If you're eager to start an online business, a popular avenue is drop shipping. Drop shipping can be a high-profit, low-investment business venture if done correctly, as it requires limited startup costs thanks to third-party suppliers doing a bulk of the work for you.
But what is drop shipping, and is drop shipping a smart business decision? In this article, we'll go into detail about the logistics of drop shipping, including the benefits of drop shipping, common drawbacks, and how to choose drop shipping suppliers.
What Does Drop Ship Mean?
Drop shipping is an order fulfillment method that doesn't require entrepreneurs to hold inventory themselves. Instead, a third-party drop shipping supplier will process orders and ship them to customers after a business makes a sale.
Drop shipping is a popular e-commerce business model, as it allows online store owners to run a business without having to have a warehouse of inventory that they have to sort through and restock when a customer makes a purchase. Because drop shipping companies don't own the inventory they sell, they mark up the products they purchase from suppliers when a customer buys that product to make a profit.
How Does Drop Shipping Work?
Now that you know what drop shipping means, let's dive into the nitty gritty and explore how the process of drop shipping works. These are the typical steps you can expect when you open a drop shipping company:
- Seller opens an online store: To start a drop shipping company, you first need to open an online store. Online stores span a wide range of industries, such as fashion, home appliances, makeup, home decor, tools, etc. Do your research to find a niche that's not overly saturated to help ensure success.
- Retailer sells products to consumers: After you've picked a niche and created your e-commerce website, the next step is selling your products to customers. To become a successful drop shipping company, make sure to market your products and generate leads.
- Retailer sends orders to a supplier: Once a customer purchases an item on your website, information will be sent to your drop shipping suppliers or drop shipping wholesalers.
- Supplier fulfills orders and sends them to customers: After your drop shipping wholesalers or suppliers received a customer's purchase information, they'll fulfill their order and ship it. Drop ship suppliers will have their own inventory of products that you sell for them at a marked-up price to earn a profit, eliminating the need for you to process the shipping and handling.
What Are the Benefits of Drop Shipping?
There are several benefits of drop shipping that lure prospective entrepreneurs into this type of business model. If you're considering drop shipping, see if these benefits align with your goals:
- Flexibility: Drop shipping is extremely flexible. Because drop shipping companies don't require a warehouse to store inventory, business owners can run their operations from anywhere, whether at home or across the country at a coffee shop.
- Low overhead costs: One of the biggest benefits of drop shipping is the limited amount of overhead costs. Without renting out a warehouse or purchasing inventory, drop shipping companies need only a few key pieces of equipment, such as a laptop.
- Reduced startup risks: Many aspiring entrepreneurs get interested in drop shipping due to its low barrier to entry. Without the need for a physical warehouse or brick-and-mortar storefront, there are limited startup risks.
- Scalability: Once you figure out a drop shipping system that works for you, scaling becomes much easier. After establishing a brand and growing your audience, you'll be able to up the inventory or products you offer by working with your drop shipping suppliers.
- Wide range of product options: A final benefit of drop shipping is the ability to have a wide range of product options. Without the need to stock your own inventory and manage a warehouse, you can work with drop shipping suppliers to create an expansive collection of items to sell on your online store.
What Are the Challenges with Drop Shipping?
While there are many benefits of drop shipping, there are several challenges to be aware of that can result in a failed business venture. Before jumping into the drop shipping industry, weigh these cons to ensure you're making a wise decision:
- Delivery time: One of the top drawbacks of drop shipping is delivery time. Because you don't run your own warehouse and carry your own inventory, it can take days or weeks for customers to receive their orders. Pietra's Fulfillment Services allows you to order a small amount of inventory to store in a U.S. warehouse, allowing you to ship products to your customers within 24 hours.
- Lack of customization: Another challenge with drop shipping is the lack of customization. Drop shipping wholesalers often have little or no customization features for you to create your own brand. With Pietra, you can create custom products with the help of our suppliers and freelance designers to make your products stand out and sell something more unique.
- Lower profit margin: A significant drawback of drop shipping is a lower profit margin. Drop shipping can be very competitive because it's easy to start. With that said, many drop shipping companies sell their products at very low costs to beat out the competition — typically resulting in lower profits.
- Competition: To become one of the best drop shipping companies, you will likely have to deal with high levels of competition. This is because there are little overhead costs, limited risk for entry, and an easy startup process.
Why Use Pietra's Fulfillment Services Over Drop Shipping?
Drop shipping may seem like an enticing business endeavor due to its low barrier to entry, limited overhead costs, and flexibility. However, drop shipping can also be highly challenging for aspiring entrepreneurs, especially because of its low profit margin and high competition.
With Pietra, you earn many of the benefits of drop shipping without the added drawbacks. Through our Fulfillment Services, Creators still have great flexibility, only needing their laptop to manage their business and work with suppliers and shippers. Additionally, because Creators don't need a warehouse or take care of inventory, there are limited overhead costs and risks. While suppliers have minimum order quantities, orders can still be customized, so you have a manageable number of products ready for shipping.
However, Pietra allows you to customize tens of thousands of products spanning a wide range of industries, from makeup to candles and everything in between. Unlike drop shipping, which doesn't give business owners the ability to customize, Pietra makes it easy to find quality products that you can make your own with your logo, graphics, and other visual elements. This makes it easy to compete in competitive markets and stand out. On top of that, your customers can benefit from two-day shipping on most orders, whereas drop shipping can take multiple days or weeks.
Start Selling with Pietra Today
Drop shipping can be a lucrative business venture if done correctly. However, running a successful drop shipping company can be challenging due to high competition and lower profit margins. At Pietra, we can help you create and sell products that align with your brand and business goals.
Like drop shipping, you can work with Pietra's approved suppliers to order and ship products to customers. The difference is that you can create custom products with your brand and logo to make your business stand out. When a customer makes a purchase, our fulfillment services will ship your products straight from the factory to Pietra and to your customer.