Start Your Ecommerce Dropshipping Business With Our Comprehensive Guide

September 19, 2022

e-Commerce

The traditional method of handling everything in-house was not successful for all business owners, especially for small businesses; that’s when the concept of ecommerce drop-shipping arose. Ecommerce Drop-shipping is a business model that saves many retail owners from recurring losses due to insufficient stock or excess inventory in their warehouse, even when the demand for the product is less.

Maybe you, too, are a business owner who is looking to start his eCommerce drop-shipping business; however, the idea is excellent to increase productivity and handle all the necessary operations while expanding your business side-by-side, as in this business model, you just need to sell the product without keeping the inventory.

According to E-DSS.org, around 27% of the retailers worldwide have adopted drop shipping which seems to them a more accessible and more profitable way to survive in the long run as a retailer without facing the biggest challenges of inventory management, warehousing, and shipping.

What Is An Ecommerce Dropshipping?

In the eCommerce dropshipping business model, you have to partner with the manufacturer or supplier company to supply the stock to the buyers, as you don’t need to hold any product in stock because the item is directly shipped from the supplier; you just sell the merchandise from your online store and when the customer order after that manufacturer or the third party logistics company will take the responsibility of the further process.

There will be a mutually beneficial situation for both parties as the manufacturer can sell their goods in another way. At the same time, the seller will be relieved of having to keep stock. The dropshipper or the seller basically works as a mediator between the producer and the buyer by providing a platform to proceed with the transaction.

The ecommerce market is escalating continuously because smartphones with online shopping applications in addition to electronic payment options have revolutionised everything in the past few years. According to market data forecast global dropshipping landscape was estimated 128 billion dollar industry in the year 2020, and India’s eCommerce market is likely to reach $200 billion by 2026 as per the data given by the Ministry Of Commerce And Industry Of GOI.

The ecommerce dropshipping business is growing at a rate of 17% every year, which means it has enormous possibilities to grow wholesalers and retailer merchants. Moreover, customers can purchase the product of different suppliers under one roof without wasting their time visiting various shops for variegated goods.

What Is the Start To End Process Of Dropshipping?

⦁ Customer Place The Order –

The first step starts with the order of goods by the buyer using any ecommerce platform. After placing the order, they received a confirmation email with the necessary details of the products they purchased. Retailers get all these details via their online store.

⦁ Retailer Passes The Information To Manufacturer Or Supplier.

All the information of the order passes through the retailer to the manufacturer or the supplier company (i.e. third-party logistics who work as a bridge between the retailer and the buyer); for this purpose, various ecommerce automation software is leveraged to avoid the manual work of transferring the data.

⦁ The Supplier Picks Up The Stored Goods And Pack The Order –

As in ecommerce dropshipping, retailers don’t keep any stock. Hence, the supplier takes the whole responsibility of storing, packaging and shipping with the brand name of the retailer if both parties are involved in the brand packaging deal; otherwise, the supplier will do generic packaging without the brand name.

⦁ The Customer Receives His/Her Order At Their Doorstep –

At last, the customer receives his order with complete packaging; while in this journey, they can also track the order to ensure within how many days they receive their products.

How is Dropshipping an Advantageous Business Model?

⦁ Decreases The Cost Of Maintaining A Business –

Dropshipping is highly effective in reducing the initial cost of starting a business as thre is no need to invest a large amount of capital, makes it more sustainable, so it is also a good opportunity for small-sized firms who don’t have enough funds to store inventory in the warehouse and supply the goods.

Dropshipping is a less-risky option for retailers, and if you are one of those merchants who want to start involved in the domain of the ecommerce dropshipping world and are unable to start the entire business from scratch or unwilling to do so, then this would be a convenience chance to earn profit and establish a brand name.

⦁ Easy To Start –

By eliminating the physical aspect through removing the headache of keeping actual goods make it feasible to start within a minimum investment. Setting up a functional ecommerce store, partnering with a reputable supplier, and utilizing tools to automate your dropship business is all you need to do as a seller. To do all this, you just need a few days.

Ecommerce dropshipping also eradicate the cost of warehouse, the cost of ordering products from time to time, incurring losses due to extra good and insufficient stock, maintaining accounts for inventories and many more such cost.

