What is drop shipping and how does it work?
I first heard of the term “Drop shipping” during my college years. At that time, I had no idea what it was or why my professor kept calling on me to answer questions pertaining to the subject. I thought I could simply avoid ever hearing about it until I realized it was going to be a critical centerpiece in my college career, because I decided to major in supply chain. So let me share with you what I've learned and what I'm about to tell you has the potential to completely transform your business.
Drop shipping is a product order fulfillment process. I know, that’s where my professor lost me too. What does that mean? It’s when a customers purchases a product from a business owner, and the product is delivered to that customer, not by the business owner, but by the supplier themselves. The more well-known method you're probably familiar with for delivering goods and services is for the retailer to order products from a supplier and then ship them out to customers when they're ordered. Drop shipping, on the other hand, takes out the step of receiving products and shipping them out, allowing the retailer to fulfill orders directly from the manufacturer or wholesaler of the goods instead.
Surprisingly, you’ve seen this type of business model before when you go to Amazon.com. Amazon is THE best drop shipping business that we both know. Most, if not all, the products you buy on Amazon, they don’t actually own. For each item that someone purchases through Amazon, they receive a certain percentage of the commission. Think of Amazon as a marketplace and in that marketplace, you can shop almost anything. Amazon owns almost none of the products
Think of it this way:
1. A customer comes to your website interested in a product you sell.
2. Customer places an order with your shop.
3. Shop places an order with third-party supplier.
4. Supplier ships order to the customer.
5. Shop alerts customer the item has been shipped.
6. The customer receives the order and you get paid.
Or this way:
Imagine if someone came to you and said, “Here is all the inventory you need to start your business. Oh, by the way, don’t worry about shipping it to your customers, we’ll do that for you.” Getting started would be so much easier if it worked this way.. well, that's what's called drop-shipping.
The clear benefit of drop shipping
The most obvious benefit of drop shipping is that you don't have to worry about ordering, storing, and shipping out inventory. As well as, paying for a warehouse, shipping orders, tracking inventory, holding inventory, or ordering products. Instead of worrying about getting products in and moving them out, you can focus more on building a brand, marketing, and customer service. Drop shipping can be pretty hands off, especially if it's set up the right way, and outsourced properly.
How To Use Drop-Shipping To Compliment Your Business
One of the most difficult parts of running any business is the hundreds of hours spent in sourcing new products, managing inventory, shipping order, and much more. Drop shipping is often a good choice for entrepreneurs that are just starting out because there is a much lower investment involved.
Drop shipping is not only a great standalone business model, but it can also be a great compliment to your current business. Whether you’re a blogger, teacher, speaker, or influencer, drop shipping can help your business in a tremendous way, especially in generating additional cash flow.
The best drop shipping businesses are a strategic brand extension of that business. Let's take a look at a few examples of how you can position yourself:
Let's say you are a branding expert who uses a blogging platform to teach other entrepreneurs about business, branding, and marketing, like Emmelie De La Cruz, it may be a good idea to start a shop called MelaninMagicShop, selling lifestyle merchandise to a very specific section of your audience who embody the lifestyle of your brand.
What if you are an artist or musician? Well, it may be a good idea to sell merchandise on your website so your fans can feel like they're part of the experience.
Even if you are a fashion stylist, you may want to think about selling other wholesalers clothing on your website, and getting a piece of commission from each sale.
No matter what business you are in, there are ways you can implement drop shipping to complement your business and generate a cash flow without having to worry about inventory or shipping.
Once you have an understanding of what it is you do and the value you provide your customers, you can then look for ways you can enhance their experience with your brand. Remember, you are not only building a business but a culture around your mission.
What reservations do you have about adding drop shipping to your business?