The online trade still offers committed founders and prospective entrepreneurs optimal opportunities to build up an independent existence. And although the growth rates in e-commerce no longer correspond to the record highs of the early years, the potential is easily sufficient to complete good deals. In view of the increasing competition on the market, however, beginners in this field should do everything in their power to significantly increase their chances of starting and establishing a business. The DropShipping trading model offers the best conditions for this.
DropShipping: The gentle entry into online trading
For people who want to become self-employed, online trading is still a good and worthwhile field of activity. In order to take up an entrepreneurial activity in this area, you do not need any special qualifications, such as in a craft trade. And thanks to the good availability of inexpensive or even free software and many helpful tools, a sophisticated technical infrastructure is available to you right from the start.
Ideally, you should choose a product area for your own online business that is as related as possible to your personal interests and preferences. The better you know your product range and your target group, the more positive your chances of success will be.
Despite all the advantages, however, the entry into e-commerce is not completely free of risks. Especially in the first few months, it is not uncommon for an online shop to have to close its newly opened doors, leaving behind a disillusioned and sometimes even indebted operator. If an Internet company runs out of money prematurely and as a result has to give up business operations, this could have been prevented in many cases if the founder had opted for the DropShipping model instead of conventional trading.
Success factors: capital requirements, running costs, labour input and competition
As a trading model, DropShipping influences almost all success factors in online trading. It considerably reduces the capital requirements of newly founded Internet companies and at the same time reduces running costs to an absolute minimum. The work commitment of the entrepreneur is far behind that of a conventionally working dealer.
This allows the time saved to be invested in advertising and marketing, which has a direct impact on sales and profits. In addition, there are considerable price advantages over the competition, especially for high-priced, bulky and large products. And last but not least, the intensive contact to the affiliated suppliers provides interesting impulses with regard to the own assortment again and again.
Overall, DropShipping significantly improves the chances of survival for young e-commerce companies. And as soon as a start-up has overcome the critical initial phase, DropShipping ensures high and stable profits. In the following, we provide you with a total of 5 convincing reasons to opt for the DropShipping trading model and provide you with 5 ingenious professional tips from which not only founders can benefit.
Reason 1: Low start-up costs
Whoever founds his Internet business by drop shipping does not have to worry about raising seed capital. While conventionally positioned shop operators have to purchase a considerable amount of inventory in the first step in order to be prepared for the first rush of customers, the DropShipping retailer can limit himself to placing any number of products in his shop without thinking about their procurement costs. After all, the goods remain with the respective supplier until the final order is placed and are shipped directly from there. Since no special starting capital required the founder is not dependent on the favour of banks or private investors. And while the start-up dreams of many budding entrepreneurs have to be postponed again and again due to a lack of start-up money, the DropShipping trader can at any time begin to take his professional destiny into his own hands and conquer the markets.
In addition, as a drop-shipping trader, you do not bear any commodity risk. This refers to the losses that can quickly occur if you decide to buy the wrong products. Any conventional retailer who inadvertently fills his warehouse with shopkeepers pays for the costs associated with unsaleable goods. If, on the other hand, you opt for DropShipping, you don’t have to do anything else in the case of a poorly performing product than take it out of your own offer with a mouse click. Financial consequences, on the other hand, do not result in wrong decisions.
Our tip: As a founder of DropShipping you do not need any capital for the acquisition of your first inventory. However, you should not start your own business without a starting fee. At the very least, you must have sufficient funds to set up a functional office and to survive the first weeks and months in your own company economically.
Reason 2: Low running costs
If you don’t buy goods, you don’t need a warehouse to store them. This brings us to another financial advantage that DropShipping merchants, unlike conventional Internet vendors, can fully enjoy. Today, storage space is associated with very high monthly rental costs. Especially if your company is located in a more urban area, the rents quickly add up to a small fortune. While as a beginner in e-commerce you can do without office space and simply work from home, storage space is indispensable for the classic retailer. Who instead decides for DropShipping as trading modelThis saves high costs month after month and is significantly financially relieved.
This is not limited to the pure rental costs for a warehouse alone. This must be supplied with energy and sufficiently insured, which entails further expenses. In addition, conventional online merchants need their own warehouse and logistics staff if they do not want to spend their working time packing parcels themselves. And last but not least, a sufficient stock of packaging material must be purchased and replenished again and again. It is easy to see the considerable costs associated with this form of online trading. These expenses must be denied not only once, but again and again and thus worsen the starting chances of every dealer from the beginning. In direct comparison, the DropShipping dealer is in a much better position because he hardly suffers from running costs.
