1. You can run your business from anywhere in the world. All you have to have is your laptop, your phone and internet access.

2. It is a mobile business because you don’t have to worry about inventory and warehouse management. So, you don’t have to spend money on those investments.

3. There will be no headache for the leftover stock as you don’t own any stock at all.

4. You can easily try a new product without buying it if you want to. All you have to find is the supplier.

5. The shipping takes less time as the product is shipped directly from the wholesaler to the customer. Speaking of which, the retailer also saves so much time as they do not have to manage the products physically.

The Downside

1. A lot of competition makes it difficult to sell a product. Even if your quality is good, you can’t expect too many customers. Unless you are selling a unique product.

2. You might have to suffer the low margin. As the supplier is doing most of the work, they may ask you for much more money than you expected.

3. You need to have good networks. Although there are many dropshipping suppliers available online, you can’t believe what they are saying.

4. There is no point in your dropshipping business unless you have a good brand identity. If no one knows you, no one will come to you. So you will have to work on building a brand.

5. You can experience times when your supplier will just raise both hands and say I don’t have the stock. In those cases, you can't say anything but find other suppliers.

Should You start Dropshipping in 2020?

Yes, you can start dropshiping on 2020. But the competition is much higher than before. Hence, If you want to do a dropshipping business, please do deep research on this topic first. Furthermore, meet people who are already doing it and also those who have failed in it. Also do the product research and find best products for dropshipping in 2020. Don’t think it's easy to do this. Moreover, if you want to play it safe, go for free ways to do it. Go for Shopify 14 days free trial and sign up to Oberlo. This would give you a basic idea of how it works. But do not expect much from it. If you fail to make money from this method, that doesn’t mean it doesn’t work. Try building a brand or a Facebook page with many followers.

Conclusion

The dropshipping business can be started with very little investment. But that doesn’t make it is an easy job. Every work in this world is equally hard. Only an intelligent person makes it easy to do. And intelligence comes from experience. Do dropshipping but also expect failure and loss from it. Learn to make a smart move in this field. Moreover, always have a backup in this business as your supplier can take his step back anytime.

This was our overview of dropshipping which also covered how dropshipping works.Share this post with all those friends who always keep annoying you by telling about easy business ideas. And let them know what a real business is?

FAQs

How do Dropshippers make money?

Dropshipping businesses act as product curators, selecting the right mix of products to market to customers. Remember, marketing is a cost you incur, in both time and money, helping potential customers find, evaluate, and buy the right product.

How much do I need to invest to start Dropshipping?

Though it's hard to predict the exact costs for any individual business, there are a few items every dropshipping business will need to spend money on in order to get started.

Is Dropshipping a legitimate business?

Dropshipping is merely a fulfillment model, one used by many global retailers, and is perfectly legal. Like with any business, satisfying customer expectations and building a brand that resonates with the right audience is still key to long-term success.