What Is Dropshipping and How Does It Work? (2022)

If you’ve thought about starting your own ecommerce store, you may be wondering how you’ll get access to an inventory of products, or where you’ll store them. Under the traditional business model, retailers are responsible for the order fulfillment process from start to finish. That often means leasing warehouse space for products, handling supply chain and inventory management, and managing shipping costs. However, there’s an alternative business model for fulfilling customer orders placed through an online store: dropshipping. 

 

DROPSHIPPING 

 

Herer is everything you need to know about the benefits of dropshipping for online store owners, and how you can start today. 

 

Dropshipping is an order fulfillment method where a business doesn’t keep the products it sells in stock. Instead, the seller purchases inventory as needed from a third party—usually a wholesaler or manufacturer—to fulfill orders. The biggest difference between dropshipping and the standard retail model is that the selling merchant doesn’t stock or own inventory—they act as the middleman. 

 

What is a dropshipper? 

A dropshipper is a person or business that uses the dropshipping model of buying inventory and fulfillment logistics from a third party, instead of warehousing and shipping the products themselves. Because dropshipping relies on a third-party supplier to handle inventory warehousing and order fulfillment, a dropshipping operation may be managed by dozens of employees or a single business owner. 

 

How does dropshipping work? 

The dropshipping process is essentially a relationship between a customer-facing store and a supplier. 

There are two common approaches to adopting a dropshipping business model. 

The first is to seek out one or more wholesale suppliers located in a particular Market (or anywhere else in your area) on your own using a supplier database. Examples of popular online supplier databases include Konga, Jumia etc.

 

You know the wholesaler or the manufacturer - you know the customers that need the products. you do the wahala of buying from point A (seller)  and taking it to point B (buyer)

 

 

 

Benefits of dropshipping

Here are a few other reasons why dropshipping is such a popular e-commerce business model for both large and small businesses.

 

1. Less upfront capital required

Probably the biggest advantage to dropshipping is that it’s possible to launch an e-commerce store without having to invest thousands of Naira in inventory. Traditionally, a brick-and-mortar or e-commerce retailer has to tie up huge amounts of capital purchasing inventory.

With the dropshipping model, you don’t have to purchase a product unless you’ve already made the sale and have been paid by the customer. Without significant upfront inventory investments, it’s possible to start dropshipping and become successful with very little money.

Additionally, because you’re not committed to selling through any inventory purchased upfront, like in other business models, there’s less risk involved in starting a dropshipping store.

 

2. Easy to start

Running an e-commerce business is much easier when you don’t have to deal with physical products. With dropshipping, you don’t have to worry about:

§  Managing or paying for a warehouse

§  Packing and shipping your orders

§  Tracking inventory for accounting reasons

§  Handling returns and inbound shipments

§  Continually ordering products and managing stock level

 

3. Low overhead

Because you don’t have to deal with purchasing inventory or managing fulfillment centers, your overhead expenses are quite low. In fact, many successful dropshipping stores are run as home-based businesses, requiring little more than a laptop and a few recurring expenses to operate.

As you grow, these costs will likely increase, but will still be low compared to those of traditional brick-and-mortar businesses.

 

4. Flexible location

With dropshipping, a successful business can be run from just about anywhere with an internet connection. As long as you can communicate with suppliers and provide timely service and support that meets customer expectations, you can run and manage your business.

5. Wide selection of products to sell

Since you don’t have to pre-purchase the items you sell, you can offer an array of trending products to your potential customers. Plus, you can rotate or change your dropshipping products list without having to worry about unsold inventory.

If suppliers stock an item, you can list it for sale on your online store at no additional cost.

6. Easier to test

Dropshipping is a useful fulfillment model for both launching a new store and for business owners looking to test the appetite customers have for additional product categories, e.g., accessories or wholly new product lines. The main benefit of dropshipping is, again, the ability to list and potentially sell products before committing to buying a large amount of inventory.

7. Easier to scale

With a traditional retail business, if you receive three times the number of orders, you’ll usually need to do three times as much work. By leveraging dropshipping suppliers, most of the work to process additional orders will be done by the suppliers, allowing you to expand with fewer growing pains and less incremental work. 

Sales growth will always bring additional work—especially related to customer support—but businesses that utilize dropshipping scale particularly well relative to traditional e-commerce businesses.

It’s important for people to understand that you’re building a machine. If you don’t pump money into the system, you can’t make it pump more money out. Dropshipping is a money multiplier.