Maybe one of your business partners or friends mentioned their dropshipping company in conversation. Maybe you saw a case study or a YouTube video about how someone from the X-country sold Y product to make Z-figures within one month. How was it done? Dropshipping, of course! There are many myths, scams and lies about this form of business, so we are here to explain the truths about how to make money dropshipping and if it is worth considering.
What exactly is Dropshipping?
Dropshipping is a form of online sales where the retailer does not have to pay for the products before selling them to customers.
Dropshipping serves as a type of third-party fulfillment method to keep prices extremely low for retailers, where the suppliers or manufacturers store, package and ship the products, thus removing the burden from the retailers.
Generally it is a supplier, a retailer (the store where the customers buy,) and a customer needs online, and from a brick-and-mortar store.
Online retailers need to find some kind of supplier to manufacture their own products or to purchase other goods at wholesale cost. Then the retailer has to store, package and ship those products when a sale is made.
Over the years, third-party fulfillment has emerged as a more economical way to store, package and ship. Instead of the retailer paying for a warehouse or storing items in their homes, why not give the inventory to a separate company to handle it?
Various third-party models are available. Many people take advantage of Amazon fulfillment when they sell on Amazon. Other brands include ShipBob, Red Branch Fulfillment, and Skipmonk. Overall, they all offer great rates for fulfilling orders.
Dropshipping, is another form of third-party fulfillment. In short, the supplier never sends the products to the dealer to then decide if he wants to store the stock elsewhere. Instead, the suppliers hold the stock and send out orders as soon as they arrive.
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How does a Dropshipping System usually work?
Dropshipping is one of the simplest forms of fulfillment, as minimal shipping is required, it is inexpensive for online retailers and you do not have to spend much time on packaging or inventory management.
Dropshipping works like this:
An online retailer finds a provider who is willing to start dropshipping.
The retailer lists available products in their e-commerce store and spends most of their time and money on marketing.
When a customer places an order, the supplier receives a notification to fulfill the order.
The supplier retrieves the stock from the store, packs it and sends it directly to the customer.
The primary basis behind dropshipping is that the stock never gets into the hands of the actual online retailer.
You, the retailer, select products from the supplier's stock. You display the products on your website for sale. They handle the rest.
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Most dropshippers handle returns, but some dropshipping providers make things easy by also accepting returns to their warehouses.
In general, the retailer does not have to worry about the storage, packaging or shipping costs. Not to mention, it is not necessary to hire people to perform these tasks or to spend their own time on a major surgery.
Of course, there are pros and cons to dropshipping. As a newer form of fulfillment, the internet is also filled with scams and fake case studies to gain hope of making a lot of money.
Dropshipping actually works for some businesses. It is a fascinating e-commerce business model that reduces many of the cost of doing business. After all, the supplier already has the warehouse and the packaging supplies, why not send out the products as well?
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The Difference Between Dropshipping and Affiliate Marketing
You may think that a dropshipping website is the same as affiliate marketing. For both, products are not managed by the site owner. Instead, the owner of the site acts as a mediator between the customer and the supplier.
However, there are some clear differences:
Dropshipping requires you to work with a supplier or manufacturer.
Affiliate marketing can be done by signing up for an affiliate program for any retailer.
Regarding the setup:
Dropshipping usually involves the retailer creating and managing an online store. It works just like a real e-commerce store.
Affiliate marketers only need links to quality products that they
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