What is Dropshipping and How Does it Work?
I know you’ve seen the ads on social media – “how I made millions on dropshipping” or the “make millions quick by dropshipping” clickbait. Drop shipping is often portrayed as a no-hassle, get-rich-quick scheme, but it’s not. Just like anything, it takes dedication to get your startup running and successful. So, what exactly is drop shipping? For many people and businesses dropshipping has simplified the process of starting an online business. The business itself no longer manages inventory, warehousing, stocking, customer fulfillment, or any of the backend tasks. One of the biggest differences between dropshipping and the standard retail model is that the selling merchant doesn’t stock or own inventory—they act as the middleman and a third party fulfills the orders. Despite the many benefits, drop shipping can be dense for beginners to understand, especially considering all the platforms available today. In this article, we will outline what dropshipping is, how it works, and how to utilize it in. We will also be touching on some of the popular platforms available today!
What is Dropshipping Fulfillment?
Dropshipping is when a business outsources shipping fulfillment to a third-party supplier. The business itself doesn’t stock the merchandise they are selling, which can lead to less liability and production waste for business owners. For example, if you are selling graphic tees, you can create an online storefront by working with a dropshipping platform while maintaining 0 inventory.
You can choose your clothing items from the platforms options and decide the graphics you want to be placed on each item. From here, the products can be placed on the site using product templates. When a customer places an order, the order will be fulfilled by the manufacturer, wholesaler, or retailer. The fulfilment center will also take care of packaging and shipping your products.
If there are any fulfillment issues or shipping delays, they can still be resolved, but it will require communication between the brand and the supplier. The most important aspect of dropshipping is to ensure you follow up on orders and focus on the customer experience. Although it takes quite a few tasks off your plate, it also reduces the level of control businesses have over manufacturing, shipment, delivery, and package presentation.
Overview of the Dropshipping Process
- The customer places an order
- The seller sends information to the supplier
- The supplier fills and ships the order
- The customer is alerted upon shipment
- The product is delivered to the customer
- The seller is alerted of delivery
Typically, this entire process is automated which is why it’s enticing to small businesses or startups. You can scale a business as a small team or an individual because of the automation and the low cost of dropshipping. Let’s say you’re an apparel company and you build a shopify website. Printful fully integrates with your ecommerce store – when you receive an order for a t-shirt with your custom design your fulfillment service (Printful,Printify,etc.) are automatically notified. From there, they dispatch the order to the designated supplier and the process begins. The designated supplier will print the t-shirt, package it, and ship it to your customer with your labeling. Ideally while the fulfilment service is taking care of the manufacturing your Shopify store is automatically sending updates to the customer such as “order received”, “order processing”, “order shipped”, and “thank you”.
4 Popular Dropshipping Platforms
Shopify
Shopify describes their business best – “Shopify is a complete commerce platform that lets you start, grow, and manage a business.” It’s also the platform we recommend and build sites on daily for our clients with e-commerce due to the user-friendly backend, API integrations, social media integrations, platform flexibility, shipping discounts, scalability, cost effectiveness, site customization (including HTML), analytics, 24/7 support, and hundreds of other reasons. Shopify’s mobile app also lets you manage most of your day-to-day from your phone. You can add products, fulfill orders, do email marketing, add team members, see analytics, and much more right from the app.
Shopify also offers a POS (point-of-sale) system for those businesses that have a standard brick-and-mortar which fully integrates with the website. Rewards programs, customer data, inventory, analytics, and much more integrates seamlessly.
Oh, and did we mention that shopify handles all the transactions for you? There are options for third party processors if you’re already working with one but by default shopify will handle all the processing and the payouts are quick.
We love this platform, our clients love this platform, and dropshippers love this platform. The basic plan will work for most businesses, as you scale consider upgrading to the Shopify or the Advance. $29 a month is a small price to pay, utilizing this platform will eliminate a lot of redundancy, easy scalability, and give you access to an unlimited number of tools.
*Shopify’s plans from their website as of October 20th, 2022. More information at https://www.shopify.com/pricing *
Amazon
Businesses can dropship a variety of products on Amazon, which is a great opportunity to be exposed to millions of online customers. The Fulfillment by Amazon program allows businesses to ship products directly to an Amazon warehouse where they will be stored until a customer places an order. Since Amazon has some of the fastest market shipping times, this can be beneficial for expediting delivery and efficiency without hassle on your end. This also allows you to focus on what you enjoy most – creating great products, Amazon takes care of the rest.
Other benefits include customer service, handling returns, integration with other platforms via software like “Multiorders”, unlimited storage space(literally), shipping discounts, low cost, and wicked fast shipping.
FBA (Fulfilment-by-amazon) is enticing to small businesses or startups because of the Amazons ability to manage a big portion of the process. Utilizing their service eliminates the need to worry warehousing, packaging, shipping, returns, and customer service at a reasonable rate. You would need a handful of people, a warehouse, software, packaging supplies, and more if you took care of it yourself.
*More information at https://sell.amazon.com/fulfillment-by-amazon *
Printful
Printful specializes in print-on-demand dropshipping which means sellers can choose from a variety of their blank products, including posters, bags, hats, shirts, and hoodies, and add their own logo or graphic design. Once you add the product templates to your live store, Printful will get notified when a customer places an order.
The product will be printed, created, packaged, fulfilled, and shipped by the Printful team. If you are interested in selling products that require custom printing, Printful is a great option as there is no initial investment for businesses. Printfuls free plan doesn’t charge a fee upfront, you simply price the item to account for processing fees and a percentage of each order that will be sent to Printful.
Printful does offer paid packages – Plus and Pro. Starting off the free package will suffice but as you scale the paid packages offer enticing benefits. With the pro package you’ll get access to a keyword tool for Esty, embroidery files digitized for free, a background removal tool, a custom mockup maker, discounted carrier shipping, and more. And you get all this for only $49 a month, a small price to pay for the benefits.
*Printful pricing plans as of October 19th, 2022. More information at https://www.printful.com/pricing
Printify
Printify is another print-on-demand dropshipping platform that promises higher profits for businesses by taking a lower cut of overall costs. They are known for robust scaling during busy seasons, which means you don’t have to worry about fulfillment issues around the holidays. The platform allows businesses to choose from over 750+ products and brands, so you have flexibility on what your customers receive. Printify also integrates seamlessly into Shopify automating the entire order process.
Printify’s plans are affordable too – the standard plan is free, the premium is $29 a month, and for the enterprise (10,000+ daily orders) you must contact them for pricing.
*Printify’s plans as of October 19th, 2022. More information at https://printify.com/pricing/ *
Conclusion
A dropshipping e-commerce strategy can be profitable with low overhead due to the portion of the process that become automated or handled by a third part, however, it’s not as easy as the “influencers” make it out to be. Typically, margins are lower on dropshipped items due to the fees associated with third party outsourcing. Also, the market for some products is extremely saturated due to the low cost and ease of setting up a dropshipping e-commerce store.
For businesses that make their own products or purchase items in bulk for resale you can opt to use a platform like amazon FBA. Uilizing FBA you can ship your inventory to them and allow them to handle the processing, packaging, returns, customer service, and warehousing.
It’s not as easy as some say, if it were, everyone would be a billionaire. Before starting take the time to research the different platforms, product options, and product market. If you have questions please reach out, we have built websites utilizing most of the dropshipping applications out there. We’d be happy to help or work with you on a business idea you have in mind!
