In this article we will be explaining dropshipping in depth and clarifying the common misconceptions about it. Hopefully after you read this article, it will give you a better idea on what dropshipping is and if you should be a dropshipper.
What is drop shipping?
Dropshipping by large is a method for fulfillment. It involves the seller who acts as the middleman between the supplier and the customer. This method allows selling products without any physical inventory on hand, usually located overseas and then proceeds to market to a specific audience for demand. At each sale to the local seller, the order is fulfilled and shipped directly to the consumer by the overseas supplier.
It is common for wholesalers and manufacturers to employ dropshipping themselves to test market responses before investing into any warehouse facilities locally at the new market. It can also be due to products that are just costly to relocate in between warehouses.
Definition of success in dropshipping
Like most trades for selling, the true key lies in web traffic, through paid advertisements and digital marketing to direct consumers to your online store.
Social media platforms like Facebook and Instagram are great for ads placements to direct customers to your store. Like every marketer, they seek to improve effectiveness of ad campaigns via trial & error, optimising the cost per click/impression and conversions.
And.. that is it, no secret sauces or rocket science theories. You can even find articles, videos, tutorials about creating great ad campaigns online for free.
While our company does not employ dropshipping models, you can still refer to our article on “finding the right product for you” to help you better manage your decisions behind selling a product.
Dropshipping as a supporting business to your core business model
Unless the costs to hold inventory locally outweighs the selling price, dropshipping business should not form the core of your business.
Ideally, you want to dropship products into your business with different objectives in mind. You want to dropship products that serve as a complement to the products you are currently selling in order to cross-sell them to your current customers.
For example: if you are selling Nike basketball shoes, you may wish to sell additional products that appeal to your customers who buy your Nike shoes like socks, apparels, etc.
In the long run, once proven demand with the products you dropship, you would want to get the official rights to sell in a bid to lower the cost and stretch your profit margins.
Misconceptions of Dropshipping
It is NOT a pyramid scheme
While dropshippers can easily turn this to a pyramid scheme, it should not be one. Though it can be rather difficult to differentiate a dropshipper between wholesalers at the get-go, it will be disastrous to further dropship products from another respective dropshipper adding layers akin to a pyramid scheme.
Intentionally or not, it is best to seek the origins of the products and trace back to either the wholesaler or the manufacturer themselves.
It IS a legitimate business however the model itself will be unsustainable in the long run
Often, dropshippers may have unintentionally sold products without the knowledge or consent of the wholesaler or manufacturer. While this arrangement is technically legal, it will be unsustainable in the long run if continued without consent from the supplier.
High performing dropshippers would attract competitors who could easily source out your supplier at the assumption of having no consent by the wholesaler and manufacturer.
If you are able to market the products well, why wouldn't you strive to lower your product cost and stretch your profit margins?
There ARE risks involved
While the idea of not holding any inventory is liberating, you will have no control on the fulfilment process which leaves you at the mercy of the supplier.
Shipping fees are also complex and subject to change if you are purchasing as a dropshipper without any form of legal documentations. Your margins will be heavily affected by any surges of shipping fees at the discretion of your supplier.
Advertising products with additional layers of mark-up requires effort and resources. Exiting the business would mean all prior investments on marketing to get traffic goes with it as well.
Dropshipping is NOT the same as Pre-ordering
Traditionally, pre-orders are purchases made prior to manufacturing the product. Simply put, you are purchasing an unfinished product to be fulfilled upon completion of manufacturing or release.
Dropshipping an unfinished product can easily be a nightmare due to the complex delivery timing by the wholesaler or manufacturer. It would also be misleading to draft a dropshipping order in the context of pre-ordering when clearly the products are ready to be shipped, though still considered legal and a mere marketing gimmick, we advise buyers to research their products prior to purchase.
While dropshipping is legitimate, we advise sellers to employ this model with a sound strategy revolving your current business in mind. In contrast to most 100% dropshipping businesses today, success is never achieved overnight and like many other businesses, it requires resources, effort and time.
At Rigorer, we do not have any active dropshipping model as we believe that our product prices are just and affordable. We feel that there should not be many price layers to our customers and therefore prefer transparency in our retail prices. You can contact us today if you are interested in becoming an authorised reseller of our brand in your country.