Dropshipping Guide

What is dropshipping and how does it work?

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What is dropshipping and how does it work?

Introduction to dropshipping

Dropshipping is a method of shipping and delivering orders for retailers that doesn't need the seller or company to have the products in stock. When the seller sells an item, they buy it from a third party who ships it directly to the end customer. As a result, the seller sees or handles the product in question.

In this system, the seller is in charge of order management and invoicing, but they do not have to deal with the storage, packaging or shipping of the products.

How Dropshipping Works

In dropshipping, since the seller does not have stock of their own products, they use a third party to organise the sale of the products in their store. This distributor can be either the manufacturer of the product itself, a retailer or a wholesaler. The difference between them lies in the volume of stock that they have of the products in question.
Potential Benefits of Dropshipping

Potential Benefits of Dropshipping

Dropshipping is a very interesting method since it significantly reduces risk and provides greater business flexibility. Here are some of its advantages:

Reduced maintenance and investment costs

By not having a physical warehouse with inventory, the costs of starting and maintaining a business are reduced.

Great flexibility for business location

In fact, since there is no physical inventory, you only need an Internet connection to manage sales. This allows you to locate your business in places where renting a warehouse can be very expensive, thus reducing costs.

Extensive product range

Not having to have a physical inventory of products means it is possible to have a larger catalogue than that of a seller who does not use dropshipping.

Potential Disadvantages of Dropshipping

Although the advantages of dropshipping are numerous, it is also important to know the potential drawbacks, such as:

Lower profit margin

Not selling the products directly means that it is the supplier or dropshipper who sets the margin.

Great competition

Because the investment and risk of creating an online business based on dropshipping are so small, this business model is increasingly prevalent, leading to little brand differentiation and increased competition.

Lack of suppliers

Sometimes, when you market a product that is very trendy—and tying in with the previous point—it is likely that many of your competitors are also dropshippers, so there could be a lack of stock, delays in supply, etc.
Alternatives to dropshipping

Alternatives to dropshipping

If you're looking for alternatives to dropshipping, let us explain how you can grow your business with FBA, one of the most advanced fulfilment networks in the world.

Conclusion

Now that you know the fundamentals of dropshipping and its alternatives, choose the option that best suits the needs of your e-commerce to optimize your sales and maximise your profits.

FAQs

What is dropshipping?
Dropshipping is one way in which a seller can outsource the process of storing, packaging and delivering products to customers through a third party.
Is it essential to use dropshipping to supply my products?
No, it's not mandatory to use dropshipping.
Is dropshipping allowed on Amazon?
You must follow Amazon's dropshipping policy if you intend to place Amazon orders through a dropshipper.
Does using dropshipping increase my costs?
Comparatively, sellers face lower overheads when using dropshipping to complete the fulfilment process. However, each individual case is different, as it depends on who you sign up with and what they supply you.
Is it necessary to have a physical store and an e-commerce store?
No, it's not mandatory to have a physical store if you have an e-commerce business.
Do I have to purchase the items in advance?
If you use a dropshipper, they usually also take care of the purchase of the products (although it depends on the exact contract you signed). If you use Amazon FBA, then you need to purchase the items in advance and ship them to your nearest Amazon warehouse before you can start offering those products for sale online.

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