Our tip: As a DropShipping dealer, you do not dispatch the goods to your customers yourself, but outsource this task to your suppliers. This is of course very advantageous for you and helps you to save money and time. However, you need to be able to ensure that shipping is absolutely smooth, punctual and tidy, as your customers measure you by your shipping performance. Therefore, select your suppliers very carefully and carry out regular reliability checks.
Reason 3: Plenty of time for advertising and marketing
In online trading, success and failure unfortunately often lie very close together. The differences are mostly advertising and marketing. These important areas, however, are almost always neglected, especially for newcomers to e-commerce. The reason for this is that the manifold and exhausting tasks of a shop operator’s everyday work do not leave enough time to take care of the promotion and marketing of their own shop. As a result, the turnover required to operate comfortably and survive financially is not achieved. Sooner or later you have to give up your dream of your own company and, if you are unlucky, you will be heavily indebted for years to come.
The DropShipping dealer is also in a completely different and much more advantageous situation here. Since he does not have to worry about the time-consuming processing of individual orders, he has sufficient time to take care of the Topics Advertising and Marketing to dedicate all my life to this. While his conventionally working competitor will not start thinking about how to make his shop more successful until late in the evening or at the weekend at the earliest, this important and rewarding area of responsibility at the DropShipping retailer is an integral part of the easy-to-manage daily program. Over time, this potential will bring significant benefits as the DropShipping retailer’s shop becomes better known, attracts more customers and generates higher sales. The prerequisite for this is, of course, that the time saved is actually invested in the marketing of the shop and not regarded as leisure time.
Our tip: DropShipping dealers benefit considerably from the fact that the connected suppliers take over a large part of the complex work steps. Here it is true that the time savings increase the smoother and better the cooperation with manufacturers and wholesalers. Well-positioned dealers should strive for maximum automation. The shop system should automatically transmit orders to the right supplier, automatically compare inventory levels with those of its partners, and react in a solution-oriented manner even in the event of malfunctions or errors.
Reason 4: Great advantages for certain products
A frequently underestimated feature of the DropShipping trading model is the pronounced advantages in relation to certain products. The advantages of DropShipping dealers in every product area are convincing. However, they are even clearer in relation to very specific products. We are talking here about bulky and large products and it quickly becomes clear why DropShipping dealers can benefit particularly from their sales.
Imagine the situation of a conventional dealer who has decided to sell such products. For example, we might think of particularly bulky garden furniture, whirlpools, car ports, kitchen furnishings and furniture or other large goods. The classic dealer must first have these items sent to him by the manufacturer or wholesaler and, in the event of a sale, organise and pay for the transport to the customer himself. The shipping costs are at large and bulky products disproportionately high, since transport is usually carried out by freight forwarders and not by the low-cost parcel services. However, these transport costs are only incurred once by the DropShipping dealer, i.e. for shipping the goods from the supplier directly to the end customer. The money saved in this way can be passed on to the customer by the DropShipping dealer as a price advantage. It will thus be able to achieve significantly higher sales figures than its competitor.
Our tip: An essential task of DropShipping dealers is to optimally align their assortment to the special trading model. The more advantageous the products in the product range are aligned to the advantages of DropShipping, the more positive the business advantages develop for the entrepreneur. You should therefore examine the financial impact of each individual product in your product range and keep an eye on the optimisation of your product range.
Reason 5: Attractive product ranges in line with the times
An online shop that always trades with the same products will sooner or later become unattractive for its customers. Any online retailer who does not know how to offer his visitors new and attractive products will sooner or later disappear from the market. It is not so easy to keep your own assortment up to date at all times. The Dealing with new trends and interesting products costs a lot of time and discipline. This very important task is therefore often postponed in the stressful working day. As a result, the shop loses attractiveness day after day.
DropShipping dealers are in very close contact with their suppliers. The affiliated manufacturers and wholesalers are contacted on an almost daily basis, while the conventional retailer usually only contacts his suppliers every few weeks or even months in order to reorder goods. As a DropShipping dealer, you should use this close relationship to inquire about new products, trends and current products from your suppliers. Manufacturers and wholesalers already know at an early stage the planned articles for the near future and can provide valuable information on optimum product range maintenance. This makes it comparatively easy for DropShipping dealers to obtain an attractive and up-to-date product range in the long term and thus score points with existing and new customers.
Our tip: In order for your DropShipping supplier base to function well in the long term, it must be carefully maintained. Maintain regular contact with all affiliated manufacturers and wholesalers and always have important conversations in person. In addition, you should continually expand your pool of suppliers with new partners. In this way you avoid excessive dependencies and create the conditions for even more variety in the range.
Did you convince our 5 reasons for DropShipping as well as thousands of readers in front of you? Then you are probably wondering whether this type of self-employment does not cost you a fortune. Our guidebook will show you how to establish without money can.
Check out Drop It Studio free product research tool to find Winning Products for your E-Commerce Shop now