What is dropshipping? How Does It Work? ​

What is Dropshipping?

Dropshipping is a delivery method that skips the delivery, which means that the seller does not need to store products in the warehouse or deliver products to the customer. 

Instead, the seller forwards the orders to a manufacturer or supplier. These units will prepare and deliver the products directly to customers. With this business method, retailers do not need inventory and shipping anymore.

This model is suitable for individuals and start-ups with limited capital, who do not want to invest in stock. The Dropshipping model is operated as follows: 

• The retailer will negotiate with the supplier to operate Dropshipping at the specified entry price. 
• When an order arises from a retailer, the supplier will process, pack and deliver products to the buyer. 
• The retailer receives profit as the difference between the entry and the price sold to the customer.

Advantages and disadvantages of dropshipping

Advantages​

Dropshipping has many outstanding advantages such as:

• Maintain low business costs: You don't need to worry about purchasing costs from suppliers, shipping costs, warehousing costs, capital backlog costs, etc. Your job is to find customers through marketing activities, manage sales orders, and contact suppliers.
• Save time and effort in importing and storing goods.
• No need to track and control inventory: No longer have to spend time and money on storing, inventorying, and calculating inventory.
• Easy to start quickly with flexible capital turnover.
• Flexible locations, easy to scale: A Dropshipping business can be anywhere as long as with internet-connected devices to communicate with suppliers and customers easily and quickly.

>>>> Learn More: How To Build A Skilled Sales Team?

Disadvantages of Dropshipping​

Thanks to its own characteristics and advantages, Dropshipping has been increasingly popular worldwide and in Vietnam thanks to its operations and advantages. However, this model still has inherent disadvantages that businesses need to overcome.

• No control over the supply chain: You do not directly check product quality, shipping time, or order tracking and depend on suppliers. Therefore, you need to choose a reputable supplier to minimize the risk.
• A significant level of competition: Many businesses and individuals have joined this market since its first days. Therefore, you need to accept fierce competition and have correct business strategies when entering the industry.
• Complicated shipping, especially if you have multiple suppliers: You will have to manage and coordinate effectively sources of products among suppliers. If not, you and your own business will be the ones to be affected.

The potential of Dropshipping in Vietnam

Currently, the dropshipping business form in Vietnam is becoming increasingly popular. There are two famous models in the world, eBay and Amazon, and Shopee in Vietnam. The Vietnamese market is growing and there is a lot of potentials to develop dropshipping. 

The benefits that this model brings are immense. With conventional business models, each store has to manually import goods, advertise and distribute products, and deliver and take care of shoppers. 

In contrast, with the dropshipping model, stores only need to focus on developing and promoting their store's brand to attract and reach a variety of customers.

Thus, with dropshipping, people do not have to invest a lot at first. Revenue and profit will come from the difference between the final selling price and the price set by sellers after deducting advertising costs.

How Does dropshipping Work?

What is dropshipping and how is it done? Here are the steps to start a dropshipping career that readers can refer to.

• Step 1: Determine the amount of capital to invest 

There are two popular dropshipping models, which are traditional and modern. Depending on the business intentions, each person can determine the appropriate amount of investment capital. The costs for implementing a dropshipping business include the cost of website design, promotional images for products, marketing costs, human resources, etc.

• Step 2: Market research and product identification

Products offered to the market must deliver value. You can refer to Google Trends to find out which products are receiving interest from customers. In addition, you can search for products that are on top on e-commerce platforms such as Lazada, Amazon, or Shopee to know more accurately.

• Step 3: Access to the source of goods

Find the source of goods with guaranteed origin and best quality with reasonable prices and costs. Readers can refer to the following sourcing platforms:

• • NetSale: Readers can search and access a variety of goods from different industries, and famous Chinese products.
  • Osiris Alliance: Osiris Alliance specializes in the distribution of watches. Famous brands of Osiris Alliance platform such as Daniel Wellington, Duxley, etc.
  • Sunrise Wholesale: This is a platform specializing in developing and providing products related to fashion, jewelry, etc. with more than 15,000 products. In particular, this is a platform that provides free services to customers.
  • E-commerce platforms: Readers can refer to the source of goods at wholesale prices at Lazada, Tiki, or Shopee trading platforms.

• Step 4: Build an online store

Create a Web page or an e-commerce shop for your store, from which customers can easily find and access products.

• Step 5: Brand advertising

When customers buy products from the store, the seller's task is to close the order and send the buyer's address to the packaging unit to ship and deliver to the buyer.

 Learn About: Apply Upsell and Cross-sell Strategies Effectively To Boost Revenue

Popular dropshipping models in Vietnam

Currently, with the development of the Vietnamese market, there are many popular e-commerce platforms. In particular, dropshipping is one of the most popular forms. Here are some dropshipping models in Vietnam:

Amazon dropshipping model 

Amazon is the world's most popular e-commerce platform. The number of users accessing daily is large but the cost is very low. To start a dropshipping business on Amazon, you need to take the following steps:

• Create an account and build an online store on Amazon.
• Consult and select product suppliers, get product descriptions, and sell at a higher selling price.
• When the buyer places an order, the readers should contact the order with the product supplier with the buyer's information.
• The carrier will deliver the product to the customer.

eBay dropshipping model

Like the Amazon platform, eBay is a globally famous dropshipping model with an extremely large number of customers. Dropshipping business on the eBay platform will help the store increase sales. eBay provides a diverse source of goods in many fields such as fashion, technology, consumer goods, etc.

eBay has its headquarters located in the US, but the products are developed and supplied. in different parts of the world such as the UK, USA, Japan, China, etc. All transactions on the eBay platform are paid for via Paypal and this provision is mandatory. The rest of the process of selling and providing products is done in the same way as on Amazon. 

However, the eBay platform has a difference in that sellers can sell products in the form of an auction. This form of selling is attractive to customers, as the product will only be sold to the highest bidder. Sellers can take advantage of this method to sell rare, high-quality products.

Shopee dropshipping business

Shopee is a very popular business platform in Vietnam. In Shopee dropshipping, if the source is overseas, the products will not be delivered directly from the supplier to the customer. Instead, the store owner will have to ship the products from abroad to his store according to the Shopee shipping unit.

Dropshipping - Yes or No?

After knowing what the dropshipping model is, many readers have asked if they should have a dropshipping business and what are the risks of dropshipping. 

This depends a lot on your business and product characteristics. Dropshipping is a promising model to start as it requires minimum investment and resources.

If the seller knows how to apply and sell the right products, the dropshipping business form is extremely effective. 

For example, if your products are large, fragile, or have a short shelf-life, be careful when choosing this model. When an order is generated, you transfer the request to the supplier in that country, and they will directly ship the product to your customer.

Assuming your product is ceramic or glass, you won't be able to control the quality directly. At the same time, the item is also very fragile in transit, making it impossible for you to ensure your order reaches the customer safely. 

On the contrary, if your business supplies custom-designed t-shirts to customers in foreign markets, dropshipping will be a wise choice. When an order is generated, you transfer the request to the supplier in that country, and they will directly ship the product to your customer.

Finally, sellers need to learn carefully about products and supplies to avoid the risks of dropshipping. Besides, having ideas and building a website that attracts customers is important. Thus, once you have gained loyal audiences, you can start selling their products.