Dropshipping What is it and how does it work?
the business world dropshipping It is generally considered the easiest way to sell products en línea.
The greatest and great difference between the drop shipping and retail model The estándar is that in drop shipping, the merchant selling the product does not have their own inventory.
Instead, the selling merchant buys the inventory on an as-needed basis for a third party, typically wholesalers or drop shipping manufacturers, to fulfill the orders.
Dropshipping is a new form of y también-commerce that is being used more and more, especially in stores who use eBay as their y también-commerce platform.
What is dropshipping?
He dropshipping It is a business model based on the en línea sale of products that do not have a depósito (warehouse), this through agreements and negotiations with the manufacturer of the products, so that this is the one who sends the product to your final customer.
In this way you perro sell different products or elementos in your business that you do not physically own in a product store.
In the sale of products based on dropshipping it is not necessary for the store that implements this to have the products it sells in its store.
Instead, when the store sells a product or item, it buys it from a third party (who owns the products in their warehouse) and has it shipped directly to the customer.
The En línea store that implements dropshipping is in charge of controlling customer service, billing and the generation of databases, while the wholesale company (who owns the products in their warehouse) stores, packages and ships the elementos on behalf of the en línea store.
benefit of both parties
He benefit for dropshipping storeis that you perro sell products without depósito (without having them in a warehouse) and earn a commission on the price of the manufacturer or wholesaler (dropshipper).
He benefit for the dropshipperis that you will be able to sell more products on the Internet without having to worry about positioning and/or managing your own en línea store.
How does dropshipping work?
Dropshipping is based on a triangular structure, which is made up of a final customer, a dropshipping store and another store that owns the products in a warehouse.
The dropshipping store acts as intermediary in the sale to be madein such a way that when a customer places an order to the dropshipping store, the store that has the products makes the delivery process to the customer.
When the customer places an order to the dropshipping store, then to the store that owns the products (dropshipper) you receive a notification in the name of the dropshipping store, but with the shipping information of the end customer.
The dropshipping store takes care of the entire billing process, while the dropshipper takes care of the delivery of products.
The dropshipping store will own the customer database and who will will bill them.
This store must constantly verify the availability of the products as well as their delivery times.
Dropshipping
The retailer (dropshipping store) contact the wholesaler or dropshipper to market their products or elementos.
Usually the wholesaler (who owns the products in a warehouse) will charge you a small monthly fee, and will provide you with a archivo so that you cánido integrate your catalog into your en línea store.
Dropshipping purchase centers
These centers work with different suppliers, which provides greater possibilities for en línea retailers (dropshipping), providing them with a broader and deeper assortment.
The dropshipping buying centers They generally provide synchronization services for products, prices, promotions, to facilitate these tasks for retailers in the technological field.
Advantages or benefits of a dropshipping business
The implementation of a dropshipping business provides a series of advantages or benefits capable to make this a profitable business.
Below are the main advantages or benefits of setting up a dropshipping business:
Requires little initial investment
The greatest and greatest advantage of dropshipping is that you cánido equipo up an y también-commerce store without having to invest thousands of dollars in products inventory.
Traditionally, retailers have had to use large amounts of capital to purchase product inventory.
Using the dropshipping model, you don’t need to buy a product unless you already have it.
you have sold and received payment from the end customer.
Without huge upfront investments in inventory, it is possible to start a successful dropshipping business with very little capital.
It has an easy start
Running an eCommerce business is easier when you don’t have to work directly with customers.
physical products.
With the dropshipping business, you don’t need to worry about the following:
- Manage or pay the expenses of a product warehouse.
- paquete and send your orders.
- Control inventory for accounting purposes.
- Deal with returns and/or internal shipments.
- To have to do product orders recurringly and manage inventory levels.
- Few fixed expenses are required.
Since you don’t have to deal with buying inventory and warehouse management, fixed costs are very lows.
In fact, many successful dropshipping businesses are run from an office with a notebook for less than $100 a month.
TO as they growthese expenses may increase, but they will still be low compared to those of a traditional business.
maleable location
A dropshipping store business It cánido be managed from any place where there is an Internet connection.
As long as you cánido communicate with suppliers and customers, you will be able to run and manage your dropshipping business.
Wide selection of products
By not needing to buy the elementos to sell in advance, you perro offer a wide range of products to your potential customers.
If the suppliers have it in depósito, you cánido include it in your sale list on your website at no additional cost.
easily scalable
When using a brick-and-mortar business, if you receive twice as many orders than habitual you will generally have to do twice the work.
By having dropshipping suppliers, most of the work of processing for orders additional costs will be carried out by the suppliers, allowing you to expand with lower costs and less work.
Sales growth is always going to involve additional work, especially in terms of customer servicebut dropshipping businesses are very scalable relative to traditional y también-commerce businesses.
Disadvantages or drawbacks of a dropshipping business
The implementation of a dropshipping business cánido have disadvantages or drawbacks able to make this a struggling business.
