Most Popular Reads
- 15 Google Shopping Campaign Tips to Make More Money While Spending Less
- The Complete Guide to Advertising on Facebook: Strategies That Convert [in 2017]
- Ecommerce Return Policy Template: How to Write a Returns and Refunds Policy to 3X Sales [Examples Below]
- 28 Ecommerce Conversion Rate Optimization Steps Guaranteed to Increase Sales in 2017
- Ecommerce Shipping: Your Step-by-Step Guide to Shipping Profitability
Before you launch an online store, one of the first questions you need to answer is where you’ll get your products. This encompasses everything from sourcing to inventory management, which can be challenging for store owners.
Once you make it over that hurdle, it’s time to deal with order fulfillment and shipping. And don’t forget about all the other things, like marketing and customer service, you need to focus on to build a successful business.
But what if you could avoid all that hassle?
That’s where dropshipping comes in.
RSVP for the Ecommerce Growth Summit
Will you be in Chicago for IRCE in June? Us, too! We’re hosting our first annual Ecommerce Growth Summit, featuring keynote presentations from Mike Ditka, NFL Hall of Fame Coach, Jason Boyce, Co-Founder and CEO of Dazadi, an Inc. 5000 brand, and much, much more.
Register for the Ecommerce Growth Summit in Chicago this June. Hope to see you there!
What is dropshipping?
The dropshipping business model allows online stores to fulfill customer orders directly from a wholesaler or manufacturer. That means you, the ecommerce retailer, don’t need to keep products in stock or worry about shipping. You simply transfer orders to a dropshipper who handles all the inventory and logistics. You essentially tap into the power of the supply chain without having the burden of inventory.
There are quite a few big advantages of going this route, especially if you are new to ecommerce. But as you become more established in your business, it can create some potential risks and headaches as well.
Here are the benefits and risks you need to consider when it comes to using a dropshipping company for your online store.
Dropshipping is a cost-effective way to sell products online. You can use dropshipping to launch a business without having to take on inventory or you can use it to expand your business –– testing out the waters in various markets before you invest in inventory. There are different dropshipping strategies depending on the goals and specifics of your business.
Here’s why so many people like dropshipping — and some success stories to show you how it can be done.
1. Low overhead costs
Starting an ecommerce business comes with financial risk. You have to fork over cash for packaging, inventory, equipment, and space to set everything up. If sales don’t go as planned, you’ve lost your initial investment and you’re stuck with piles of unsold inventory. If you’re getting started in ecommerce, dropshipping is a low-risk way to dive in.
Bigger businesses can benefit by saving money on warehouses, storage, equipment, and employees. Dropship businesses generally get the benefits of wholesale prices (or at least close to it), minus the inconvenience and risks of carrying inventory.
Success Story #1: Luna Surf’s Dropshipping Expansion Model
As explained by Anthony Dorgan, Founder at LunaSurf.
As a growing business, the idea of dropshipping can be a pretty attractive one with obvious benefits. Margins aren’t great but it’s a trade off, you don’t have to invest in stock, store, pack or ship the product.
We love creating new designs and it’s a great way to test new products with your existing customer base. We can design and produce mockups on multiple products within a day and get reactions through our social media channels and sales that same day.
That’s great for measuring what’s popular which, ultimately, can help you scale your business quickly for very little expense.
2. Save time and scale your business quickly
Fulfilling your orders and shipping them out takes a lot of time. It might not seem like it while your store is small and you receive just a couple of orders, but it becomes more difficult to manage once your business starts to grow.
If business is booming and you’re having trouble keeping up with demand, dropshipping can be your answer. You keep growing without stressing about fulfilling orders correctly and on time. Instead, you get more time to plan and manage your business’s growth.
If you’re a smaller business, you need to hustle to get the ball rolling with marketing and sales. A dropshipper takes care of the practical operations while you spend time on growth.
Bonus: drop shippers can often negotiate better shipping rates due to the extremely high volume of orders they send each day.
Success Story #2: How Lash Stuff Uses Dropshipping to Expand Their Product Catalog
As explained by Jess Phillips, CEO of Lash Stuff.
