And even better, you first get the payment from the customer and then go ahead and place your order from the vendor.
By the end of this article 'How To Open An Online Store Without Inventory', you will get to learn the basics of Dropshipping.
And as always, for any one-on-one consulting and assistance, you may mail me at firstname.lastname@example.org
As much as the idea of starting your own retail store is exciting, the actual process of getting it up and running is quite a daunting task.
From identifying the most apt, yet affordable high street location that attracts a good flow of customers to tying up with vendors for the supply of goods to hiring, registrations, legal entities, and a whole lot more.
And that’s where opening an online store or rather the online eCommerce stores are way easier than the traditional brick and mortar stores.
You can cut down on your overheads, the monthly rentals, salaries, etc., and most importantly, you can start a store even within 24 hours.
Yes, it’s that easy. All you have to do is get your vendors listed out and have your inventory ready. And of course, tie-up with your shipping partners for seamless delivery.
Now, what if I tell you that I’ve got a better business model to work on.
The above model, while it works perfectly fine, too has a slight risk. You’ve got to stack up inventory and then ensure you sell off the inventory to make your profits.
What if you do not sell your inventory? Oops!!
What if you could start selling from day one without investing in any inventory. And even better, you first get the payment from the customer and then go ahead and place your order from the vendor.
And it gets even better.
The vendor will take care of your shipping process too and have the package delivered to your customer directly.
And that my friends, is what’s called Dropshipping. This is how you can open an online store without any inventory.
What is the Dropshipping Business Model?
Wikipedia defines Dropshipping as a supply chain management method in which the retailer does not keep goods in stock but instead transfers the customer orders and shipment details to either the manufacturer, another retailer, or a wholesaler, who then ships the goods directly to the customer.
And just as in any retail business, the retailers make their profits on the difference between the wholesale and retail price.
And one of the biggest advantages is, you need not make any upfront investment in stacking up inventory. And you needn’t worry about packaging and shipping. It’s all taken care of by the vendors.
Pros and Cons of Dropshipping Business
Every business has its pros and cons. So does Dropshipping.
Let’s walk through some of its advantages and disadvantages. What do we start off with? Ok, let’s do the advantages first!
Advantages of Dropshipping Business
1. Easy to get started
As I mentioned earlier, if you are interested in starting an eCommerce business, dropshipping is definitely an easier option to get you started on day one. You really do not have any overheads to look into. No retail space, no inventory, no hassles of managing packing, tracking orders, or delivery. It’s all taken care of by your vendors.
2. Less upfront capital requirement
With blocking funds on inventory and deposits for the retail space out of the picture, you are left with a very small capital requirement to start off your dropshipping business. Your main investment requirements here will be to build an online store and in marketing and advertisements.
You also have very low overheads. All you need is your laptop and an internet connection.
3. Location independence
With the only requirement being your laptop and an internet connection, you can be on vacation and running your dropshipping business. A perfect example of ‘How To Build An Online Lifestyle Business & Make Money’.
As long as you have an internet connection and you can communicate with your vendors and customers, you can work from just about anywhere you want to.
4. Wide Range of Products
Since you do not have to purchase inventory, you can try different products out there.
It’s completely your call if you’d like to cater to a very niche market (e.g., Wireless Bluetooth Headphones) or be a general store (e.g., Amazon).
A suggestion is to try out a general store if you are starting off. Identify the products that generate maximum sales.
You could always build another niche online store catering to that one product later on.
That’s the flexibility the online Dropshipping model gives you.
Disadvantages of Dropshipping Business
1. Shipping Charges
Ideally, you would be dealing with multiple vendors from different locations. And a customer visits your store and purchases multiple items. And the customer expects the products to come from one location.
Hence, the customer expects one standard shipping charges. This may not be the case for you. You may be sourcing your products from different vendors and hence the shipping charges would vary from vendor to vendor.
Hence, it’s important that you factor this cost into your product selling price.
2. Inventory Issues
Since a vendor would be servicing multiple merchants, such as you, the actual inventory would vary from what’s displayed on your online store.
If a customer has purchased a product in your store, and when you contact the vendor, if for some reason the vendor doesn’t have the product, you would have to find a similar product with another vendor, in order to fulfill the customer requirement.
Eventually, if you need repeated business from the customer, you will need to source the product and service the customer.
3. Price Margins
While I wouldn’t really classify this as a disadvantage, it’s best that I do mention this. Just as in any business, there’s bound to be competition.
And if all merchants are selling the same product, how do you stand out from the competition.
Either you offer exemplary customer service or your reduced price. Which affects your margins.
With the number of dropshipping stores out there, and everyone looking at selling their products, merchants do reduce their profit margins in order to generate more sales. This is a call you can take, though.
Some Frequently Asked Questions (FAQ’s) on Dropshipping
Is Dropshipping easy?
Well, yes and no. The dropshipping model definitely allows you to start off immediately. And all the benefits added to it, as discussed above. If you think this could work on autopilot, you’d need to think again.
Dropshipping definitely allows you to work from where ever you want to with just a laptop and no team at all. However, you would need to invest at least 2 to 3 hours on a daily basis to ensure there’s no glitch in the order fulfillment and the delivery process.
Is Dropshipping worth it?
Absolutely. If you are considering an online store, I would definitely suggest you start off with the dropshipping model.
What Should I dropship?
If you are starting off with a general store, you could Dropship just about anything. I’ve listed out some top niche categories that may be of use to you.
- Women’s Clothing
- Men’s Clothing
- Home Products
- Beauty Products
- Baby Products
- Wedding Decorations
I will also be creating, very soon, an article on 50 Best Niche Products To Dropship And Sell Online in 2020. This will include a Google Trends report on each of the products
Can you Really Make Money Dropshipping?
You most definitely can. Some of the top merchants worldwide are making a minimum of $1 Million per year.
This is a serious business and has some serious income to be generated.
But if you were to open an online store and expect to generate revenue, it just won’t happen.
The top merchants spend a lot on advertisements too. They optimize their store, create great product reviews, and extensively promote their store.
Treat this business as your only source of income. And you would surely put in the hard work to make this a success.
Dropshipping is a great option if you would like to open an online store without investing in any stock upfront.
That being said, there’s a lot of work to be done, in identifying the right product, the vendor, and in promoting your store.
Do consider promoting your online store. I’ve got a course on Google Ads (Beginner to Advanced Course in Google Ads) and also on SEO (Beginner to Advanced Course in SEO) to get you started in promoting and optimizing your online store.