Dropshipping is the method of shipping products straight to your customers coming from a third-party distributor or supplier, without having an intermediary step (like storing the products at your physical business location).
In other words, dropshipping is the act of selling a product on your website without actually handling the order fulfillment and delivery. Another advantage of dropshipping is that you will not pay for the goods until the customer pays for it, making dropshipping an appealing option for people who don’t want to risk buying products that won’t easily sell. This low barrier to entry allows amateurs and experts alike to pick a niche and run their own dropshipping-based ecommerce store.
This is drop shipping explained in 4 simple steps:
Step 1 – You list the supplier’s product on your store for buyers to purchase.
Step 2 – The customer purchases something from your eCommerce store.
Step 3 – You order that exact same product that your customer paid for from your supplier.
Step 4 – Your drop shipping supplier deliver this item directly to your customer. So, your customer gets the product that they’ve ordered from you.
To discuss a little further, it all starts with building your own eCommerce store and posting goods on your website. I recommend setting up this store on Shopify and customizing it to fit your target customer.
However, whose products are you selling? The products that you are selling comes from a variety of distributors and brands. You may be asking yourself, “How come these companies don’t offer their products directly to customers?“ The thing is, there are suppliers that only focus on innovating products and depend on sellers to retail them.
That’s where you come in as a drop ship retailer, you’ll be selling for these brands who don’t sell to the public. They look for individuals to sell their goods, to make them money, and expand their business for them. You are one of these retailers.
You’ll want to concentrate on getting approved to sell for these various companies. Once you’re approved you’ll put their products on your Shopify store. Afterwards you will promote to bring potential buyers to your store.
Customers come to the store, and after they purchase, you reach out to your suppliers. After that they dispatch the items straight to the customer. You aren’t purchasing any stock. All you’re doing is accomplishing an agreement with the drop ship supplier to market their goods on your store.
You get their price lists and put their products for sale on your website. When someone purchases, you place that order with the distributor. You only order the product once the customer has paid you. Then you’ll get in touch with that supplier and say “Ship item XYZ to customer ABC.” Then they ship it and bill you.
The distinction between your list price and what you pay your distributor is the net profit. From my experience, when you drop ship the right method, you’re looking at about 25 to 30 percent average net profit. That means if you close a sale of an item worth $1,250, and your supplier billed you for $1000, your profit is $250. That’s the standard I’ve seen in my prior experience. Sometimes it’s higher than average, sometimes it’s lower, but that’s a good goal to aim for. It’s a realistic expectation.
Next lesson, eCommerce Business Models
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