The typical process can be summarized in three steps. It begins when your customer purchases products from your online store. Subsequently, as the seller, you order those particular products from the relevant supplier, who will then send the products to the customer directly. By effectively acting as a middleman in the transaction, you profit by marking up your products.

   5 benefits of dropshipping

1) An overall low-cost business idea
Usually, when people talk about low-cost business ideas, they intrinsically link those ideas with low startup costs. However, this is not the case for dropshipping. In dropshipping, low-cost means lower investment in almost every aspect of the business. Not only does it require low capital to start but it also involves very low or virtually no inventory costs. As a result, it comes with a relatively low overhead too.

2) Improved flexibility

Dropshipping provides a flexible way to start and operate a scalable business from anywhere anytime, making it easier to set up, and easier to grow. This flexibility is reflected in almost all aspects of the business as it allows the freedom to choose exactly which products to include, niche or not. You can also run everything through automation if you are busy with other responsibilities or would simply like to take a break.

3) Low barrier of entry
With all the above-listed benefits, you probably realize why dropshipping has generated so much hype over the past years and continues to thrive in 2022. Yes, simply put, the barrier of entry for dropshipping is low. The most important underlying message for a new seller who wants to launch a new online business on ecommerce platforms and social media is the ease in which they can go ahead and test out various business ideas!

Rome was not built in a day, and neither was a business! Many new business ideas may be subject to experimentation and refinement before they work. Hence, dropshipping’s low barrier of entry means there’s more room and opportunity for new entrepreneurs.

4) A great side income business idea
Dropshipping is easy to manage due to its flexibility and lack of inventory. All these make it an excellent side income business idea, which allows you to gradually build it up without the need to leave your existing bread-and-butter job. Better still, it can serve as a great passive income source as well, since it runs 24 hours a day, even while you’re sleeping.

5) Lower risks
Since dropshipping does not require your full daily attention, you are free to focus on other responsibilities. This usually means reduced risks should anything go wrong. While life can be full of surprises, to start a business and be aware of every likelihood is impractical. So a lower-risk business idea may be the way to go long-term.

4 Challenges of dropshipping
1) Shipping woes
When it comes to shipping arrangements for dropshipping companies, the typical “good value for money” shipping partner selection criteria may not be at all applicable. This is due to the complexity of the shipping arrangement once you choose to work with multiple suppliers. For instance, if your customer places an order for goods from three separate suppliers, your shipping fee becomes payable to three suppliers instead of one.

As well as complicating the arrangement, higher costs are inevitable. In addition, the worldwide on-off lockdown situation due to the coronavirus severely dented the freight and shipping industry, adding longer shipping times on top of higher costs.

2) Lack of control
The most distinctive feature of dropshipping is that it allows your suppliers to ship goods directly to your customers. However, this can also be a mixed blessing. Because the bulk of your business activities are being handled by a third party, your overall control may be limited. This can result in quality issues and a lack of product customization — unless you are ready to pay higher fees — which is likely to hike up your product’s price tag. Perhaps most critically, this can cause customer retention issues because quality control is crucial to customer loyalty.

3) Difficult customer support
As discussed above, a lack of control in the product deliverance process can result in customer retention issues. The main reason for this is that it can be difficult to provide customer service to your customers, not to mention giving them sufficient customer support if they encounter product quality or shipping issues.

4) Highly competitive
According to E-DSS.org, about 27% of web retailers use dropshipping as their main order fulfillment method. Additionally, between 2016-2018, the total dropshipping transactions on eBay grew by a whopping 146%. In terms of market growth prediction, the dropshipping market is forecasted to hit around US$ 591.77 billion by 2027, based on a 2019 dropshipping market valuation of US $ 162.44 billion. Finally, dropshipping’s CAGR is expected to grow 18.3% between 2020 and 2027.

The popularity of dropshipping inevitably makes it a highly competitive field. As such, dropshippers must prepare significant resources, unique products, and specialized categories from reliable manufacturers to stand out from the crowd. If they don’t, a price war with the many preexisting online retailers relying on third-party suppliers is likely. Needless to say, the result of such unhealthy competition is a lower profit margin as well as additional effort, time, and resources.

That shouldn’t put you off from trying, however, as the above growth prediction coupled with the many other successful dropshippers bodes well for anyone determined enough to gain a portion of their market share. Read on to see how you can overcome the challenges listed above.

Is dropshipping worth it?

After reading through the pros and cons of dropshipping above, let’s do a quick assessment on whether dropshipping is worth it for you. In essence, the answer to this question is very much dependent on what your basic goals are in the first place.

Are you a beginner looking to start something new in ecommerce and want to learn the ropes of online retail to make some decent cash on the side? If so, the assessment for starting a dropshipping business would be comparative to a new startup business evaluation.

The seven major fears that stop many entrepreneurial hopefuls from starting out, as Forbes describes, include financial limitations, inexperience, fear of failure, and current responsibilities. The nature of dropshipping unwittingly solves these apprehensions, and therefore, it is something worth your attention and exploration.

