Dropshipping

If you have been reading my article on my first success and the basics section, you will realise that they involved getting real physical inventory, stocking up, and selling as and when people decide to buy them. While this traditional model of inventory stocking works for online selling, and is indispensible for brick and mortar retail shops (real physical shops), many people are adopting a revolutionary model of online selling called ‘dropshipping’. The following image explains very clearly what dropshipping is all about. It should get you very excited

Are you as excited as I am, yet? In a nutshell, the benefits of the dropshipping model is that as a seller, you do not need to fork out expensive capital to stock up on inventory, not knowing when your products will sell. Stocking up too much inventory is bad, obviously. If your products do not sell, you are stuck with piles of items at home rotting away! Remember – INVENTORY = MONEY. For every item waiting to be sold that you stock up, your inventory (money) is in a FROZEN state, and that sucks because to put it quite simply, you can’t use that money!

With dropshipping, you only pay for an item AFTER a customer buys the product from you. After you receive payment for a product (with a marked up price), you place an order with your dropshipping supplier for the item that your customer ordered, and your dropshipping supplier ships the item directly to your customer. You pocket the difference between what you charged the customer for the item and the price the supplier charges you. No inventory to handle, no worries of whether your item listing sells (since you do not stock inventory). With this model, you can go ahead and sell expensive items WITHOUT fear of buying an expensive item and worrying if it would sell at all. No sales = no loss and at the same time no profit. This beats ‘no sales = loss = NEGATIVE profit’. Superb!

You may asking – “But won’t my customer find out that I actually bought the item for a lower cost when he/she receives the parcel? Will the cost or the dropshipping company’s logo be on the parcel?” The answer is NO. The purpose of dropshipping is that customers will NOT find out where your items are from. They only care that they paid for their item, and that the item is shipped to them. This model is a win-win situation for both dropshipper and reseller (you). A win for you because you make money by buying low and selling higher. A win for the dropshipping company because they get FREE marketing of their products from resellers (you). They have absolutely NO reason to betray resellers’ trust by printing their logo or invoice on the parcels that they dropship. If they do that and incur the resellers’ wrath, resellers will probably abandon these dropshippers and hop to more reliable dropshippers. The marketing power of resellers is very enticing, and dropshipping companies know this, and rely on resellers to do FREE marketing for them. In return, they are able to sell items at lower than retail prices.