At Lash Stuff, we use dropshipping to create custom eyelash products that can not be purchased anywhere else. These products include phone cases, pillows, mugs, and even clothing.
Dropshipping is a no-brainer for a business if the dropshipping company is efficient. One of the biggest expenses for a retail company is inventory and a place to put the inventory. With dropshipping, there is no inventory, no warehouse, no warehouse employees. This frees up all kinds of money for other expenses.
It also allows a company to expand their catalog with little effort. This is huge because product selection is a big attractor to customers. If I had to front the money for all my inventory, my catalog would be a lot smaller. Also, if a product does not sell, then I am not stuck with lots of inventory to clearance.
3. Validate new products
Not sure if your products will sell? Interested in expanding into a new market? Test out new products with a dropshipping supplier first instead of stocking up on inventory and hoping your gamble pays off.
Big businesses can experiment and expand their product line quickly, while startups can test initial product ideas.
Success Story #3: Less Money Down + More Products That Actually Sell
As explained by Natalie Meagan, Founder of The Crybaby Club.
Dropshipping has allowed me to expand my business in a way that I always wanted to, without having to fork out a bunch of money upfront to stock my shelves.
It also allows me to test and see which designs are the most popular so that I don’t spend money on designs and products just to have them sitting around, not selling.
The benefits are plenty, yes, but there’s a reason not everybody doesn’t utilize the dropship model. For every benefit of using a dropship service, there’s a drawback.
1. Low barrier to entry means high competition
Since there’s little required to sell online through dropshipping, the competition is stiff. Some markets are more crowded than others, so be sure to research what you’re selling and who you want to sell to.
This might not be a problem for established businesses, but startups still developing their brand and business may find it difficult to stand out from the crowd.
2. You’re not in control of quality
You’re trusting a third party with your products and brand’s reputation, which can be a risk. If your dropshipping service sells poor quality products, this reflects badly on you. Make sure you test your products and order samples for yourself. The quality should meet your standards.
You also don’t get to brand your orders as much as you may like. With ecommerce, the devil’s in the details. You don’t get to interact with your customers face-to-face like you can at a brick-and-mortar store, so every opportunity to wow your customers counts, like a personalized packing slip.
Good to Know
Some dropshippers do allow you to slightly personalize your package with your logo. If, however, you are looking for a completely customizable packaging experience in which you, as the business, are hands off –– then you likely are looking for a 3PL.
Smaller businesses might not want to shell out the money on these extras; it’s more important to get sales and build your store’s reputation. But a large brand may have the resources and desire to go the extra mile with their branding –– meaning dropshipping might not be your best bet.
3. You earn lower profit margins
There are two transactions that happen with a dropshipper:
- Your customer pays you for your product.
- You pay your dropshipper for said product.
What’s left in between is your profit. So you need to take your dropshipper’s base price into account when you’re setting your retail prices. You won’t walk away with 100% profit. Even though you may start with a wholesale price, your dropshipper will always take a cut.
You might get a lower profit per sale, but the upside is that you still save money on overhead and startup costs.
4. Coordinating logistics can be complicated
If you’re working with multiple dropshippers, it can be confusing dealing with each of their policies and shipping methods.
Drop shippers are also susceptible to human error. Sometimes your customers will receive a damaged dropshipment or maybe even a product from somebody else’s store altogether. Errors are bound to come up, so be prepared with how you handle them and how you communicate with your customers.
Is dropshipping worth it?
Like most aspects of ecommerce, dropshipping isn’t black or white. Assessing whether dropshipping works for your business depends on your needs and preferences.
If you’re curious about ecommerce, but aren’t keen on the risks of starting a business, dropshipping is a relatively low-cost way to get started. And if you’re a medium to large sized retailers looking to scale quickly and efficiently, this is an easy way to grow without burning out.
But if you can handle fulfillment on your own, or want to maintain greater control of your products, don’t jump in just yet.
If you want to be hands off with inventory management while maintaining a more detailed and personalized packaging experience, then you can always use a 3PL.