⦁ Various Products Under The Same Roof –

Using your ecommerce platform, you can sell a large variety of products related to the same category that also gives the buyer a wide variety of choices and helps to bring in more customers. As you don’t need to stock any item, you can showcase it on your online store at the market price, which you wouldn’t be able to do earlier due to inventory handling and other risk-taking factors.

⦁ Security From Overstocking –

Many merchants face the issue of overstocking, which results in negative returns, or they have to sell the goods at a lower price. However, this problem can be avoided by forecasting market trends. Through dropshipping, you can save from losses by placing an order only at the time of increase in demand, without wasting money on overstocking. Then, the supplier will be responsible for delivering the goods.

⦁ Higher Profitability & Easy-To-Scale –

Retailers dealing with dropshipping can earn 50% more profitability than the retailer who keeps stock; however, the profit depends on many other factors. You can scale your business by providing better or improved ecommerce customer service, adding more goods to your store, and investing time in other essential areas of your business.

⦁ Operate Anywhere In The World –

You don’t need to set up an office to start the dropshipping business as it can be started from anywhere in the world if you have technological resources, and you can connect with manufacturers and suppliers; that’s the reason dropshipping is a flexible source of income irrespective of the location.

Now Let’s Move To The Limitation Of Ecommerce Dropshipping

There are many advantages of ecommerce, but everything has its own pros and cons, so dropshipping too. Below are all the major problems that come in the way of merchants and whosoever surpass them later came as an established brand.

⦁ Escalating Competition –

Many ecommerce owners are aware of dropshipping business, most of them have already started, and some of them are in the process of doing the same as all of them are aware of the digital advancement and the customer requirements that would result in profitability if their brand stands out from their competitors.

Due to fierce competition in the market, retailers are compelled to sell the same product at lower prices than their rivals. The only way to distinguish the brand is to provide unexceptional customer support, fast deliverables, and a smooth functional ecommerce platform with other benefits to please the buyer.

⦁ Complications In The Shipping Process –

It could become difficult later while to calculate the shipping charges whose payment is incurred from the customer’s end as most dropshippers deal with a number of suppliers to deliver the product.

For instance, if one of your customer order three products at the same time from three different suppliers, then there would be three additional shipping charges because suppliers have other payment structures and billing processes; now, to avoid overcharging the buyer, you have to figure out the reasonable cost of shipping.

⦁ More Challenges In Customer Experience –

As an ecommerce dropshipper, you have to rely on the supplier to deliver products to the buyer. Any negligence or mistake from the suppliers’ end, such as a customer didn’t get a timely delivery or receiving a broken product or wrong item, will impact your brand image. The customer will drop bad reviews on your ecommerce store, leading to a loss of customers; plus, if one customer faces a bad experience, he gives the same feedback to other people, which can deteriorate the business image in the market and your competitors can take advantage of such circumstances.

Furthermore, you can’t inspect the quality of goods as the item will be directly shipped from the suppliers’ end, and impaired quality is one of the biggest reasons for customers’ hate as a dropshipper it’s your responsibility to eliminate all problems faced by customers in online shopping.

⦁ Lower Profit Margins –

Lower profit margins in the dropshipping business are due to the extended supply chain you would opt for, as you have to make payments to a third-party supplier.

Ecommerce dropshipping can be started easily, but sustaining it for a prolonged period of time could be a significant challenge, especially when most sellers have identical product.

Eventually, you have to penetrate the market by selling in large volume; there would be no choice to remain except to sell lots of products on your ecommerce platform to survive and overtake the competitors.

Ending Up

Commencing eCommerce dropshipping could be a great idea, but you have to consider all the above-mentioned points as it’s not easy to establish a big brand name; it requires a lot of effort and a fully functional system from the manufacturer to retailer to the supplier to the end customer.

Businesses can’t survive without putting your blood and sweat into it; your ecommerce dropshipping business will be like a seed that you have to grow using different business strategies with time. However, with careful planning and execution, all the limitations can be tackled step-by-step, and you can build a thriving and profitable company.

If you are ready to accept all the hindrances that come your way to run the business, nobody is stopping you, as ecommerce dropshipping also has great potential for scale.

We can assist you in reducing the burden by designing a wholly operational ecommerce store as we are a top-notch ecommerce agency, helping national and international businesses to become a brand name. You just need to send an email or visit our website to know more about us.