Chances are if you are active in the online marketing world. Then you have heard of Drop Shipping. However, as a marketer do you fully understand What Drop Shipping Is?
What Is Drop Shipping?
Drop Shipping is a retail fulfillment method where online marketplaces don’t need to carry items in stock. Instead, whenever a product is sold, the retail company purchases the item from the manufacture and has it shipped directly to the customer. This allows the retail company to never see or handle the product. Everything is fulfilled behind the scenes!
The biggest differentiating factor between a normal retail model and drop shipping. Is that in a drop shipping model the retail company does not own any inventory. This allows digital entrepreneurs to create a full scale business with little to no start up cost. In addition, growth and scalability is indefinitely easier in a drop shipping model because of the direct connection to wholesales and manufacturers.
Low Start Up Cost – Drop shipping allows almost anyone to start and run an e-commerce store. Unlike traditional methods where retailers would need to purchase a vast amount of inventory, costing tens of thousands. Now your average Joe, can hop online build out a website and link it directly to a drop shipping service that will fulfill all the orders.
Easy Set-Up – With drop shipping, you don’t have to worry about:
- Managing or paying for a warehouse
- Packing and shipping your orders
- Tracking inventory for accounting reasons
- Handling returns and inbound shipments
- Continually ordering products and managing stock level
In addition, a store can be created from anywhere in the world. All you need is a laptop and an internet connection!
Vast Selection of Products – Due to the fact that you do not need to purchase inventory. You can list thousands of products on your store. This will enable your shop to attract a larger audience pool. Allowing your shop to be the one stop shop!
Easily Scalable – With a direct line to the manufacturer or wholesale sellers you will be able to move a massive amount of quantity without even breaking a sweat. These companies were created to handle big volume. In addition, the higher order quantities typically receive a better price per unit. Allowing a bigger % profit for your shop or a better deal for your customers.
Highly Competitive Niche – Because method is so easy to implement, there are so many stores out there. The vast amount of digital entrepreneurs either drop ship or do social media marketing. In either niche, the vast amount of marketers causes the margins of profit to decrease. In order to win over the audiences you have to be providing the best deal out there. Which means you have to beat all the other competitions prices. This can be very tough sometimes impossible.
Shipping Complexities – When it comes to listing tons of products on your site, shipping could become a serious headache. Most drop shipping companies do not house every single product. This means that you will need to integrate multiple drop shipping services. However, different services call for different pricing.
Meaning that if a customer purchases 3 products off your store. But each product is from a different drop shipper. You’ll incur three separate shipping charges for sending each item to the customer, but it’s probably not wise to pass this charge along to the customer, as they’ll think you’re grossly overcharging for shipping! And even if you did want to pass these charges along, automating these calculations can be difficult.
Is it Worth It?
Drop Shipping is a stress free way for anyone to become a retail store. The implementation of this method allows for low startup cost, easy growth, and a wide range of product selection. However, due to the fact that it is so easy to implement this method this niche has become highly competitive. But do not let this deter you from starting your own online drop shipping store.
When it comes to these new highly competitive niches one thing most experienced marketers will understand. Is that they are full of brand new entrepreneurs who do not yet have the experience or the knowledge on how to grow or start a business. This has allowed many experienced marketers to make millions in this niche.
In addition, when speaking of a highly competitive niche we are speaking about drop shipping retail stores. But what many marketers forget is that there are a lot of untapped niches in the world that don’t yet have stores created for them. There are a ton of diamond niches out there that need to be taken care of. All it takes is a little research and understanding to see the diamond in the rough.