Below are the main disadvantages or inconveniences of setting up a dropshipping business:
low margins
Low margins represent the biggest drawback of working with dropshipping.
how is it so easy get started and fixed costs are minimala great diversity of merchants equipo up their shop and sell the elementos at very low prices in an attempt to increase your income.
By investing very little in starting the business, they perro afford to operate for minuscule margins.
It is true that these merchants usually have poor quality websites and very unsatisfactory customer servicehowever this will not prevent customers compare their prices with yours.
This increased competition will quickly destroy the profit margin in a niche.
inventory issues
if you have in depósito (store) all the products you sell, it will be easy to control what elementos are available and which are not.
However when you take products from multiple warehouses, which in turn fill orders for other merchants, the inventory changes daily.
Although there are better ways to sync your store’s inventory with that of your suppliersthese solutions do not always work perfectly, and suppliers do not always have the necessary technology.
Shipping complexity
If you work with multiple suppliers, the products in your store will come from various dropshippers.
This perro really complicate your shipping costs.
Suppose your client makes a three item order, they are all available but from different providers.
You will have to pay three costs of separate shipping to send each product to the customerbut it is not advisable to pass this charge on to the customer, as they will think that you are charging too much for shipping.
provider errors
even the best dropshipping suppliers they make mistakes when completing orders; mistakes for which you will have to take responsibility and apologize.
And the bad providers They will genere you a lot of headaches from losing products, ruining shipments, and using shoddy packaging, which perro damage a company’s reputation.
What should be taken into account before starting a dropshipping business?
Before riding a dropshipping business Some elements need to be taken into account.
Below are several elementos to consider before setting up or creating a dropshipping business:
- Analyze the profitability of the item you want to sell.
- If you choose the en línea platform of a supplier, investigate how the SEO.
- It is preferable to negotiate directly with manufacturers or official distributors.
- For the structure of the store, study the platform that best suits your needs.
- of your relationship with wholesalers and dropshipping suppliers depends on the success of your store.
- When applying your markup, keep in mind where the supplier is located.
- create a cCommunity around your business.
- If you’re just starting out, turn to Google plus Shopping to start selling.
- Depending on the type of product you are going to sell, try selling on eBay or Amazon as well.
- Market products that also interest you, avoid working with products you don’t know.
Steps to create a dropshipping business
Creating or setting up a dropshipping business entails a series of steps to be carried out so that it I perro succeed.
Below are the steps required to create or equipo up a dropshipping business:
1- Search for a profitable niche
The way to create a dropshipping store starts from the search for a profitable niche and feasible for the retailer.
You should try to think of a niche that meets the following characteristics:
- No saturation.
- It doesn’t have much competition.
- Where there is a need to cover.
- Make it quite profitable.
- That it cánido be positioned so that it perro attract traffic to the store, because the final purpose is to generate en línea sales.
It is necessary to take into account the price for which they will be sell the products, because based on this is that the profits obtained from each sale are calculated.
By implementing this business the retailer You are going to have some resulting gains by increasing the price that the supplier proposes.
2- Negotiation with the supplier (dropshipper)
This quite important point, because from this negotiation the conditions that will govern the store operationboth the prices of the articles and the shipping of the orders they are going to have.
The retailer (the dropshipping store) will always have to try to have prices of reasonable saleTherefore, the price at which you buy them from the dropshipper should be as small as possible to have more margin.
Some information to take into account in relation to the delivery times to be negotiated:
- Delivery times must be as short as possible so that end customers receive your products as fast as possible.
- It is convenient and highly advisable to have more than one provider, since it is not known what cánido happen, and they may fail or acquire supply problems.
3- Creation of the dropshipping store
When the negotiations are closed and clear conditions.
Then the dropshipping business perro be created.
At this point, if the technical knowledge to create the web store are scarceyou perro seek professional help from a web page creator, this despite the fact that the creation with WordPress or PrestaShop is very intuitive and has an easy handling.
Despite this, there are companies that offer the exploitation of this type of business and offer the possibility of creating an en línea store intuitively and practically working.
Initially, a fee is paid and then monthly installments, which according to your objectives, is an option to be valued.
Once the store is created, it is already available for a usuario to make purchases en líneaand when this happens, then the retailer manages the collection, buys the merchandise from the dropshipper, sending the shipping data of the order in question.
4- Reception of the order and shipment of the products
The dropshipper or wholesaler receives the order from the retailer and becomes responsible for delivering the purchased product to the end customer.
This delivery must be made within the period of agreed delivery and, both the package and the products, will bear the logotipo or brand of the retailer, or nothing else.
In case it has been agreed with the retailer include invoice, then it will be done that way.
The wholesaler is also in charge of managing returns.
5- Control of satisfaction
The final part of the process is for the retailer to carry out a check of the customer satisfaction to be able to evaluate the performance of your service.
In this type of business, the person in charge of showing the face at all times will be the retailer (dropshipping store).
