What is DropShipping?
In real life, to setup a business, retail trade, or shopfront, requires major planning and budget for retail space, warehouse to keep your inventory/goods, and some staff to entertain customers, and provide background services such as packaging the items, collecting payment, delivery.
You know you have eliminated most of that such as Payment (you use Paypal which is fully automated), and you response to customers via email. Now the other major parts such as a warehouse, packaging the parcels, delivering to the postal service could be eliminated entirely - reducing further the cost of operating your business online. And this next level up is called "dropshipping".
Here is a brief summary and explaination of the meaning and the mechanism of dropshipping. In the rudimentary sense, dropshipping is the process of "shipping goods or services from a supplier directly to a seller's customers" - WAIT A MINUTE - that sounds familiar?
That means less cost? That seems a bit like what Michael Dell (Dell.com) did for years? The seller (you) does not need to manage a warehouse, stocks, security of the warehouse, inventory management, shipping management and huge administration costs.
The steps are fairly simple:
1. You (seller) choose a product from the dropshipper or supplier.
2. You advertise it yourself and determine a price.
3. You sell and collect payments from you buyer.
4. You go back to the dropshipper's system - place an order.
5. Your buyer receives the goods.
The traditional way would mean you have to buy the goods, put it into a warehouse, pack them, get Fedex to collect. All these steps are eliminated. You made a BIG JUMP in business speed, and minimising cost. No more worries about rental for a warehouse, no more worries about your items being stolen (even own staff could steal), no more worries about packing, driving up to the depot, parking, talking to the postal officer or Fedex. Wasting alot of time, fuel, food, time - and LIFE. Imagine how much time you saved. And everyone is wise to know - TIME IS MONEY.
Summary of Benefits:
- You DON'T have to have a lot of capital, money, investment to startup (since you do not need to rent a warehouse, buying stocks)
- You AVOID risks common to businesses - theft, security, staff
- You DON'T have to keep stock with large inventory (money stuck in the goods)
- You AVOID the trouble and extra staff for packaging, warehousing
- You DON'T have to deal with product returns, warranties (the dropshipper does all that for you - products are never returned to your address)
- You DON'T have to create shipping labels, check the product, paste stamps, drive to the postal office - all the SMALL things in business that takes BIG TIME
- You DON'T have to buy the product until after it has been sold (zero stocks, Just-In-Time Management is a reality - see that in Management School)
- You AVOID wasting precious time shipping the product, waiting for Fedex to pickup, driving and parking to get to the postal service.