返回
顶部
Blog > Get Started > Details

What Is Dropshipping? How Does Dropshipping Work?

July 29 2020 01:43
Winnie
603

What is dropshipping

Dropshipping is a business model through which retailers don't have to keep product inventory on their own in their warehouses. Instead, they buy from the suppliers and have items shipped directly to the customer only when a product is sold in their brick-and-mortar or online shops.


The most significant difference between dropshipping and the standard retail business is that the seller doesn't own stock or inventory. Instead, the merchant purchases inventory as needed from a supplier, usually a wholesaler, manufacturer, or drop shipping website like Crov Dropshipping, gathering both a large number of orders and fulfillment.


How does dropshipping work

Under the dropshipping model, the process which selling merchants can be summarized with the following steps:


1.    List products from a dropshipping supplier to your shop


2.    Promote your shop and get orders


3.    Place your order with the supplier


4.    Have order shipped out and get informed of the tracking


how does dropshipping work


How does dropshipping work on Crov dropshipping?

There are four approaches to do dropshipping on Crov:


1.       Sellers selling on their websites using shopping carts like Shopify, BigCommerce, WooCommerce, and more: Connect your store to Crov dropshipping, list products of your interest to your store with just a few clicks. Once a customer buys a product from Crov dropshipping on your shop, the order will be synced to Crov dropshipping automatically, and then the order placed with us will ship directly to your customer.


2.       For sellers selling on third-party marketplaces like Amazon, eBay, and more: Likewise, connect your store to Crov dropshipping, list products to your shop via bulk product upload or integration without much manual work from your side. 


3.       For sellers selling on self-developed websites: Crov dropshipping also provides API integration to those sellers with their own IT team to perform product and order data transmission more efficient.


4.       Selling on other channels? If you are selling on different channels, the bulk product and order upload function it provides can meet your dropshipping needs in general.


Get Started with CROV Dropshipping


Pros and cons of dropshipping

After knowing the definition of dropshipping, you may want to get into something more in-depth, like the advantages and disadvantages of dropshipping before starting your dropshipping business or not.


Benefits of dropshipping

1. Less initial capital and low overhead is required

Inventory is a considerable capital occupied item in traditional retail, but as mentioned above, with the dropshipping model, retailers don't have to purchase inventory upfront. As a result, it is feasible for many people, especially those who have never been in the retail industry to start their own business with little upfront investment.


Since you don't have to purchase a product unless the customer has paid you, you won't have to invest significantly in inventory, thus decreasing the risk of launching a dropshipping store.


Dropshipping also lets a third party take care of the order fulfillment, stripping a large number of overheads off your business operation, including warehouse, organize, track, label, pick and pack, and ship your stock.


2. Easy to get started and scale up

Without having to invest thousands of dollars in purchasing inventory upfront and carrying out the order fulfillment on your own, running an e-commerce store is much easier than a traditional business model. From the perspectives of capital and time investment, you don't have to worry about the following things without dealing with physical products:


  1. Managing or pay for a warehouse


  2. Handling packing and shipping


  3. Tracking inventory for accounting reason


  4. Handling returns and inbound shipments


  5. Continuously ordering products and managing inventory level


3. Flexible time and location

Without having to handle the physical products, retailers can run a dropshipping store from anywhere and anytime, as long as they have an internet connection to communicate with the suppliers and customers directly.


4. Extensive product selection and more accessible to test products

Since you don't have to buy what you're selling upfront, you can offer your potential customers an array of in-demand products.When the supplier has a new product, you can list it for resale at no additional cost. Aside from that, dropshipping allows store owners to look to test new products easily without having to take the risk of carrying an obsolete inventory.


5. Being able to prioritize on sales

With a traditional business, store owners need creative work from marketing and customer support to manage order shipping. But by leveraging dropshipping, most of the work will be borne by the supplier, and you can focus on acquiring more customers and establishing a relationship with customers.


Disadvantages of dropshipping

Like anything, there are two sides. In conclusion, the downsides of dropshipping fall into these four aspects: inventory, shipping, profit, and branding.


1. Less control over inventory level and quality

Using dropshipping as your fulfillment method means you don't keep the inventory and have no control over the products you sell. Your supplier doesn't only supply you; they also provide their products to many selling channels, making the inventory level vary frequently. On the contrary, it is most likely that you won't only source from one supplier when doing dropshipping. The number of suppliers you work with also increases the uncertainty of your inventory level. Aside from the inventory level, you don't access the physical products, and you have no idea what the supplier will get to your customers.


Inventory issues frequently occur, especially when dealing with a large number of orders, which leads to customer loss in your store.  Fortunately, there are many dropshipping sites, or apps like Crov dropshipping, let you sync with suppliers. Crov dropshipping allows you to track the inventory level in real-time and send you inventory update alerts when it hits the threshold you have set.


2. Less control over order fulfillment and leads time

Although you don't have to manage a warehouse or pay for it, you may pay for it unless you work with a high-quality supplier. The manufacturer or wholesaler you work with is in charge of managing and shipping your orders if they fail to get products to your customers as agreed, your buyers will leave your shop and buy from competitors.


3. Less profit

The hidden cost of dropshipping is that you won't have bulk pricing; you would otherwise have if you own your warehouses and stock them yourself. If you want to earn a lot of money by dropshipping, you will have to sell more products to cover the pricing difference.


4. Limited branding

Above all, the downsides of dropshipping mentioned above will cause some uncertainty to your business, leading to poor customer service. So, it is hard for a retailer to build a brand and scale up its business, totally relying on the dropshipping model.


Here is what makes your dropshipping easier

After knowing the pros and cons of the dropshipping, you must be aware that working with a reliable supplier is vital in the long run if you want to start dropshipping. We mentioned that one of the cons of dropshipping is not being in control of the products you sell could lead to potential stockout. You can work with a dropshipping app or website that enables inventory synchronization between your shop and the suppliers, which needs the app or website to integrate into the popular marketplaces or shopping cart or provide API integration. Crov dropshipping offers seamless integration with popular marketplaces and shopping carts, and we also offer API integration for you to manage your product and order in batch.


Try CROV Dropshipping


Common questions about dropshipping

1. I'm new to dropshipping, what's the benefit to having a niche compared to having multiple significant categories?

As far as what niche you select, if you're coming in fresh with no existing audience/customer base, honestly, you should probably choose something that you're passionate about, as it will help you build up that knowledge needed without it feeling like work. If you have an ideal market you'd like to sell to; you can likely find some existing market research that will help you make that decision.


2. Is there a minimum order requirement?

For most dropshipping platforms, they don’t have a minimum order requirement for retailers.


3. Do I need to pay the supplier upfront?

Suppose you choose to use dropshipping to sell products. The manufacturer or supplier is responsible for shipping to the end customers, so unless you have sold a product on your shop and got a pending shipping order, you won't need to pay the supplier.


4. As a newbie of dropshipping, how can I find the supplier I need?

You can join a congregate dropshipping platform like dropshipping.crov.com, which has thousands of suppliers available to you.


5. How to be profitable via dropshipping?

With the increase in product sales, your profit will naturally increase. You can also attract target customers through marketing activities such as promotion and advertising.


6. Is dropshipping worth it?

Objectively speaking, when working with a reliable supplier, your chances of being a successful drop shipper are higher.