Definition:
Dropshipping is a business model based on offering products in an online store without having them in stock. It is about selling products from suppliers in your online store for which you are going to take a commission. This way, you don’t have to worry about your store’s stock, as it’s competition from your suppliers, and you can focus all efforts on selling those products.
They are online stores at low cost, in which the vast majority of procedures will be made by your supplier, so it is a simple and achievable business model without the need for a large investment, fixed costs, or logistics. Undoubtedly, the great advantage of this type of business is that the risk-cost ratio is very low, and it is an option to take into account for many digital entrepreneurs.
Advantages and disadvantages of dropshipping
Among the advantages that we can list of creating an online business of these characteristics are the following:
- It does not require a significant initial investment of capital because you do not have to have a minimum stock to start online sales.
- Savings throughout the logisticsprocess: no need to worry about packaging, returns, etc.
- Fixed expenses are limited: you only need a small office and you do not have to have or maintain a warehouse.
- The characteristics of this type of business allow us to offer a more extensive and varied catalog.
Creating an online store with dropshipping also has some disadvantages,which makes it a limited model:
- The margins are very low as it is a very competitive niche with very reduced prices.
- Having several dropshipping suppliers complicates shipping costs,since the customer can make a multiple order with products from different warehouses.
- It is very complicated to coordinate with suppliers to control inventory.
- Being an intermediary makes the owner of the online business responsible for possible errors that occur during shipping.
Some of the best-known dropshipping providers are AliExpress, from the Chinese group Alibaba, and BigBuy.
What are the most profitable products?
The most suitable products to sell in an online dropshipping business are those that, due to their low cost and resistance, ensure a low percentage of claims and returns. In this sense, experts recommend above all office supplies and toys.
To obtain higher margins, it is recommended to negotiate with suppliers in order to obtain lower prices. Having an alternative supplier to be able to solve a foreseeable setback in a delivery or make a good digital marketing strategy are other keys to ensure success in a dropshipping business.
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