As e-commerce spreads in popularity, brands and online stores are looking to keep adding more products to their catalogs. And many are starting to eye a low-barrier, low-risk e-commerce business model to test and sell new products: dropshipping.
Dropshipping works by letting entrepreneurs, e-commerce stores, and even companies outsource all aspects of their order fulfillment to a third party. An example of which is Amazon. The company, through its FBA services, acts as the drop shipper.
Through dropshipping, businesses can sell products and ship them to customers without ever laying eyes on the product. Also, dropship products aren't their own, in-house creation. They purchase inventory from a third-party supplier—either a manufacturer or wholesaler.
Also, if you can do the above without going through any middlemen, you can offer products at better markups and profit margins.
This is a good place to start. One of the most popular platforms is Oberlo, a Shopify-exclusive service provider that lets you browse through the catalogs of AliExpress suppliers and choose the products you want to claim as your own.
When a new order comes in from a customer, companies like Oberlo automatically order that product from your supplier.
While the average dropship storefront might look like a relatively cheap Shopify site, some major companies also quietly sell products by dropshipping.
The discount e-commerce giant Rue Gilt Groupe, which owns the e-commerce sites Rue La La and Gilt, has an in-house drop shipping team, and solicits potential dropship suppliers through an online form.
The upsides of being a dropshipper revolves around it being an endeavor with less hassle.
For small business owners or existing brands trying to expand, dropshipping can be a low-cost market research method:
That means you can put a new product onto the market without having to sink a lot of money into it.
This lets brands get more flexible in their product selection. Maybe you’re a fashion brand and you want to test out the baby category, but you aren’t sure it’s going to stick. Offering a few dropshipped products is a cheap way to evaluate whether it might work.
Plenty of companies—especially fashion brands—are constantly worried that they'll have too much stock at the end of a season.
Dropshipping eliminates these concerns. With dropshipping, you buy products after each order comes in. You won’t ever end a season with inventory you don’t know what to do with, which is highly beneficial for small store owners.
There are two major dropshipping models. You can either sell specific products that a manufacturer on AliExpress (an Alibaba service) has already created, or you can sign up with a print-on-demand service that lets you create a custom design.
T-shirts, mugs, and so on are often made through print-on-demand, and they are highly customizable. The benefit of this approach is that you can quickly dispatch products that jump on trending memes or news events.
If a celebrity quote has gone viral, for instance, dropshipping lets you offer products that feel relevant to the conversation. You also don’t have to worry about what happens when the trend fades.
At the end of the day, you won’t have any excess inventory on hand to worry about.
Meanwhile, here are the cons of dropshipping.
Shopify is riddled with dropship companies that offer a vast array of products to customers, with no discernible theme or branding to them. That sense of incoherence and clutter can make it hard for a company to build an identity as a brand.
The better path is to curate dropship products that align with each other in some way. An example of a niche dropshipping store is Blinds.com, a million-dollar site that offers a wide selection of a relatively niche product—blinds—all fulfilled through dropshipping.
Typically, traditional retail businesses or big e-commerce brands will need to buy massive amounts of products ahead of a shopping season, then keep that inventory on-hand until it sells. When you dropship, by contrast, you are able to buy stock as customers order it.
That flexibility is why dropshipping involves such low upfront costs, but the downside is that you miss out on discounts for wholesale prices. Big retailers that place massive upfront orders are able to negotiate for price reductions because of their purchase size.
With dropshipping, you are much more likely to be paying the regular sticker price from your suppliers.
Because they aren’t your own products, dropshipping means you lose control over the supply chain—namely the quality and shipping of your products. The end result is you'll probably see more customer service inquiries than you had previously.
If you push through with a dropshipping business model, having knowledgeable customer support teams on hand who can talk shoppers through questions about shipping, product quality, and returns is essential.
This will ensure that your brand remains as strong and beloved as your in-house products.
Chatdesk supplies real fans of each product who can answer customer inquiries in a live chat or in social media comments.