Dropshipping has become a popular business trend in the field of online business. This business method is easy to implement in that the seller does not need to store goods, package, and transport them. This business model is suitable for businesses with little capital and new to the market. In today’s article, we will share the advantages and disadvantages of the Dropshipping model and how to implement it effectively. Follow now!
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What is the Dropshipping model?
It is a form of business that skips the storage and transportation of goods in which the seller will focus on tasks such as promoting products, closing orders, customer care, order management, etc. Simply put, this is an online business model where sellers do not need to invest capital or import goods but can still sell products.
When customers buy products, the seller will transfer orders to the supplier so they can pack and ship the goods directly to the customer. The profit achieved is the difference between the product price at the supplier and the price we sell to the customer (minus shipping fees).
With this business model, sellers can easily expand with many products. However, attention needs to be paid to choosing a reliable supplier and managing the delivery process well to ensure product quality reaches customers. Dropshipping is very suitable for businesses with limited investment capital and no place to store goods.
The advantages and disadvantages of the Dropshipping model
Advantages of Dropshipping
Compared to other forms of business, Dropshipping has many outstanding advantages such as:
Easy to deploy
Completely different from traditional business models, with Dropshipping you do not care about storing goods, packaging, shipping goods, or tracking inventory. Your job is to market products, import and sell goods, track and manage orders, and customer care.
Low capital requirement
In traditional business models, you incur many expenses to set up a business, such as raw material investment, warehouse rent, production costs, etc. With Dropshipping, you can eliminate all these fixed costs. Instead, you only need to spend money to buy a domain, web hosting, website maintenance fees, etc.
Low cost
When doing Dropshipping, you only need to pay attention mainly to product promotion, closing orders, customer care order management, etc. You do not need to spend money on renting space to store goods, Hire bill of lading staff,… This will help you save a significant amount of costs and focus on investing in building and developing sales channels.
Flexible and many product choices
A big advantage of Dropshipping is the flexibility of being able to operate from anywhere with an Internet connection. At the same time, it is easy to adjust according to market developments. You can completely learn and experience trial sales with any type of item you want, with no limit on quantity or item. You can also sell many types of products at the same time from many different suppliers.
Low risk
Because you don’t have to import goods and store inventory in advance, you don’t have to worry about being stuck with unsold inventory. This helps you minimize risks related to sluggish goods being left in moldy inventory at the yard. There is no need to worry about whether the goods you transport to customers will be damaged or broken and the shipping of goods will be taken care of by your partner.
Save time and effort
The Dropshipping business model skips steps related to storage and delivery. Then, sellers can save time and effort to focus on product promotion activities and increase sales by using dropshipping facebook ads for example.
Expand business scale easily
All activities related to goods and order fulfillment in Dropshipping will be handled by the supplier. Dropshipping allows businesses to test the market quickly and expand their product portfolio easily. Businesses have plenty of time to expand their business through multi-channel sales, convert to App, optimize and improve operating processes,…
Disadvantages
Besides its outstanding advantages, the Dropshipping business model has many limitations:
Profits are not high
With fierce competition and the popularity of this model, the profit the seller receives is often lower than that of some traditional business models. Profits will depend on product prices being competitive among retailers.
Difficult to manage quality
When you have multiple sources to supply from different warehouses, it is difficult for you to keep track of where your goods have been transported. You are completely dependent on the supplier to maintain product and service quality. This can create risks if the supplier does not ensure product quality.
Complicated transportation
With the Dropshipping business model, you cannot be proactive in shipping issues but need to depend on the supplier. Sometimes they may encounter issues related to delivery times and shipping services that affect delivery times and customer experience.
Responsible for handling when the supplier encounters errors
In some cases, you will be responsible for mistakes made by the supplier. This happens when you work with unreliable suppliers with poor-quality products and unprofessional working processes. These mistakes can damage your business’s reputation and leave customers dissatisfied.
In addition, there are many limitations when doing Dropshipping business, such as difficulty in tracking inventory, high competition in the industry, and many costs incurred when transporting goods (increased shipping rates, delivery) redelivery multiple times for the same order,…).
Instructions on how to do Dropshipping for beginners
You now clearly understand the pros and cons of the Dropshipping model. However, if you still want to try this market, please follow these steps:
Market research
Market analysis will help you find the right product that is receiving the most attention from people. At the same time, better understand the needs of target customers and analyze the situation of competitors to create a reasonable business strategy.
Select the product and contact the supplier
Although the Dropshipping model allows you to sell a variety of products, you should focus on a niche market when starting. You can sell items that are popular among people.
This step is the most important and determines 80% of success in the dropshipping business. You must consider carefully the products you want to sell. Then find a reputable supplier that provides quality products to negotiate and agree on shipping terms, and price policies,…
Create a professional sales website
Now start your campaign by building your brand. You can create a Website or immediately create a shop homepage on electronic platforms such as Amazon, Shopify, Shopee,… and then post your products there.
Your business process takes place on the Website, so you need to ensure the website interface has an eye-catching design and provides full information to customers. At the same time, ensure the sales and payment process is quick and simple.
Marketing and promoting products
In this step, you need to carry out marketing activities to attract customers to your store. By running ads on social networks (Facebook,…) and offering incentive programs to promote customer purchasing behavior.
Running Dropshipping ads on Facebook is a form of reaching target customers chosen by many businesses because it is easy to deploy, low cost, and highly effective. If you want to deploy effective Facebook Dropshipping Ads campaigns, rent an Optimal Agency account. We have a high, stable trust account with the best rental fees on the market and many attractive incentives. For more details about the service, contact the hotline: +84819004282!
Receive and manage orders
When you have an order, please place an order and transfer the order information to the supplier so they can package and ship the goods to the customer. Once the supplier has dispatched the goods, it is your responsibility to track the order and ensure that the goods reach the customer safely.
In addition, you need to do a good job of customer care to bring them satisfaction to build customer loyalty. By closely tracking orders and providing timely customer support.
Summary of orders
After a month of sales, you should summarize the number of orders and revenue of the month. Be sure to record complete data and order information to ensure you will not miss information when comparing information from suppliers to receive discounts. In addition, getting customer opinions is also a very important job you need to do. This helps you gain more experience and better sales skills.
Above is all the information about the advantages and disadvantages of the Dropshipping model so you can better understand this online business method. From there, choose a business model suitable for your business to increase profits and develop your brand in the future.
Please see more:
- Does Google Ads allow Dropshipping?
- How to use Facebook ads for Dropshipping really effective
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Frequently asked questions
The sustainability of the Dropshipping business model also depends on many different factors such as the product, the supplier’s reliability, marketing strategy, etc. If planned carefully and implemented properly, Dropshipping is a safe, super profitable, and sustainable business model.
Finding a reliable supplier is very important, and it determines the success of the Dropshipping business model. You can source supplies through online catalogs, wholesale markets, or contact the manufacturer directly. However, you need to carefully check the suppliers by considering whether the product quality, price, time, and shipping policy are suitable for your customer base.
