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How Dropshipping Works in 2023

how dropshipping works

Dropshipping is a retail model in which the retailer doesn’t stock goods, but rather forwards orders to a third party (known as the dropshipper), who then handle the delivery process.

An example of dropshipping would be a person with an online clothing boutique that purchases clothes from a wholesaler that in turn manufactures and fulfills the orders the boutique owner gets on their website.

With dropshipping, the retailer does not stock goods but is rather the channel to a third party.

The Benefits of Dropshipping 

Dropshipping has seen recent popularity and success in helping people build an income, but there are risks involved as well.

So, why use dropshipping as a business model? 

1. Start with minimal risk

In a traditional business, the prospective owner is on the hook for thousands of dollars buying stock to sell.

With dropshipping, an owner doesn’t have to invest in a product, but only has to purchase it after they’ve received an order and payment from a customer.

Also, because you’ve not invested in a huge cache of stock upfront (that may or may not get sold, the risk is lower than in traditional selling.

2. Overhead is low

As an online business and one in which you don’t need your own warehouse and stores, the overhead cost is low.

Many dropshipping businesses are online businesses based in the owner's home, with nothing more than a laptop and a few added expenses.

Despite rising costs as the business grows, dropshipping will remain less expensive to run than a traditional store.

3. Easy to begin

Running a dropshipping business takes away a lot of the hassle of owning a traditional store.

With no stock to maintain or handle shipments and inventory, this model makes running a business a far easier prospect.

4. Flexibility of stock

Because you haven’t purchased stock, it’s much easier to read and follow trends in your sales.

You aren’t beholden to anyone thing and can discontinue selling a product, or add a new product with ease as you read what your market demands.

5. Flexibility of location

As an online retailer, you can run your business anywhere there is an internet connection.

From home, from a coffee aren’t anchored to one place.

6. Risks of Dropshipping 

Any business venture comes with its share of risks, as well.

While dropshipping has several advantages, there are some things to consider before getting started.

7. Competition

Because dropshipping is such an attractive prospect, the market can be flooded with other stores selling the very same things, or at least in the same niche.

There may be some work involved with getting yourself seen and building a reputation.

8. Syncing with multiple suppliers

Because you aren’t stocking your own products, it can be difficult to follow what is in the current inventory of multiple suppliers at any given time.

Only work with suppliers that you trust to keep up with demand, and look into apps available that allow you to sync your information with retailers in real-time.

9. Supplier Error

All suppliers will make mistakes sometimes, and you will have to be the one to apologize and smooth things over with disappointed customers.

Be sure to vet your suppliers well, so you don’t have irate customers on your hands.

How to Start a Dropshipping Business

There are several steps you’ll need to follow to set up a dropshipping business for yourself.

Keep in mind that this model is quite competitive and margins are thin.

Do your research when it comes to suppliers to ensure that they are reliable.

Find your niche

First and foremost, what are you going to sell?

The best option is to find something that you are personally passionate about, as this will make it easier to market your products.

You want to engage your customers, and get eyes on your website.

Offer interesting and useful content on your page, such as a blog or tutorials.

For instance, if you are selling clean makeup products, you can offer makeup tutorials, and blog about clean living topics to create buzz.

Whether working with one or more suppliers, you need to be sure that they’re reliable.

It’s difficult to build a brand reputation for quality and excellent service if your suppliers consistently miss orders and let customers down.

Products should be quality, but not overpriced (there go your profits).

Create a website

You may choose to build your own website, or you can decide to use an online hosting platform specifically created for dropshipping businesses, like Doba.

Building your site

When listing products on your site, you want them to be appropriately priced and attractive to customers.

Take the time to find out what similar products run on other sites, to make sure that you don’t price yourself out of the market, or cut away at your own profits.

Each product should have a clear, professional picture and an accurate and attractive description.

Remember that there is a lot of competition in this market, so take the time to set up a quality site that will draw customers.

Manage money wisely

Remember, a dropshipping business runs on razor-thin margins.

Unlike traditional retailers, you aren’t buying stock in bulk and receive discounts.

Work closely with your payment app to ensure you don’t incur any high bank fees and work closely with suppliers to ensure that items are stocked.

As with all fulfillment models, dropshipping comes with benefits as well as risks.

By doing your research, and lending your own verve and voice to your business, you can hope to alleviate the risks and make your business come out on top.

When it comes to handling your dropshipping finances, there’s no better platform than Statrys! 

A Statrys account application only takes 15 minutes and is totally contactless.

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