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Dropshipping Explained In Layman’s Term

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I’ve made an attempt to explain what is dropshipping so that even a complete beginner or a ‘layman’ – someone who has never heard about dropshipping before can read it here and understand.

A recent post I found says drop shipping is…

An ecommerce website that operates a drop shipping model purchases the items it sells from a third-party supplier or manufacturer, who then fulfills the order. This not only cuts operational costs, but it also frees up your time to focus all of your efforts on customer acquisition.

In a nutshell, dropshipping is an ecommerce business model which does NOT require you to purchase the stock of the goods or keep an inventory. All you’ve got to do is, find the “right”niche and products, convince the customer to place the order from your online store and send the order to your supplier. You don’t even have to do the packaging or delivery. Your suppliers handles that bit on your behalf.

6-steps to start drop shipping

How dropshipping works diagram
How dropshipping works
  1. Your customer visits your online store.
  2. He/she adds the products in the shopping cart.
  3. Customer pays for the product using either a debit/ credit card/ PayPal.
  4. You take the difference between the wholesale price and retail price as profit.
  5. You forward the order to your supplier.
  6. Your supplier processes the order, packs it and sends it out for delivery.

Difference between drop shipping and retail business

There are several major differences between ‘dropshipping’ and running a retail outlet but the one key difference is, when you’re dropshipping, eventhough your customer visited your store and bought from you, he/she doesn’t really know that their product will be delivered by a dropship supplier more than half way across the globe.

As far as the customer is concerned, he/she has paid for the product and expects the product to arrive as soon as possible at his/her door step.

Did you know? You can even request your supplier to deliver the product in your company or store name? In fact, some suppliers will even go to the extent of giving extra gifts or vouchers to your customers as a sign of good-will and thanks.

Why dropshipping

Because anyone who doesn’t have much capital outlay or does not wish to tie up their limited funds on stock inventory, will benefit immensely from this business model.

In fact, most retail businesses have very high overheads. They usually have a large amount of funds tied up into purchasing goods in bulk and end up storing it for an indefinite period, either in their outlets or in their rented warehouses.

Other than that, you regularly need to replenish your stock, have an inventory maintenance, do regular stock checks, all of which can seem a huge burden. What if the 500 pieces of ladies blouse you ordered is not doing well? What if the stock is not moving? I’m sure you get my point.

3 different types of dropshippers

Business people who are involved in dropshipping can be divided into 3-types.

  • Validating: As a newcomer, you can quickly use this model to evaluate and validate if a certain niche or product will sell well. Since your cost to run a dropship business is kept at a minimal and you don’t need to tie up your cash on stock inventory, you can test various products and markets. You can then focus on selling products which has a better response.
  • Budget: If you’re a startup or low on budget, then dropshipping is ideal. In fact, its the perfect business model because as a dropshipper, you can control the pricing and of course the profit margins.
  • Walmart: If you want to sell a broad range of product categories and models of course minus the huge stock inventory cost which comes along if you’re running a traditional hyper market such as Walmart or Tesco.

However I must be honest, dropshipping is not a perfect business model. No business is. You need to put in the work to see results. But you will quickly discover that dropshipping does have its benefits compared to running other types of online businesses or running a retail store.

How can you benefit from dropshipping?

  • Easy Setup: It doesn’t take a lot of investment to setup a dropship store. In fact, if you purchased our Amethyst package, there is a one-time payment of $349. Everything is done for you. But if you wanted to save this cost too, of course you can do it but then you’ll need to learn web development, niche research, marketing, social media advertising etc.
  • Lower Cost: The majority of expenses in conventional business models relate to the establishment and management of retail activities, for example, the procurement of stock and inventory but dropshipping removes this step, and hence the cost is lowered.
  • No fixed location: You don’t need to rent a place for your dropship business. As long as you have a PC/laptop, you could do this from a cosy little room at home. You don’t require any inventory, staff, equipment etc. Little or no physical space commitment means you could do this business in a beach in Malibu, and still make decent profits.

Indeed, dropshipping is a convenient and easy way to get started with very little capital investment especially if you’re new to the eCommerce world.

Undecided on which way to go? Give Amethyst a test run. I’m sure you will find the convenience of having a dedicated team of experts building your next dropship online store most assuring.

Questions or comments? Use the comments section below or simply click the red round button (bottom right) to open a chat session.

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3 thoughts on “Dropshipping Explained In Layman’s Term”

  1. Pingback: Shapewear Dropship Business Makes Money - eComYoda

  2. Pingback: Do You Need To Register a Dropshipping Business? - eComYoda

  3. Pingback: How To Start a Dropshipping Business in 2021 - eComYoda

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