What is Dropshipping and How Does it Work? Make Money With Dropshipping
With the development of the internet, people are now aiming to make money on the internet. The concept of dropshipping is actually one of the e-commerce methods to sell online.
It is a matter of curiosity how and where these processes are done. What is dropshipping and how is it done? We have compiled information about dropshipping advantages and disadvantages.
What is Dropshipping and How Is It Done?
E-commerce is a method of making money that many people prefer recently. Dropshipping is known as a method where sales can be made without stock. In this way, operating expenses are completely eliminated and a start-up can be made with a low capital.
There are big differences with a standard retail model. One of the biggest known differences is the lack of stock status. People who use the dropshipping method do not need to hold stock for any product.
Sellers buy a product from any person at an affordable price and offer it for sale at their own profit price. In this way, it is a system of selling other people’s products as intermediaries.
This method of making money has recently been used by everyone, especially young people. Since it is a business that does not require capital, good earnings can be obtained.
There are some details that people who want to do dropshipping must learn. These details are necessary for a better profit. The person from whom the product is purchased acts as a wholesaler.
How to Do Dropshipping Business?
The seller offers the product for sale without purchasing from the supplier and without stocking up. It forwards the incoming orders to the supplier, and the supplier delivers the orders to the buyer on behalf of the seller. The seller who makes the sale with dropshipping earns through this sale process.
According to the agreement between the seller and the supplier, the seller may offer all the products in the supplier’s portfolio for sale, or only a certain part of them may be offered for sale.
If the supplier has hundreds or thousands of different products in its portfolio and the vendor infrastructure uses a suitable e-commerce system or marketplace, it can automatically add all products to its own site or store in the marketplace via XML.
If the supplier has few products in their portfolio, or if a seller considering dropshipping wants to focus only on a certain part of the products, instead of XML integration, they can add each product to their site or marketplace store one by one.
Advantages of Dropshipping
- Low capital requirement: The seller who will sell with dropshipping does not have to pay for any product that he has not sold yet, since he does not stock any product. In addition, since there is no need for a warehouse, a smaller workplace is used, thus reducing rental costs.
- Operational workload is reduced: Since stocks are not kept, transactions such as receiving, storing, and sending the product from the supplier are eliminated, and the operational workload arising from these transactions remains with the supplier.
- Personnel expenses are reduced: Since most of the operational workload is removed, departments such as logistics and technical service will also be eliminated, there is no need to employ personnel in these areas and personnel expenses are reduced.
- An increase in product diversity is achieved: In stock sales, it is necessary to make a purchase for each product in advance, while such a process is not required in sales with dropshipping. In this way, the seller can offer the products of every supplier he has agreed to for sale and can list many more products on his site than stock sales.
- Unsold products are no longer a problem: When any product is stocked, it is absolutely necessary to sell that product because the price has been paid for that product. However, in dropshipping, if a product is not sold, the seller has no liability and does not incur any material damage due to the unsold product.