Explore the many reasons why you should start an online drop ship business
By: Bailey Holtz
Drop shipping is one of the incredible benefits of building a business in the internet age. More and More people are turning to the web to do their shopping. Businesses are now being freed from the need to have products on hand in a brick-and-mortar store. Consumers are shopping online and having products shipped right to their doorsteps! That’s why drop shipping becomes a very viable and very popular option for businesses. It’s a way to keep costs down while still offering the same products and excellent service to customers. Sound too good to be true? It’s not!
In this article, we at Pure-Ecommerce help you explore the world of drop shipping. Including its benefits and possible obstacles. Read on to discover the reasons why an online drop ship business is right for you…
The State of E-commerce Today
The internet has completely transformed the way in which we buy and sell things. Formerly, we would have taken a dreaded trip to a brick and mortar store. Where we may or may not find just the right product. Now, we can simply go online from the comfort of our homes. Then with a few clicks can find just the right product to purchase!
According to Digital Commerce 360, global web sales neared $3 trillion in 2018. This is increased the online’s share of total retail sales to the north of 15%. While ecommerce sales in the United States reached $513.61 billion online in 2018 according to The U.S. Department of Commerce. This was up 14.2% from 2017.
By 2022, global digital sales are expected to near $6 trillion. More than that, it has also transformed the lives of millions of people. It offers them completely new sources of income. According to the incfile blog, over 38 million people own their own e-commerce business, which they operate from home. The exciting news is that as e-commerce continues to grow! There will be even more innovations and systems of support for business owners—including drop shipping.
How Does Drop Shipping Work?
Drop shipping, while a relatively new innovation in selling, is not complicated or complex. In fact, it’s nothing more than a simplification of the entire selling process! You, as the online business owner, do not keep products in stock. You simply receive the order from the customer and pass it along to your vendor. Who will then ship the product directly to the customer – that’s it!
All the management of inventory, shipping, and other logistical details are handily taken care of by your vendor. Leaving you to focus on other aspects of your online business. If you would like more of a detailed explanation, check out this helpful page on our website, “What is Drop Shipping?”. Where we answer some of the most common questions about drop shipping.
Benefits of Drop Shipping
There are many benefits to making the decision to start an online drop ship business. Here are four of the top benefits we think you should consider…
- Profit Margins: Your profit comes from the mark-up you put on your product. The average margin range for the drop ship vendors we work with at Pure-Ecommerce is 35-50%. Of course, it is best to price the products you sell at the suggested retail price set by your vendors in order to stay competitive. However, many vendors will allow you to price the products you sell for them at or above their suggested price. This will increase your profit margin but may also outprice you from your competition.
- Products are Outsourced: Save yourself the hassle and personal stress by outsourcing much of this time-consuming work. You can focus solely on your web presence and your marketing efforts. Then leave all the logistical details to the pros. Having more time means you can grow and expand other aspects of your business.
- Product Variety: By working with drop ship vendors you are able to formulate your own mix of products that you want to sell. Plus, you do not need to have developed your own product or product collection before starting your own ecommerce business. Whether you have a passion for pets, furniture, children, fitness, outdoors, etc. there are many different niche market industries out there so you can put your passion to work for you!
- Low Risk: You will find that the risk of damage is lower when you drop ship. This is because fewer items are being moved from place to place. For example, if you were to order your inventory wholesale and have it transported to your storage facility. There is any number of accidents that could happen en route to damage or harm your products. When you drop ship, only one product is shipped at any given time, leaving less room for error.
- Low Overhead: Additionally, if you feel trepidation about leaping into a totally new business venture and having to spend lots of money to hold inventory. Then stop worrying! By working with drop ship vendors you will never have the need to hold product inventory. This means you don’t have to spend money to acquire inventory and storage space. This means there are virtually no overhead costs. All you have to pay for is your website and other minor costs. Rest easy knowing you aren’t putting your life’s savings at risk to pursue your dream!
Challenges of Drop Shipping
While there are numerous benefits to drop shipping, there are also some challenges too. Here are a few we would like you to consider. Don’t worry, they’re not that bad!
- Drop Ship Fees: While simple and untaxing, drop shipping is not every business’s magical formula for success. For instance, some vendors charge fees for drop shipping, which may lower your profit margin. However, sellers like yourself may choose to figure that cost into the cost of the product, passing it along to the customer. Again, you want to stay as competitive as possible so you may decide to “eat” the cost. Just think, it is better to pay a small drop shipping fee to your vendor versus having to hold inventory and store it in a facility.
- Lack of Branding Control: Another issue to consider is the comparative lack of branding control you have over your products. When the product arrives at a customer’s doorstep, they may not be able to see your business’s name or any of your branding on the packaging. It depends upon the vendors you work with whether or not they will add your logo label to the package as some will and some won’t. This could be considered a missed opportunity for your business to get its name out there. However many sellers feel that the costs and labor saved by drop shipping make up for this. Plus, you have other ways to brand yourself with your customers. For examples, direct emails before, during and after purchasing, social media, newsletters, etc.
- Not All Vendors Offer Drop Shipping: Unfortunately, not all product vendors offer drop shipping. You will need to spend time making inquiries with vendors to learn if they do, and what their stipulations are if any. Once you have set up that relationship, however, moving forward will be far easier than it would be if you had to buy your own inventory.
Drop shipping is a great option for many new business owners, but it does have some drawbacks. It bears careful consideration and once you have a solid stream of income, it might also be worthwhile to consider securing inventory. It depends on where you want to take your business!
How Pure-Ecommerce Can Help
If drop shipping sounds appealing, you’ve stopped by the right place! Pure-ecommerce has years of valuable experience working with vendors who drop ship. All vendors who supply our businesses-in-a-box offer drop shipping, so you won’t have to make inquiries or do research. Just buy your site and go!
Take advantage of the incredible business opportunities the internet opens up for you. Thanks to the digitization of the buying process, there are many costs you can eliminate as a business owner. While drop shipping is not always possible, it is still worth looking into, along with all the helpful tools offered by Pure-ecommerce. We are experts on the ins and outs of setting up a new business. We offer our clients access to our exclusive eLearning Library, plus step-by-step consulting to help you get started.
Take a look at our helpful ebooks—one of which is on drop shipping – to explore this option further. To see if starting an online drop ship business is right for you!