Ecommerce Encyclopedia

Dropshipping Definition for Beginners

Describe dropshipping definition

Dropshipping is an ecommerce business model in which sellers do not have to keep their products in brick-and-mortar warehouses. Once an order is placed, the sellers will transfer its detail to a third-party supplier, who can be a manufacturer, or a retailer, or a wholesaler. The supplier will process the order by preparing products and then transports it directly to customers. As a result, sellers can free their hands from product storage and delivery and focus more on other aspects of their business.

What to do to launch a dropshipping business?

  • Select niche products/markets
  • Pick suppliers/wholesalers
  • Register an ecommerce platform
  • Use tools to promote online stores/websites

Sellers should spend time researching dropshipping pros and cons. This ensures that they can avoid the drawbacks of dropshipping and take advantage of the benefits as much as possible.

Pros of dropshipping

Dropshipping is becoming more and more popular for many reasons as follows:

  • Unlike selling in a brick-and-mortar store, dropshipping sellers don’t have to put in too much money in the beginning and pay for overheads to maintain their business. Consequently, it allows people who have a tight budget to start selling right away.
  • Dropshipping allows sellers to easily test and scale up/down their business. When the sellers want to test the prospect of product A, just put it on their store and track customers’ responses. If customers like it, import thousands more to sell more. If they don’t, just take it down. No cost required.
  • It is an online business, so sellers do not have to work at a fixed place. They can work wherever they want, as long as that place has stable access to the Internet. So, dropshipping is very suitable for freelancers, parents working at home, and employees wanting to have a side gig to supplement their income.

Cons of dropshipping

Dropshipping also goes with several disadvantages as follows:

  • Dropshipping products do not go through the seller’s hands but go directly from suppliers to customers. Therefore, sellers cannot control product quality.
  • The dropshipping market is very competitive because of 2 reasons. First, the entry barrier is low. Second, products are not as unique as they are supplied by the same manufacturers.
  • It is quite challenging to ensure customer satisfaction and retention. They almost depend on product quality and shipping times, which are out of sellers’ control.

What mentioned above is really fundamental, please read the pros and cons of dropshipping for more detail.