How Does Dropshipping Work?

Dropshipping is the process of selling items to customers without ever having stocked them in the first place. Confused yet? You’re not alone. Dropshipping is entirely different from, for example, a grocery store or clothing store. Below, you can find out how and why.

What is Dropshipping?

Dropshipping is fast-becoming a popular method for business owners to help bring overheads down, streamline processes, and make physical stores far smaller than they need to be. It involves selling and advertising items for customers to buy but having them shipped directly to them from a third-party instead of stocking them in-store. The store owner and “seller” of the goods, may never actually see the product they are selling.

What Are the Benefits of Dropshipping?

Now that you know how does dropshipping work, it’s essential to understand then why store owners prefer this method over conventional methods. The first and most important benefit is how little start-up capital you need. When you first get into business, the debt can be crippling. However, if you start up an eCommerce store, for example, you don’t need to purchase a significant amount of inventory. Instead, you can build a relationship with a supplier and make a call when someone buys the product you’re selling.

Another significant benefit is that you don’t need to invest in large premises. If you were to own the items you were selling, you would need to lease or buy somewhere to store them. If you run your business through a dropshipping model, you can work from a small office or even your own home.

Why Wouldn’t You Choose Dropshipping For Your Business?

For all the benefits of dropshipping when you see how does dropshipping work, there are equally as many disadvantages. The primary drawback is not knowing at any given moment what the inventory levels are like. Unless you can sync your stock levels with those of the supplier, you will only know there is enough stock to fill your customer’s order when you go to order it. Sometimes, this can lead to customer disappointment if you aren’t able to give them what they want.

Dropshipping is fast-growing in popularity for eCommerce stores, so if you’re ready to start up your own business, there’s every reason to consider the pros and cons for yourself.

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