Everything You Need to Know About Dropshipping

5 min read

As you look to set up your online business, you’ve likely come across the word dropshipping before.

Many ecommerce businesses swear by dropshipping, but you probably want to know the details.

Luckily, we’re here to help.

If you’ve got questions about dropshipping, we’ve got answers. We can even offer you an easy way to implement it with your sales funnel.

What is Dropshipping?

Dropshipping is a type of retail fulfillment method where the online store buys an item from a third party whenever they sell a product. That third party then ships the product to the customer.

Let’s use an example of the dropshipping process.

If you’re an online company that uses dropshipping, you’ll have a customer buy a product from you. For the purposes of this example, let’s say that product is $50.

You promptly receive the order for that product.

As the online store, you then forward that order to your dropshipping partner. You would pay the wholesale price for the product, which would be $40 in this example.

Your partner, the supplier, will then ship that product to the customer.

For your part, you don’t have to worry about shipping or storage. The customer gets the product, and you get to keep $10 in profit.

That’s dropshipping in a nutshell.

It’s easy to see why dropshipping has become so popular with many ecommerce sites.

According to E-DSS.org, roughly 27% of online stores now use dropshipping.

Famous online retailer Zappos started out as a dropshipping company. Amazon does it too, though not with all their products.

So why do so many love it?

Let’s go over the major advantages dropshipping provides, while also reviewing some of its drawbacks. In this way, you can decide if dropshipping is the right choice for your business.

The Benefits of Dropshipping

Dropshipping gives online businesses some notable benefits that make it an attractive option.

Great for new companies

If you’re first starting out, dropshipping can be especially useful.

Dropshipping, in a sense, makes running a business much easier.

Think about all the things you don’t have to worry about when you’re using dropshipping.

You don’t have to be concerned with managing warehouse space. You’re not in charge of shipping management. You don’t have to track your inventory.

All of these advantages make dropshipping a great choice for a new online company.

Less capital needed

On that note, you also don’t need a lot of capital when you launch your business with dropshipping.

Many business owners need to spend thousands of dollars just to get a company up and running.

With dropshipping, you can avoid that expensive cost since you don’t have to buy a ton of product inventory.

In other words, you only have to purchase the product when you make a sale.

Better product variety

Dropshipping allows you to offer a greater variety of products to your customers.

If your dropshipping partner has it in stock, then you can offer it.

This can make your efforts at cross-selling and upselling even easier. Offer products that complement each other and you’ll have increased sales and satisfied customers.

Increased flexibility

Dropshipping also offers you increased flexibility in how you run your business.

Since you don’t store and ship the items yourself, that means you can run your company from almost anywhere.

This is especially handy for people who want to run an ecommerce business from a home office.

All you need is an internet connection and your good to go.

You get to manage your sales funnel, talk with customers, and communicate with suppliers all from a single location.

There’s no need to run a warehouse in this scenario.

Dropshipping essentially lets you concentrate on other aspects of your business.

Drawbacks of Dropshipping

As you think about running a dropshipping business, you should also know it comes with a few drawbacks. Let’s go over some of them now.

Customer service difficulties

Your customers expect to get the products they paid for in a timely fashion.

What happens if something goes wrong with the shipping process? What if the supplier screws up?

You want to know who gets the blame? You do.

Any mishap on the supply side of things will be something you have to answer for, even if it’s not your fault.

Needless to say, this can cause a lot of frustration if you’re not prepared for it.

So using a dropshipping supplier can make the customer service side of things more complex.

Inventory shortfalls

While not having to produce, store, and ship your items can save you a lot of time, it can also introduce some headaches.

For example, if your dropshipping supplier were to run out of an item that customers have paid for, you could be put in a difficult position.

That leaves you dependent on the supplier to keep all the items you need for your business in stock.

The best suppliers will make sure that’s not an issue, but problems and unexpected mistakes may still happen.

Thin margins

Dropshipping may sound like a great way to earn some easy money, but for many businesses, the profit margins can be a bit thin.

That’s partly because the space is so competitive.

Many online stores try to attract customers through extremely low prices, even if it cuts into their profits.

Even if these stores offer inferior products and poor customer service, some customers will still only compare prices.

To make money with dropshipping, you’ll need to go the extra mile with more effective sales funnels, better products, great customer service, and more.

You’ll have to separate yourself and stand out from the crowd.

Dropshipping: Frequently Asked Questions

What products can you dropship?

You can dropship almost anything provided there’s a dropshipping supplier that has it.

Do you need a business license for dropshipping?

Local governments will usually require that a business get a license. That business license is something that should be renewed with the city or town regularly.

When it comes to dropshipping, however, the requirements might be different.

Always check what your city’s laws and regulations are before you start.

Is dropshipping legal?

This question seems to come up a lot, so the answer is yes.

Yes, dropshipping is legal. It’s just another way to fulfill your orders.

Will customers know you’re using dropshipping?

Not unless you specifically tell them.

From the customer’s point of view, when you use dropshipping, all orders are handled no differently than if you were shipping the items directly.

Can you make money from dropshipping?

Very much so. Just make sure you’re providing great products to your customers in a timely manner.

Also make sure you’re using a dropshipping supplier you can trust.

Enjoy the Benefits of Dropshipping Thanks to ClickFunnels

If dropshipping sounds like an intriguing option you’d like to try out, ClickFunnels makes it easier than ever.

ClickFunnels lets you build effective sales funnels that will help you convert more customers.

ClickFunnels also gives you the ability to integrate your shipping with third-party applications like Shipstation, Disc Delivered, and Kunaki.

This is all done easily with just a few clicks.

In moments, you’ll be able to dropship your products to customers and experience the full benefits of dropshipping.

You can give ClickFunnels a go at no cost to you. Just start a free 14-day trial and see how easy it all is.

Do you have more questions about dropshipping? What have your experiences with dropshipping been like so far? Feel free to let us know in the comments below.

Continued Reading

Ecommerce KPIs: Key Performance Indicators You Need to be Measuring

Increasing Your AOV: What is Average Order Value and Why it Matters

How to Start An Online Store


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