Or, if you have the space to manage your own inventory and shipping system, a shipping solution like ShipStation will help to get you the lowest possible rates and easily printable labels across all channels.
As you become a more advanced seller (or if you already are), the low margins in dropshipping can be success-prohibitive. If you like the products you are already selling, and aren’t having them mocked up (i.e. for art sellers using a print on demand dropshipper this may not be feasible), you can go direct to the manufacturer. This means you’d bypass the dropshipper, thereby and forgoing the packing and shipping they do, likely taking it on yourself.
The benefit here, however, is potentially huge –– saving you tons of money in profit margins. Supplier to consumer brands like Parachute, for instance, have made waves in the industry for lowering the cost for the end consumer while maintaining margins for the company itself.
Finding the Right Dropshipping Service
The possibilities of what you can dropship are almost endless – apparel, jewelry, electronics, food. You name it, you can probably dropship it. But do thorough research first. Some dropshippers are great for art or apparel, others for electronics. Do the due diligence to understand which is which.
Does a dropship supplier insure your orders? Do they offer fraud protection?
First, decide on which products you want to sell. Look for dropshippers that provide those products at a reasonable cost and in good quality.
Make sure you read up on the dropshipper’s policies:
- How do they handle returns or damaged orders?
- How long does it take them to fulfill an order?
- Are they white label?
- Is their customer support helpful and responsive?
The key thing you must do: order sample products.
You need to see what you’re selling to stand by your brand and test the quality before offering to the public.
Here’s a short list of dropshippers to get you started.
The Top 4 Dropshipping Companies
This is a print-on-demand (POD) dropshipper that specializes in print products like t-shirts, posters, phone cases, and more. Here you can sell custom products with your design, and they’ll print and ship it out to your customers.
Printful + BigCommerce
BigCommerce merchants can begin using Printful right now. With a quick integration between the two platforms, you can create various SKUs and variants for individual products (i.e. poster sizes) and have them sync with your BigCommerce product structure. Here’s what that looks like.
Login to Printful. Choose a product and your own custom image. In this instance, we are using a poster and some art. Watch how Printful turns a single product into multiple SKUs and variants -– adding it to your BigCommerce product catalog easily and accurately.
This entire process take approximately 5 minutes.
Doba is a marketplace that connects you with wholesale suppliers and distributors that can dropship products for your store. This isn’t a free service – you’re required to pay a monthly subscription fee, starting at $29/month.
Doba + BigCommerce
AliExpress is a giant marketplace of products you can sell on your store through dropshipping. They offer hundreds of products at reasonable prices.
Here’s how you can sync products from AliExpress to your BigCommerce store.
Modalyst is a dropshipping marketplace enabling ecommerce retailers to source, list and sell unique products without the financial risk of purchasing inventory, warehousing, and fulfillment. Modalyst specializes in reliable suppliers producing quality products with unique designs. With their direct integration into BigCommerce, retailers can easily add products to their store in one-click.
Modalyst + BigCommerce
19 Additional Dropshipping Companies
Beyond the three most common dropshippers above, below are 19 other companies you can use to find products and begin or expand your business.
Remember, be sure to vet out the dropshipper before you begin using them and selling to customers. This means you need to test the product and shipping quality first and foremost.
- Wholesale Central
- Dropship Direct
- Sunrise Wholesale
- National Dropshippers
- Dropship Design
- Smart Living Company
- Trade Ghost
- Furniture Pipeline
The Bottom Line
Dropshipping is an efficient way to get started in ecommerce, and its benefits apply to both smaller and more established businesses. You can launch a store with minimal financial risk, experiment with new products, and quickly scale your business without losing time to operations.
Although dropshipping takes care of the operations and fulfillment, running your store isn’t totally hands-off. You’ll still have to take care of the marketing, product development, and sales. Your business won’t grow and thrive unless you put the work in, and dropshipping gives you the time to do so.
Want more insights like this?
We’re on a mission to provide businesses like yours marketing and sales tips, tricks and industry leading knowledge to build the next house-hold name brand. Don’t miss a post. Sign up for our weekly newsletter.
Less Development. More Marketing.
Let us future-proof your backend. You focus on building your brand.