What is dropshipping?

what is dropshipping

E-commerce is the next “Big Thing”, even if it has been around since the start of the internet, the current reality of things is that nowadays E-commerce is more accessible than it ever was, right now, everyone, with time, effort, and dedication, can start an online business without requiring a team of programmers to set up a website and administrate the sales of a product.

What’s even better, there are methods where you could run your store without having to worry a single day for storage or even product stock. This method is called dropshipping, and it simply is an order fulfillment method that doesn’t require a business to keep products in stock; instead, your store will sell the product passing the order to a third-party supplier, who then ships the order to the customer.

dropship definition

Before we get to details let’s look closer to the word that defines this method “dropshipping”, even if it seems to be a made-up buzz word, dropshipping has been around since 1926 (almost 60 years before the creation of the internet). The Merriam-Webster dictionary defines “drop-ship” as: “to ship (goods) from a manufacturer or wholesaler directly to a customer instead of to the retailer who took the order”; or on simpler terms “to ship goods from a supplier directly to a customer”

Now that you know what dropshipping is, let us talk about what it is in terms of a business scheme. Currently, around 33% of online stores use dropshipping as a fulfillment method, the “why” behind its use is simple: For stores, it represents a hands-off process where the merchant doesn’t have to order any inventory or fulfill the orders in any way since the third-party supplier will take care of the product itself. Additionally, this method is great for entrepreneurs because it won’t demand as much investment compared to the traditional retail model.

With dropshipping, your first inversion will be cut by a lot since you won’t have to open a brick-and-mortar store, pay overhead, and stock products; instead, you can open an online store using a free CMS service (like WordPress) and buy wholesale from suppliers who already have products and warehouse space.

Why choose dropshipping as your business method

Dropshipping can sound like the ultimate solution to become instantly rich, and sure, it seems like easy money, but the reality is that nothing (legal) will make you an instant millionaire unless you hit a jackpot on a casino.

At the end of the day dropshipping is just a form of a sustainable business model that is worth checking out. Below we will give you a list of reasons why you should choose dropshipping as your business method.

Dropshipping is easy to start

As we have mentioned, you don’t need to be a graphic designer or a professional programmer to start an online business, you just need some time to learn the basics about managing a website and running an online business to get started, the rest you can learn is as you go.

Also, dropshipping requires very little as you start since most of the process will be done by a third-member party, you just need to focus on the marketing and publicity aspects of the business.

Dropshipping is a low capital business

Since you are cutting a lot on logistics, maintenance, and infrastructure costs, you won’t need a lot of capital to start your own business; and as you start, you won’t need to make any high-level investments, also, even as you grow, the cost will be fairly low compared to traditional business expenses.

A flexible and easy to manage business

This method will allow you to start your own business and be your own boss, which means that you will be the one setting the work hours and the workplace. Since e-commerce is a form of business that can be done from everywhere as long as you have a device with an internet connection work can be done from the comfort of your home on your laptop or pc.

Additionally, dropshipping will also give you a lot of room to make decisions that work for you and your business, for example, you could add new products whenever you want, and you can even adjust your strategies as much as your business requires to.

Affiliate marketing vs Dropshipping

Let’s compare affiliate marketing vs dropshipping. Another form of sustainable e-commerce is affiliate marketing, in simple words, affiliate marketing is creating an alliance with a company that offers a product or a service, then, you (the affiliate) will promote the company’s product in your website. With this method, someone can make a profit based on a goal that could be referring your website’s traffic to the company’s website, or by getting the clients to complete an action like, for example, buying a good from the store.

Of course, there are a lot of similarities between affiliate marketing and dropshipping, for example, they are both low-cost businesses since everything can be set up online without requiring to be a professional, these models are also low-risk business models since you won’t need to invest incredible amounts of capital just to start.

Also, they both require similar skill sets as you will need to focus your attention on creating the marketing and publicity strategies to make the customers consume the product that you (or the company) are selling.

But now, let’s focus on the differences between affiliate marketing and dropshipping.

Taking care of clients

Dealing with the customer is the most delicate part of any business, as they are what sustains them. In the case of affiliate marketing, you won’t need to make any interaction with the customer, meaning that you won’t be responsible if something goes wrong in other people’s stores. But the case is the contrary with dropshipping since you will be the one in contact with the client. For starters, this should not be a problem, but this is something to take into consideration, especially if you plan to scale up and run a big online business.

The cost of the product

With affiliate marketing, you won’t have any control over the costs of the products offered, so, you will rely only on commission. On the other hand, dropshipping gives you total control of your profits, since you will be the one making the calls regarding the final price of the product; however, this can make things go wrong quickly if, for some mistake, you make a price too low or too high.

Network support

One of the most important differences between dropshipping and affiliate marketing is network support. In the case of dropshipping, you will certainly have more freedom to choose what products you offer in your store. You could even mix your products according to your target markets. But this freedom comes with a cost, and it is that you won’t have anyone backing you up (in terms of a network or a big company name). So, this is a “you are on your own out there” kind of situation.

On the other hand, affiliate marketing gives you a more centered kind of business model, where you won’t have much freedom to choose the products (compared to dropshipping), but you will have the advantage of having an affiliate network that will help (and advice you) with the best ways to run your business model for free since you are their affiliate.

At the end of the day, we recommend that you should choose the model that adapts better to the type of business that you want to create.