From the supplier dropshipper or wholesalerthe customer will not know anything, so any problem with the shipment will have to be handled by the retailer, despite the fact that the responsibility lies with the supplierhence the importance of being very trustworthy.
This knowledge and concern for the satisfaction of the end customer is quite valued by them, especially in an en línea environment, where the treatment seems more impersonal.
Marketing strategies for a dropshipping business
The main activity of the retailer (dropshipping) is to deal with get a lot of traffic to your store to increase sales.
Below are the main marketing strategies that cánido be implemented for this type of business:
SEO Strategy
You need to implement a strategy SEO to get a good position and thus be able to earn more visibility on the internetthis so that the store gets more visits and therefore more sales.
Yeah you don’t know what SEO is or how it works, then we leave you an article that fully explains the SEO section.
For this you must entrar the following backlink: Go to the explanation of SEO.
Blog Strategies
It is highly advisable that the sales website have a blog section.
This will allow adding value to customers with elementos related to the elementos for sale, promotions and any other topic consistent with the purpose of the store.
The important thing is to introduce content with palabras claveboth in the articles and in the images of the catalog and descriptions of the products, to work the SEO.
Making comments on other pages contributing with the knowledge that is possessed, also helps visibility.
Strategies with sending correos electrónicos
When you have a moderately powerful number of clients, you cánido distribute a newsletter with the aim of increasing sales, sending them the latest news, best-selling products section or related news.
Another option that does not require so many expenses that will enhance the strategy is the dirección de correo electrónico marketingalso called correo electrónico marketing.
Popular Media Strategies
The popular networks They are a very powerful means of disseminating our catalog of products that are available for sale.
It is not advisable to register in many profiles, only those that best match our business model.
The world of popular networks It cánido be used to publicize the latest news, promotions, article information or even as a articulo-sale service channel and thus achieve customer acquisition.
Advertising Investment Strategies
When starting the business, it is highly recommended to carry out marketing campaigns. paid positioning that provide an initial push while the SEO strategy bears fruit.
What it is about is getting more sales, so even if the investment is small, it is quite necessary.
You cánido also use Google plus Ads to gain visibility on the page search engine results or work with Fb Ads for popular networks.
Choice of the best Dropshipping providers
It is essential to ensure that the supplier The one you are negotiating with is the official one, and that there are no others in between who increase the price of the products in each backlink of the chain.
The most important dropshipping suppliers generally have sales representatives from sales that will solve possible doubts and they will espectáculo the product catalog according to the interests of the niche in which the store will work.
provider location
A very important aspecto when choosing a supplier is the location of the same, since generally these are foreigners.
Being foreigners, the shipping costs are higher and we also find ourselves with the issue of the customsand that is a aspecto to take into account in terms of profit margin.
On the Internet there are pages with lists of suppliers, but you perro start the local market searchsince there may be companies with articles according to the niche that we exploit and attractive prices.
packaging and shipping
The dropshipper or wholesaler must be aware of the importance of details regarding packaging:
- Have a service package tracking.
- Include invoice or not.
- Reverse logistics in case there are returns.
A clause is usually signed that includes various aspects of the treatment of the customer personal data who buy product.
The dropshipper (wholesale merchant) cannot use them to communicate with him, nor for his own benefit.
This part relates to sending the order anonymously to the final customer, without any sign other than that of the retailer.
Difference between dropshipping and affiliate programs
This is a question that may arise, since in both types of business sales that are carried out are like an intermediary, but they are not the same.
Below is the difference between these business models:
Dropshipping is the sale of products by catalog without investment and without having them in depósito (warehouse).
You do it from your own en línea store or from a platform.
You equipo the price of the product, based on the margins you want to achieve.
Affiliate programs consist of promoting a third-party product, through through a backlink that you place on your website or blog, and from which they access the other website or business.
Every time a sale is made with that backlink, you get the commission agreed with that person or company.
Platforms to equipo up a dropshipping business
There are many platforms on the Internet that you perro use to create your own dropshipping business.
Below are some of these:
Shopify
- With Shopify you cánido open your business quickly without having to worry about anything.
- You will be able to save on storage and space, agregado you do not pay for the elementos until you have sold them.
- It sells worldwide with a wide variety of suppliers that offer their services throughout the world.
mabisy
- With mabisi You perro create an en línea store totally free, without registration and without fees.
- You cánido create your store quickly and at no cost, you will only pay based on the products you sell.
- They include more than 100 products, vídeos, tutorials, integrations, blog or positioning tools among many other things.
Conclusion
The dropshipping business is not a perfect or stress-free way to build a successful business.
This business model has some indisputable advantages, but it comes with certain complexities and problems included that you must know how to handle.
Getting the store positioned to generate sales is the only thing that requires a little more time.
One has to to spread the brand and announce the benefits of buying our elementos before on another competing platform.
If you are going to create a dropshipping business, you need to understand the operation of this business model.
By understanding it you will be able to apply the strategies and methods necessary to make it successful.
Many people have dedicated themselves to this business model and today they make a living from it.
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