What is Dropshipping Exactly? How Does it Work?
I decided to write a blog about it because I am always asked “what do you do?! What is dropshipping?!” So if you are here, you are interested in what this “dropshipping” thing is. Maybe you are seeing people like myself and others talking about it and making money from it. All these “digital nomad” people talking about it. Well, today, I am going to give you a quick overview of what exactly dropshipping is! The pros and cons and my recommendations with it.
Who knows, maybe you’ll want to start your own side-hustle after reading this by starting your own dropshipping business! With that, let’s get into it!
So what is Dropshipping exactly? It is a retail fulfillment method for stores and online outlets that gives the freedom to not have to carry or own any of the products that are being sold by you. You own a store or an eCommerce store and that is all. You own none of the products you are selling. Another way of putting it? When someone buys from you, you then go and purchase the item/product from a wholesaler, who then in return handles the fulfillment of your order by packaging and shipping the item/product.
Why would you think about this method? Simple. You do not need to purchase upfront massive inventory or handle any of the fulfillment end. So instead of purchasing a large amount of inventory, dropshippers will partner with a supplier and list their merchandise for sale.
What are the Benefits of Dropshipping?
My #1 – Low Startup Cost. This is hands down the main reason so many people are looking towards getting involved with dropshipping. As you get better and better with setting up stores, you can get one going for as little as $100. Because you do not need to purchase any inventory, the only startup costs are domain setup, Shopify monthly fee (which I can give you a free 14-day trial at the end of this post), ad expenses and, your time.
#2 – Location Independence being my number two benefit to dropshipping. Instead of having to store physical products, the only requirement is a laptop and wifi. Now-a-days that can practically be anywhere in the world. Yes, I was running my stores from all over Thailand. Even in places as remote as Pai, Thailand.
#3 – Selection of Products. Because you do not need a warehouse, that is right, you can sell almost anything. As long as you are able to find a wholesaler to dropship the products for you (send the product to the consumer) than you can sell it!
#4 – Scalability. Normally, with most businesses, the more business you get, the more work you have to do. Well, dropshipping this is an exception. Yes, you may have to handle more customer calls, however; the majority of the work load when scaling falls on the shoulders of your suppliers and them fulfilling (packaging and sending) your orders.
#5 – Overall Experience. If you are looking to take the route of an “entrepreneur” and starting your own business (offline or online), dropshipping may be a great place to start. You will learn how to run a real business. Marketing, Online Markerting, Customer Service, Logistics, Credit Card Processing, Refunds/Returns, Outreach methods and, Selling yourself to potential Suppliers. I would say, for the minimal startup cost, this is a fantastic way to learn about business.
From running multiple stores the past few years, I strongly believe in this model, even in 2017. I have met a dozen people at least during my travels this past year who are also running successful dropshipping stores and don’t think it is going to slow down anytime soon.
What are the Disadvantages of Dropshipping?
With every positive there is always a negative and dropshipping is the same. There are so many incredible benefits and upsides, however; there are detriments as well.
My #1 – Inventory Issues. You are running your store from literally anywhere in the world (almost). You have zero inventory in your visible site. Unless you have setup the proper inventory management system, inventory can be a nightmare as it has been in my past. Orders coming in and the supplier you purchase from shows an “Out of Stock”. This changes constantly, so figuring out the best way to keep up the date is a requirement. Theres solutions available out there to help mitigate this as well, so don’t stress too much!
#2 – Errors by Wholesalers. No one is perfect and sometimes your wholesalaes or “supplier” makes mistakes. Well, you will be whole heartedly held responsible from your customer because you are believed to be the one who shipped it.
#3 – Customer Service. I strongly suggest picking a niche you have some interest. Just know, if you build it, they will come. And customers will come, and they will have questions. I have had experience with stores that I have literally no interest in and having customers call in asking questions about products that A you don’t give a shit about and B you have literally no idea about is daunting to say the least.
#4 – Margins. Major disadvantage is the low margins you could be working with. It’s easy to get started, you can imagine many new comers will enter the market and fight for the cheapest price to get traffic started. This can mean you can see items selling for as little as 5% in markup.
Theres always downsides, but just know that while dealing with these disadvantages, you will learn a ton about business. It’s impossible now too. And every business has downsides.
Where can you see people selling dropshipped items?
To be honest you may not know it, and it is truly hard to point out, however; dropshippers are literally everywhere. From eBay to Amazon to hundreds of thousands of small niche sites are all dropshipping products.
I remember when I was working for my family business, a company we eventually ended up partnering with that handled all our sanitary suppliers. One day, a rep came in for a meeting. It was the first time I met this guy and quickly realized what we were dealing with while I asked him about their office space and how many employees they had. He told me a number along the lines of less than 10. I followed up by asking him how they ship out all these products they have that they are selling to us if they only have 10 employees. He responded with a long answer that basically said they don’t have a warehouse and they dropship all their orders. All 10 employees were sales reps/admin employees. Point of this story was to show you that even businesses that you may be dealing with in person can potentially be a “dropshipping company”.
Can you make any money dropshipping?
The question that is asked probably more than any question. And the answer is yes. I’ve met people who make over five figures a month to people like JohnnyFD who has sold two stores totaling over $100,000 for both to others who generate hundreds of thousands of dollars in gross revenue a year to someone recently who sold a store for over seven figures. Yes, over a million.
Now, let me warn you! These people may be exceptions for not everyone, including myself if making over $10,000/month is net profits or selling a half million in gross sales/year. BUT, what I am saying is, it is very possible.
Yes, you can also lose money as well! It happens, it’s happened to me, it’s happened to countless people who get into the business of dropshipping, but; the best part is, there’s millions of items you can sell online. Move onto the next niche is one doesn’t work for you!
Who Should Start a Dropshipping Store this Year?
So you may be thinking that anyone can do this, right? Theres some things I would like to point out before I agree with you. If you are living in a country that using your credit cards to purchase products online, and receiving packages via UPS/FedEX or any other carrier is even almost normal, than dropshipping can work for you if you follow the right process and formula. And second, if you have the drive to build a business. This means you are willing to put in the work in the beginning. Your best best is to take a few months and learn the proper formula and build as you learn. This will ultimately give you the best result out of the gate.
Who are people that may want to look past dropshipping? People who want to live the 4-Hour Work week without spending any money. Yes, you can run a fully passive dropshipping store, however; it will cost you for outsourcing and starting out, this may deem difficult considering you do not even know what to outsource.
Recommendation to get started!
So you think dropshipping may be your next favorite side-hustle? Maybe you want to leave your cubicle and live the location independent lifestyle. Or you just want to earn some extra income. I strongly suggest you take the free 10 day mini course offered by Dropship Lifestyle. It’s a great learning tool for you to open your eyes further into dropshipping.
Ready to make the investment in yourself and your future? I strongly suggest learning the right formula with Dropship Lifestyle. I invested in myself and my future by purchasing this course two years ago and still to this day, use the resources within it. The best part? The courses are updated with new sections every year! This course literally takes you step-by-step on how-to get from nothing to a fully operational store, making sales.
Remember! If you have any questions, you can always reach out to me and I will do my best to help and guide you in the right direction!
Thanks for reading and, all the best,
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