On the other hand, Google Trends statistics revealed a solid truth: Google searches for the keyword “dropshipping” have been growing for the past five years and continues on an upward trend in 2022. The popularity of dropshipping means that it won’t be difficult for you to find plenty of support, resources, and wholesalers to whom you can reach out.

Of course, you may also weigh the advantages and disadvantages based on personal efforts and how much time you will need to put in. This will depend on your business goals. After all, we reap what we sow, and all successful businesses require hard work and effort — no matter how easy it is to get started.

5 final tips to make fewer mistakes
Whether you want to start a dropshipping business or not, here are some important takeaways to save you some time and effort in your business journey.

1) Shipping issues

As previously noted, shipping can be a pain point in dropshipping. To minimize potential issues and maximize your user experience, you should do the following:

a) Know your shipping process inside out

You should use and experience the shipping process yourself. The goal is to know how long shipping takes and how suppliers are likely to respond throughout the process. This way, you can provide more accurate answers to your customers.

b) Set a reasonable shipping policy

Once you understand the shipping process well, you should set a clear shipping policy. This should include shipping options (categorizing by delivery timeframe, for example) and various shipping rates (based on a real-time case or dependent on product type, or even based on a flat rate). The key here is to balance a policy that is practical as well as attractive to your customers.

2) Take charge as much as possible

Early on, we discussed how powerless you may be when it comes to the majority of arrangements being in the hands of your suppliers. However, this issue can be alleviated by:

a) Ensuring proper management of inventory statuses across multiple suppliers

Schedule regular checkups on the availability of stock across all of your suppliers in case real-time stock data feeds are not supported. This does not mean merely having multiple suppliers but having a few suppliers with overlapping inventory to avoid a potential out-of-stock situation.

b) Defining a fulfillment method

How much control you have over your dropshipping business is highly relevant to the way you route your orders. Typically, you have the option to route your orders according to stock availability, the nearest location, or simply based on your preferred suppliers and price. You can plan your order fulfillment strategy depending on the stock availability management and shipping policy you established earlier.

3) Devoting time to uniqueness

Dropshipping is known to be a fiercely competitive market, so devote time to find a way that makes your product listings unique and your dropshipping niche. Then it’s a case of listing enough products to discover which are your own superstar products. Additionally, while looking for distinctive and niche products, don’t forget one point that cannot be emphasized enough: only source products from reliable sources.

4) Taking care of your customers

If you have adequately implemented the above-mentioned tips, you should by now know how to handle and reply to your customers’ inquiries. If you have enough resources, you can utilize a live chat system to ensure prompt support. Meanwhile, to whatever extent is possible, you may want to think about providing “free” upgrade options for your customers from time to time should they encounter shipping issues or out-of-stock items in order to cultivate good relationships.

5) Focus on marketing

Apart from addressing all the major issues in dropshipping, you should also focus on sales and marketing. Pay attention to wholesale prices and retail prices to ensure yours are in line with the market. Focus on marketing to attract customers to purchase your goods online. There are multiple online marketing tools that you should learn, such as search engine optimization (SEO) and online advertising platforms to place your ads. Facebook ads, YouTube ads, and Instagram ads are common social media marketing (SMM) platforms that you should consider adding to your dropshipping business to boost its publicity.

Where to do dropshipping ?
Did you know? The term “dropshipping” became a widely familiar term in 2006 after AliExpress and other Chinese ecommerce stores sprang up across the United States at that time.

Today, AliExpress remains one of the most popular platforms among dropshipping suppliers, as well for sellers wanting to set up stores to sell goods, similar to Amazon or eBay.

As for the difference between AliExpress versus Alibaba.com, and which one you should choose, the answer is relatively straightforward: AliExpress is positioned as a B2C marketplace, whereas Alibaba is a B2B marketplace. In other words, the typical buyers on AliExpress are consumers and resellers, while the buyers on Alibaba.com are generally businesses. Alibaba.com is hence a great go-to place for anyone looking for manufacturers, exporters, trading companies, and wholesalers.

In view of its wholesale-focus direction, naturally, Alibaba.com can provide lower prices as well as product and branding customization. Tailored-made products in line with your brand and vision are completely possible on Alibaba.com as you will work directly with the manufacturers, offering a plethora of products to buyers. These span ready-made products as well as various raw materials and customizable products from a wide variety of international products courtesy of sellers from more than 200 countries and territories. You don’t need to worry about getting lost amid a sea of options, either, thanks to the request for quotation (RFQ) function on Alibaba.com, allowing you to request a quote for a product with exact specifications. This way, sellers can reach out to you with offers so that you can focus on negotiations with the right partners rather than spending time sourcing and contacting sellers.

 Additional resources
There are many ways to get started and gain your own foothold in the online business world, and dropshipping is undoubtedly a method worth exploring if you are looking for a quick setup and easy start. Hopefully, this article has helped inform how you should best start the online business you long for.