How to Validate the Dropship Business Model

dropship business model

Dropship business is the early stage of e-commerce, in its simplest form.

Drop shipping is an internet business model that allows you to sell products online without having to do the fulfillment process. No need to carry inventory and no need to ship the items by yourself.

In the dropship business model, you manage the order taking process and your drop shipping company takes care of all other jobs for you.

If you are just starting out, read on to learn about the drop shipping business. Find out how the business model works, the pros and the cons, and whether the business model is the right one for you.

How a Dropship Business Works

Drop ship programs allow you to sell as little or as many products as you would like.

You buy products from a drop shipping company at wholesale. But rather than ordering stock in bulk, the stock remains with the company.

Your job is to market the products and get orders. It’s the dropshipper job to send out the goods to your customers.

A drop shipping company is a wholesaler that offers fulfillment services. They sell products at wholesale and work on your behalf by fulfilling orders using your business name.

When you make a sale, either on your ecommerce website or on external sites like eBay, you’ll have to inform your dropshipper to fulfill the order. Based on your instruction, they’ll pack up the product with your company label on the box, and drop shipped it directly to your customer.

You get profits by keeping the difference between your selling price and the wholesale price you pay the drop shipper.

In essence people who buy products from you are your own customers. For this reason, make sure your customers only know you and your company name. You should keep the drop ship companies behind the scenes.

Pros and Cons of a Dropship Business

If you are considering starting an internet-based drop shipping make sure you evaluate the pros and cons first. Find out whether the business model fits your needs.

Running a drop ship business means outsourcing handling and shipping for your products to another company.

It allows you to spend more time for doing higher value activities such as marketing and building relationship with customers. Because you know your customers better, you can offer them more products they need and improve the profitability of your company.

Although your drop shipper does almost all the jobs for you, you are still responsible for any delivery issues.

Your business partners are out of your control. Any problems related to damaged products, shipping delays or running out of stocks can cause you to spend a great deal of time dealing with angry buyers.

Is the Dropship Business Model Right for You?

Dropshipping is an ideal business model for beginning entrepreneurs. The start-up investment and the working capital are relatively low. It’s right for you if you like the idea of taking orders but you don’t like the fulfillment processes.

Just find and work with good drop ship partners and you’ll be able to focus your time and efforts on marketing and building relationship with customers.

However, be very careful with your profitability. The entry barrier is low so does the margin. If there are big players and you can’t niche down with enough volume, chances are you aren’t going to be profitable.

But if you’re lucky enough to discover a niche with validated profitability, take a look at these tips before you…

start a dropshipping business.

 

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How to Validate the Dropship Business Model was last modified: June 25th, 2015 by Paul Sarwana