Many people think about doing business on the Internet, but they are stopped by the lack of money to purchase goods and doubts about the relevance of the chosen direction of trade.

Investing your last savings in advertising, renting a warehouse, or a wholesale batch of goods so that the price is competitive is a big risk for a beginning entrepreneur. What if things don't work out?

But there is a way out, albeit not as ideal as it is often said. But it’s great for testing a niche and upgrading your seller’s skills. It's called dropshipping. Agency Stelvel Ltd offers to join the dropshipping network and use an innovative approach to growth.

Dropshipping: what is it and how does it work? 

Dropshipping is a scheme of work when an online seller does not buy or store goods, but sells them directly from the supplier’s warehouse. That is, the store acts as an intermediary between manufacturers or wholesalers and buyers.  

That is, the intermediary does not have to:

• rent your own warehouse;
• have a budget for purchasing products;
• register a company;
• buy cash register equipment;
• provide logistics.

This trading system allows the owner of an online store to sell other people’s products and easily expand the range: dropshipping suppliers can be different, as well as their product categories.

In this case, the seller’s earnings consist of either the difference in price or the percentage that the dropshipper pays for the sale of his product.

How does the dropshipping system work?

In simple words, cooperation between the supplier company and the retail outlet occurs like this:

1. The buyer goes to the online store page, selects and pays for the desired product.
2. The seller transfers the payment to the supplier, minus his markup. In the order recipient column, the seller indicates the address of his client.
3. The dropshipper sends the completed package to the recipient.

Many stores operate this way and don’t test it. This is understandable: after all, many websites of foreign suppliers have an inconvenient payment system. To buy the item you like, you need to go through a complicated registration, and this is not always possible. It's just inconvenient. Therefore, people use the services of intermediaries, even realizing that they are overpaying a little to save their time.

Pros and cons of dropshipping 

Before you start working on the dropshipping model, it is worth understanding what advantages and disadvantages it has. Let's look at the main ones. 

Benefits of dropshipping

Minimum investment required. 
Perhaps this is the main advantage of this model of work: you can launch your own online store without investing in the purchase of assortment. And since you don’t have any products in stock, there is no risk that they won’t sell out, and your money will remain mothballed in unnecessary goods.

Easy start
In addition to the fact that there is no need to invest in products, the dropshipper is freed from many tasks and processes: 

• warehouse management and maintenance, 
• packaging and delivery of orders, 
• tracking and replenishment of goods, 
• working with returns.

Essentially, all you need to do at the start is to launch a store and  find a supplier .

Low operating costs 
This follows from the previous two points: for a dropshipping platform to operate stably, you do not need a lot of resources and a large team.

The ability to offer customers a wide range 
Since there is actually no need to purchase products, you can sell literally everything: test different categories of products and then leave the most popular ones.

Easier to scale 
In standard retail, if sales volume increases, then the load on the business increases proportionally: you need to invest more in the assortment, you need more people to process, pack and ship orders. In the case of dropshipping, the bulk of these tasks fall not on you, but on the supplier.

Disadvantages of Dropshipping

Low margins 
This is a niche with a low entry barrier and high competition. And since the costs of starting a business are low, dropshippers can afford to work with a minimum margin.  

So, you need to understand that the main way to gain clients in this client niche is to set a price lower than that of a competitor, or at least the same. 

There is no control over the availability of goods 
It is logical: if you do not have your own stock of products, then you cannot check in real time how much and what is left in stock. As a result, the client can place and pay for an order, and then it turns out that the supplier no longer has the goods.

Supplier mistakes, and the responsibility is yours 
When placing an order, the buyer sees a high-quality product in the photo, reads reviews about fast delivery and expects the same service. However, in fact, everything may turn out completely differently: the goods are packaged poorly, the deadlines are missed, the goods are defective. And guess the first time who will be to blame? Naturally, the person to whom the buyer turned.

It turns out that you are responsible to the buyer for those processes that essentially you cannot influence in any way.  

There is no possibility to customize or personalize the order. 
Working according to the dropshipping model, you become less flexible in terms of customer service. For example, a customer orders something for a gift and asks to add holiday packaging and a card to immediately send a surprise to the recipient.

So, if you have your own warehouse of goods, doing something nice for the client and getting loyalty points is not a problem. But with dropshipping this is unlikely to happen. 

How to start dropshipping

The success of dropshipping depends on the fulfillment of several conditions:

• The advertisement is seen  by the target audience.
• The store is focused on the interests and needs of the buyer.
• There is a creative approach and non-standard marketing tools.
• The value of the resource for the client increases.

To set up smooth operation, you need to take the following steps.

Niche analysis and selection

Market analysis is necessary to identify the level of competition, study competitors, take into account their mistakes and do better. Even with a lot of competition, you can make a good profit if you make the best offer.

What sells well online? Anything: household chemicals and penthouses. It depends on the approach to business and the selling proposition. 

But there are more traditional niches that are in constant demand:

• Household products,
• Childen's goods,
• Automotive products,
• Pet supplies,
• Clothes, shoes,
• Textile,
• Cosmetics, perfumes,
• Equipment and gadgets,
• Bags, watches, other original accessories.

Find suppliers

It is advisable to work with several suppliers, even those competing in the same niche. This way you will protect yourself as much as possible from suddenly running out of goods in the warehouse and will not let your customers down.

Carefully study the working conditions: the actions of the dropshipper in the event of a client’s refusal of the goods, how defective products are replaced, etc.

Launch an online store

The website can be assembled for free using an online builder.

In any case, sales are easy to start on social networks, where the target audience gathers in thematic groups. Even if you have a full-fledged website, social networks cannot be ignored.

Run advertising

Use affiliate programs, SEO, contextual and targeted advertising for promotion. Choose based on your budget, but you can’t do without it at all.

For an online store and an advertising campaign, you will need high-quality photographs of the product, preferably from different angles. Even better, a video demonstrating the product.

The supplier may provide materials and information. If not, you need to purchase a unit of the product and conduct the shooting yourself. In addition, you will be able to check how well your future partner works: the quality of the packaging and the product itself, the speed of delivery.

Where to find suppliers

Finding a good, truly responsible supplier to deal with will solve most problems. To search for suppliers on the Internet, there are databases and catalogs that are constantly updated.

Perhaps in your city, even district, there are manufacturers who are ready to work under the dropshipping scheme. This is much more convenient: to resolve any issues, you can arrange a personal meeting.

The ideal supplier is one who:

• Delivers quality products.
• Does not delay delivery.
• Deals with all issues after receiving an order from the seller.
• Doesn't make a big problem out of exchanging or returning goods.
• Updates data on product balances in the warehouse.

We hope that we were able to show the pitfalls of business and its advantages.