Article by Jabeen Sultan Ali from Entrepreneurship Wing, GAEE JMI

Dropshipping is an online business model, so if you’re looking for an online business opportunity, you’ve probably come across this one. It can be very profitable for an aspiring eCommerce entrepreneur. Furthermore, a minute of start-up capital combined with sweat equity is sufficient to get your dropshipping venture off to a good start. But what exactly does drop shipping entail, and how does it work?

What is Dropshipping?

Dropshipping is a retail “fulfilment” method for online stores in which a company does not keep its product in stock or in a warehouse inventory. Instead, the store sells the items and then forwards the sales order to a third-party supplier, who ships the orders directly to the customer.

In any business, there is a manufacturer-distributor-retailer relationship. When you use the drop-shipping model, you become the “retailer” in that relationship, and the “company” that supplies the products to the customer on your behalf is known as the “drop shipper.”

What’s the best part? You can build your business right from your laptop, which is very hands-off, especially once you get started.

Benefits of Dropshipping

The benefits of dropshipping have been listed below:

1. Dropshipping is a simple and rewarding business model that many entrepreneurs are flocking to because it is simple to set up and has low barriers to entry.
2. Instead of the traditional retail method, running a store requires no operational costs plus zero to negligible overhead expenses.
3. Another advantage of dropshipping is that your business model will not have to change much as you grow. Yes, as your business grows, you will have to put in more effort in sales and marketing, but your day-to-day activities will remain largely unchanged.
4. The most significant benefits of dropshipping is that it is one of the most flexible careers. It gives you a lot of leeway in making decisions that are best for you, and the possibilities are truly limitless.

Disadvantages of Dropshipping

For all of its benefits, dropshipping is a double-edged sword. Some of its harsh realities are rarely mentioned.  It can be difficult to maintain a business doing dropshipping, the reason being low margins. You put less money in, but you also get less money out. 

The majority of the money from each sale goes to the supplier, with the remainder being skimmed off the top. This makes covering other expenses such as\ marketing/advertising, website maintenance, sales orders, and so on difficult. Furthermore, your traffic will have a significant impact on your profits.

Dropshipping— Is It A Viable Option?

Dropshipping is not always a good option if you are starting your eCommerce business from scratch. It is recommended that you enter this model if you have a consistent client base and a regular traffic source.

Low entry barriers imply fierce competition. As a result, the larger a company is, the better equipped it is to offer the lowest prices. Therefore, in order to compete with their prices, smaller businesses must reduce their profits— which becomes unsustainable. The problem is exacerbated when drop shipping is done in a highly competitive niche.

Some argue that dropshipping is a better sideshow than the main attraction. However, it is largely dependent on the entrepreneur and how they handle the business. It is a matter of softening the disadvantages.

When deciding what to sell, look for products that aren’t available in local stores, as thousands of brands aren’t sold there. Following the discovery of the products, the next step would be to research your competitors and competition online.

The most important aspect is to select wholesale suppliers who will ship within 24-48 hours of placing an order. Drop hipping service requires constant communication with your wholesale supplier.

Certainly, dropshipping is not for everyone. Neither is it a get-rich-quick-scheme, but it can be profitable as it is a low-risk business model. However, with careful planning and consideration, most of these obstacles can be resolved and need not stop you from building a profitable and thriving drop shipping business.

Article summary: For years, dropshipping has been lauded as a fantastic side hustle opportunity. People have referred to it as an easy passive income stream because sellers do not technically need to manufacture, store, or ship any products. Dropshipping can be quite profitable for those who commit to this business model for an extended period of time without regard for profits at first. The key to this profitability is that because you don’t need to manage your own inventory, you save on all of the expenses that a traditional retailer or eCommerce store would have.

(Jabeen Sultan Ali is a B.A.(Hons.) Psychology student at Jamia Millia Islamia, Delhi, GAEE JMI, an autonomous branch of Global Association of Economics Education (GAEE) in India. The views expressed are personal and they do not purport to reflect the opinions or views of GAEE or its members.)

Follow Us & Stay Tuned: https://linktr.ee/gaee.jmi