What is Dropshipping?
An innovative business model that has revolutionized the industry, dropshipping involves three key stakeholders: the manufacturer, the customer, and the retailer.
The manufacturer is responsible for conceptualizing, creating, and manufacturing the products themselves. They’re also the ones in charge of storing inventory and shipping orders on behalf of the retailer. If a particular item is returned because it is damaged or defective, then they must replace it, as well.
On the other hand, the retailer – or, you – mainly takes care of the digital storefront, rebranding the manufacturer’s products as their own and selling them through a website. Your tasks also include marketing the items through advertising channels like social media platforms and the like. To add to that, you’re also responsible for customer service and setting prices. The latter, in particular, can be a tricky thing to do since you have to balance being affordable enough to entice buyers with being high enough to ensure that your business earns a tidy profit.
Lastly, any business would be lost without the customer. Buyers will purchase the products from the retailer, reaching out to them if they have any questions or if any issues arise.
In short, this is how drop shipping works:
A customer purchases a product from your digital storefront at the retail price that you’ve set.
This order, which you pay for at wholesale price, is forwarded to your manufacturer.
The manufacturer packages the product under your business name and ships it directly to the customer.
Naturally, this business model is very appealing since you don’t have to purchase and store stock, assuming the risk of unpurchased inventory, in the process. Moreover, it doesn’t require you to put up a lot of capital upfront, which is one of the main reasons why people are hesitant to start a business.