Drop-shipping is a kind of retail fulfillment service. With this, you can list products on your shop or web store without having any of the items in your possession. That is because drop shipping service providers stock the items instead. And when an order comes in, you can relay it to your drop-shipping partner, usually a manufacturer or wholesaler, who will send the items directly to consumers. This means you can have a wide range of products and serve a wide range of customers.
This method of commerce has been popular since 2020. That year, the global drop-shipping value was $128.6 billion. It is expected to reach $476.1 billion by 2026. That is a significant increase of 3.5 times or $347.5 billion. This growth is largely due to the change in people’s shopping preferences. Since the pandemic started, an increasing number of consumers are choosing to do their shopping online instead of in physical stores.
Furthermore, drop-shipping is receiving an increase in popularity from cross-border e-commerce. That means more buyers are purchasing goods from sellers outside their own countries. Cross-border e-commerce is so huge that it can reach $3.53 trillion in revenue by the end of 2022. Europeans are the ones to thank for driving this growth, especially those who come from Ireland.
Image by Claudio Schwarz on Unsplash.
Benefits of Dropshipping
If you are thinking of starting a business using drop-shipping, there are several benefits you can enjoy:
- Lower startup costs. There is less risk in drop-shipping because you do not have to shell out huge amounts of money upfront for inventory. There is also a minimal risk in case of changes in consumer trends because you are not the one financing and producing the goods.
- Minimal business risks. Since you do not own the inventory, there is only a small likelihood of financial loss. At most, you will only lose the money you used to set up your web store and anything you spent on advertising on Google services and other marketing activities.
- Less backbreaking work. You do not have to deal with the challenge of packing the items and sending them out on time. Your drop-shipping partner takes care of that for you.
But for all its benefits, drop-shipping has its share of downsides. One thing you should always look out for is scams. These will cost you a lot of money when you try to refund customers. Not only that, your reputation will take a hit, and you will likely receive bad reviews and have difficulties setting up another business.
On that note, here are the things you should do to avoid scams:
1. Conduct transactions through legitimate platforms only.
Those who are unfortunate enough would encounter the “magical seller”. These are sellers who disappear as soon as you make an upfront payment for the service. To avoid being scammed of your capital, make sure you only complete transactions on legitimate platforms. That means if your supplier is on Alibaba, pay them for the goods or the drop-shipping service only on the site. In this way, you can make a complaint if they think about doing the disappearing act on you.
2. Read reviews first.
One thing you could do to protect yourself from drop-shipping scammers is to read customer reviews first. Often, reading reviews can help you weed out the bad actors from legitimate drop-shipping service providers. In this way, you can avoid the headaches that come with dealing with difficult drop-shippers.
And even if the service you are considering is well-known, it is still in your best interest to read about other businesses’ experiences with them. Because in some cases, the relationship might start out smoothly but become rocky and problematic at a later time.
3. Make sure the drop-shipper is easy to contact.
When you visit a dropshipper’s website, check their contact details. Send them an email, give them a call, and if it is in your capacity, pay them a visit to their office. These steps are all to ensure that they are legitimate businesses. Oftentimes, those who pose as drop-shippers but are not easy to reach out to for communication are unreliable. Also, be on the lookout for websites that pose as legitimate drop-shippers.
Image by Chuttersnap from Unsplash.
4. Test the service first
Before you put your capital into the drop-shipping service, test them out first. Order samples of products you want to include on your website. Take note of the specifications and quality of the samples. It would also be a great idea to do this several times. That might mean more money out the window, but at least you can ensure the consistency of the products.
5. Steer clear of annual or monthly fees.
While on the lookout for a wholesale clothing supplier for your fashion business or a manufacturer for your sporting goods store, avoid suppliers that ask for a membership fee. There are instances when these businesses only care about their own profits. And if that is the case, your own business could suffer.
Other things to consider
To protect yourself and your customers, be sure your partner is reliable. They should be open to communication and willing to help you resolve issues with orders. As well, do not get blinded by “get rich quick” schemes. These could lull you into believing you will double or triple your capital in a short time. That is not the case. Remember, drop-shipping is a fulfillment option, not a business model.
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