What Is Dropshipping? It’s the Easiest Way to Start an Online Business!

Dropshipping is a business model that allows entrepreneurs to sell products to their customers without ever actually stocking the items themselves.

But dropshipping isn’t a new business model.

Zappos started dropshipping back in 1999. Amazon and Sears have used this business model for a while too.

Nowadays an estimated 33% of the entire ecommerce industry uses dropshipping as their primary inventory management model.

The benefit of not carrying any inventory? You can concentrate more on the important things – bringing in new customers.

In this article we’ll do a deep dive on what dropshipping is, and why you should care about it if you’re interested in business.

What Is Dropshipping?: How Dropshipping Works

At this point you might be asking yourself, how does dropshipping work?

Maybe you’ve heard the term floating around before, or maybe this is one of your first times hearing the concept.

In it’s simplest terms, once a dropshipper sells a product they will buy it from their supplier, who will ship it directly to their customer.

This business model includes a bunch of advantages for entrepreneurs, like

  • Control over your margins – you aren’t bound to a suggested retail price (MSRP) and you can decide your retail prices on your own.
  • You don’t need to be an established business entity before getting started with your store, although you will need one as you grow.
  • You have access to a catalogue of millions of products that you can add to your store through Oberlo.

What Is Dropshipping?: Dropshipping FAQS

dropshipping business model

1.How to Start a Dropship Business: Can You Dropship Products Easily?

Yes, you can easily dropship thanks to tools like Oberlo.

2. Will My Customers Know If I’m Dropshipping

If you use Oberlo Suppliers or Verified Suppliers to source your products, your customers won’t be aware that you’re dropshipping.

Why? Simply, you won’t need to worry about those suppliers including any promotional material or invoices in the packages which will be shipped to your customers.

On the other hand, AliExpress suppliers don’t know that you’re dropshipping, so we can’t make any guarantees about this.

3. Why Should Someone Buy From My Store Instead of the Supplier?

Because you’re better.

Call it better marketing execution, which reached the prospective customer first. Call it branding, which drives people to buy from you. Call it creating a store that people trust, even if based solely on location. Call it the value you offer by providing extra services or content. Call it technology that allows your customers to shop more easily.

Don’t be preoccupied with price competition – don’t try to be the cheapest, charge a price that you’re comfortable with. 

4. Shipping Takes Too Long, Will My Customers Wait?

Your task is to define your shipping policy, and then display it on your store’s website in order to set clear customer expectations.

With the commonly favored ePacket delivery option, it typically takes only 7-14 days to reach the US.

Another benefit of the dropship model is that the ePacket delivery method is now implemented across 29 countries around the world.

In addition, some suppliers keep their most popular products in US warehouses, which offers even quicker delivery.

Lastly, you can opt to source products from Oberlo Suppliers or Oberlo Verified Suppliers instead – they have a proven track record of fast shipment. However, if you choose an AliExpress supplier, we can’t guarantee a delivery time of the same speed.

5. What About Quality Risk and Copyright Infringements?

You’ve probably heard stories about the ridiculously bad quality of Chinese products. Sadly, some of these claims are  true. As usual, though, there are two sides to every story.

In reality, you can easily run into a bad supplier no matter what their geographical location is.

In the end, you need to be cautious when it comes to choosing your dropshipping suppliers. We always recommend that you source products from Oberlo Verified Suppliers or Oberlo Suppliers. 

6. Do Suppliers Speak English?

Chinese suppliers’ English isn’t always perfect, but you can contact the suppliers in advance to get a sense of their level of proficiency before doing business with them. Larger suppliers are typically quite responsive. They have sales teams managing your orders and can answer your questions via live chat or email.

7. Is AliExpress Dropshipping Favored by PayPal?

PayPal is one of the most well-known and widely used payment gateways, so it makes sense that many ecommerce entrepreneurs want to use it for their businesses. 

That said, we suggest you really think this idea through before integrating PayPal too deeply into your business. From a customer’s perspective, PayPal is a great system as it tends to favor customers over merchants. If a customer has a payment dispute or wants a refund, for instance, you can bet that PayPal will take the customer’s word and respond accordingly. All of this is meant to protect the many millions of people who use PayPal to make purchases every day.

In order to create a more stable and secure experience for customers, PayPal has set some precautions in place that can make using it as a payment gateway a bit of a hassle. For example, PayPal puts limitations on the money in your account in advance. These limitations are based on your business history, track record, ability to provide proof of delivery on time (via tracking numbers), your business’s physical location, and many other factors. Holds on your funds can sometimes last for months, which can end up being a problem when you’re trying to grow your business. 

As dropshipping becomes increasingly mainstream, PayPal is also adapting some of its policies to make it a friendlier environment for ecommerce entrepreneurs who dropship, and there certainly are merchants who have success with this option. That said, we still suggest exploring other payment gateways. Some of our top picks in this regard include Stripe, 2Checkout, and Shopify Payments. Shopify Payments in particular is a great choice if your store is hosted on Shopify because you can accept payments directly with this inbuilt system, which eliminates the complication of utilizing a third party payment gateway. Note, however, that Shopify Payments isn’t available in every country.

8. How Can an Established Businesses Benefit From Dropshipping?

When it comes to dropshipping, learning by doing works best. Dropshipping is the ideal model for first-time entrepreneurs. It’s totally understandable that an established business wouldn’t change its order fulfillment model and adapt to dropshipping, but it’s still worth considering in these scenarios as well.

Why?

Simply, dropshipping is a great model that you can use to quickly test new product ideas.

In addition, you can add a new product category within a few days and if it proves to be successful, you can stock the products in your warehouse as you usually do. This way, you reduce the risk of stocking the inventory before knowing what sells. It increases your business flexibility.

Conclusion

Becoming adept at dropshipping requires time, careful research, and planning. I still prefer it because its the easiest way to kick-off your online business and it’s totally awesome for testing new product ideas. It requires low starting capital, and therefore you have the ability to try your hand at ecommerce with limited risks.

There are lots of helpful apps and services available to use in conjunction with dropshipping, including Oberlo and Shopify. These can facilitate and automate the more complicated aspects of the dropshipping process, and eliminate some of the pitfalls we’ve discussed in this post. With these tools, you can devote your time to maximizing profits through developing the right marketing techniques and solidifying your brand. You don’t have to concern yourself with storing inventory, which only further accelerates the formation of a successful business. To learn more, check out the Oberlo app or have a look at our blog for information about the leading dropshipping apps and platforms.


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