You must have heard the term dropshipping or dropship somewhere on MMO forums or business groups. The dropshipping market is predicted to reach $557.9 billion by 2025 and is growing at a CAGR of 28.8% from 2019 to 2025.
This is the most promising e-commerce business model today. But what exactly is dropshipping? How does this business model work? Why is this the best option if you want to start an online business? Let’s answer all the above questions with ICOS in this article!
What is Dropshipping?
Dropshipping is an MMO model where the seller does not need to import goods or invest capital. When there is an order, the seller transfers the order to a third party supplier when someone orders the product, the supplier (usually a wholesaler or manufacturer) will process the order from a to z.
This means that sellers do not have to be directly involved in product management and still benefit from orders. Instead, you should focus on branding and promoting your products to customers.
Dropshipping is a superior business model because it does not require large investments like other traditional models. You don’t have to spend a lot of capital to build a store, stockpile, or hire employees.
All you have to do is set up an eye-catching online store and focus on promoting your products and building your brand to reach potential customers. Marketing costs, the profit you make is the difference between the price you pay your suppliers and the price your customers pay you.
Dropshipping is just a business model. But many types of businesses use this form and print-on-demand is also a popular form of dropshipping.
How does dropshipping work?
- Find a third-party supplier for the products you want to sell
- List prices for each product on your website and start promoting them
- Customers pay when they shop on your website
- Transfer orders to suppliers and pay product fees
- The supplier will ship the order to the customer
- Repeat the steps above! You can find other products and suppliers if you want to scale your business.
Advantages of dropshipping
Capital savings: Since there is no need to import goods, it reduces general costs such as storage or transportation.
Omnichannel: You can do dropshipping both on your website and through e-commerce platforms like Amazon, Shopify, eBay, or other social media channels.
Flexible Location: Dropshipping allows you to scale your business worldwide no matter where you are, opening up opportunities from all over the world.
Expand your business: You can use suppliers to expand your product portfolio without having to invest in production steps.
Check out new products easier: No need to import products, and you don’t have to worry about inventory if the product doesn’t sell well.
Dropshipping in the US market
The US market is a perfect environment for dropshipping companies to thrive. Why? In 2021, the US will reach 333 million people, 70% of which shop online. In the e-commerce industry, the US is one of the fastest adapting countries to online shopping, even during the peak of COVID-19.
The pandemic has boosted the industry’s growth to $469 billion in revenue with a much larger number of online shoppers. It is people’s adaptation to new life through more mobile shopping that has led to this breakthrough development.
With about 826,803 wholesale agents, choosing the dropshipping model is a big advantage when entering the US market. Because dropshipping allows you to try a variety of products to find the one that best fits your niche.
Anyone can have a dropshipping business on Amazon. As long as you meet the seller account requirements, comply with Amazon regulations, and find a third party to fulfill the order.
Merchants can also use the Fulfillment by Amazon (FBA) service in dropshipping. FBA offers the same benefits as dropshipping and makes it easier to control the quality of your brand.
Another benefit is that you don’t need to set up an Amazon store to use Fulfillment by Amazon. With hundreds of millions of unique visitors per month and more than 30 product categories, Amazon is considered a very suitable sales channel for the dropshipping model.
But dropshipping on Amazon also has some limitations, the large market also means stiffer competition when there are millions of people selling the same products as you. Unfair competition can also lead to dumping, which can have a huge impact on your bottom line.
It can be said that Shopify is more focused on dropshipping because they are also launching an intermediary sales application that allows dropshipping sellers to source products from AliExpress suppliers. With Oberlo, you can import product data into your Shopify store, edit product postings, and place orders individually or in bulk.
Not only that, but to create an e-commerce website, you just need to follow a few basic steps. All of them are optimized to be closer to the user, allowing you to customize the look and feel. Stores, product listings, and management functions with just a few clicks.
All are carefully curated to help sellers optimize their stores as much as possible. With this enthusiastic support, Shopify is easier to use than other e-commerce platforms like BigCommerce and Wix Commerce.
In the end, it doesn’t matter if you expand your dropshipping business to the world market.
This business model offers many advantages in terms of cost, geographical distance, and flexibility! All of these make dropshipping one of the fastest-growing industries.
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