Dropshipping Business and Drop Servicing Explained

A Dropshipping business and Drop Servicing are excellent ways of running a business with minimal capital. In these scenarios, you essentially act as the intermediary between a customer and a provider for goods or services.

The primary role of the Dropshipper or Drop Service provider is one of marketing. Dropshippers don’t produce or hold products, and suppliers will fulfill orders. In Drop Service, the service gets handled by freelancers or other core service providers.

How Dropshipping and Drop Servicing Work

Often, the system is transparent to customers. Once customers place an order, it gets routed directly to suppliers. Suppliers then provide the product (or service) directly to customers. Meanwhile, the drop provider collects payment and hands part of that to the supplier or service provider.

Dropshippers and Drop Service providers are responsible for marketing and customer service. For example, they might run websites to list products and services for sale. To increase sales, they would advertise, enhance Search Engine Optimization (SEO), run marketing campaigns, or any other activity that may increase sales leads.

Suppliers, meanwhile, only focus on producing and shipping the products or handling the actual service requested. The relationship between Dropshippers and suppliers is behind the scenes, and customers seldom know they are dealing with two separate entities.

For more reference, check out these dropshipping websites listed on Flippa. 

What You’ll Need as a Dropshipper

The most important traits to have when considering a move towards Dropshipping are discipline and planning. Working alone and often from home, Dropshippers need to understand that it’s a serious business and not something that works when lounging on the sofa.

The list of core tools you need is short but important;

Good Internet – Almost all your work will be digital, so having fast and reliable broadband is one of the critical assets in your tool cupboard. If you already have a line, but it’s sluggish, there are several things you can do to speed up your Internet.

Digital Security – The web can be a dangerous place, so make sure you have essential safeguards in place. While options are primarily flexible, having a robust Internet security application running isn’t optional.

Reliable Devices – Depending on the platform you ultimately choose, the choice of devices can be flexible. Selling on social platforms like Facebook can be done via smartphone, but it’s better to consider devices with larger displays, such as a laptop or PC.

The Advantages of Dropshipping and Drop Servicing

Dropshipping removes much of the risk element that is associated with traditional retail businesses. It allows even individuals with little capital and staffing to operate and run a potentially lucrative business.

1. Dropshippers Reduce Risk by Not Holding Inventory

In traditional retail businesses, companies purchase products that they resell for a profit. It’s a tried and tested methodology that remains to this day. While this system works, companies need to purchase stock in advance and manage this inventory.

This holding of goods is expensive and risky. Many suppliers price products in tiers- the more you order, the cheaper the unit price becomes. Retail outlets need to play a delicate balance between paying for large amounts of stock versus the risk of holding more inventory over more extended periods.

Dropshipping eliminates this risk by removing the need to hold such inventory. In the case of Drop Service providers, they don’t need to retain expensive staff on permanent payroll, resulting in similar risk reduction.

Caption: Marc made $178,492 by dropshipping US and European products without the need of spending funds on acquiring products and holding inventory (read case study).

2. Dropshippers Can Operate Lean

Since drop service providers don’t need to fulfill orders, the business can be run lean. Even as Dropshippers grow, the business expansion is focused and streamlined, specializing in a narrow field. It is entirely possible to run a profitable Dropshipping or drop servicing business alone.

The operational model is in stark contrast to a traditional retail business that will require increasingly diverse talents as the business grows.

3. Dropshipping is Incredibly Flexible

Earlier, we used the example of a Dropshipper selling products through a website. However, this isn’t the only method available. 

Dropshippers are free to market products and services in any way. There are multiple platforms where the Dropshipping model works, from Facebook to Youtube or even Instagram.

Rather than the channel used to make sales, the key to success in Dropshipping remains in the marketing space. The larger an audience that Dropshippers can garner, the greater the potential sales volume. Since these channels are mainly digital, Dropshippers can choose to work from any location they want.

4. There’s Little Startup Cost in Dropshipping

Aside from the equipment needed and an Internet line, there’s little additional cost to starting a Dropshipping business. The platform you build the business will vary in price between free or perhaps $15 to $30 each month if you want to run a website.

Most of the expense will be an investment of your time and effort. That’s part of what makes dropshipping ideal for those who kick it off in their free time. 

Of course, if you can afford to vest in the business entirely, it’ll move things a bit faster. Be warned, though, that doing so can increase risk since your success isn’t guaranteed.

Getting Started With Dropshipping

While Dropshipping may sound easy and advantageous, you need to take adequate measures to ensure higher chances of success. Like any other business, failing to do the groundwork can result in spectacular failures.

Thankfully, the Dropshipping business isn’t entirely new, and you have access to established methods. As a guide, expect to follow this process.

1. Choose a Niche

Although you can create a generic dropshipping business that sells everything under the sun, a focused niche will often work better. Much of this is due to SEO considerations. By focusing on a niche, you can more easily gear your content for better results.

2. Competitive Research

As you choose your niche, make sure to scrape out the competition in the fields you’re considering. Run product queries through Google and note which websites pop up; those are the ones against which you will likely compete.

3. Choose Your Supplier

Choosing a reliable supplier is essential. Remember that you’re the “front” for the business, and if suppliers take ages to ship or deliver shoddy products, it’s your business that will get customer flak. Given how readily consumers today take to social channels to complain, negativity can quickly tank your business.

4. Develop Your Platform

The most common Dropshipping model makes use of websites since they’re excellent for product listing and have fantastic SEO potential. However, there are several other ways you can do this, and we’ll expand more on your options further down the article.

5. Do Your Marketing

Once you’ve built your platform, it’s time to get eyeballs on the products you promote. Advertising is an expensive but quick way to get started. More realistically, you need to focus on content to draw potential customers more organically. 

Choosing the Right Dropshipping Platform

When it comes to platforms for Dropshipping, it’s a good idea to consider something that lets you focus on your core role of marketing. Building a website from scratch can take lots of time and effort. That’s where Shopify, Amazon, and Facebook offer substantial advantages.

Shopify Dropshipping

Websites can be challenging to construct and maintain, especially for Dropshippers who need to integrate payment methods and shopping carts. Shopify reduces these challenges by facilitating easy eCommerce website construction.

It comes with everything you need; drag-and-drop website builder, product management systems, shipping cart plugins, support for multiple payment gateways, and more. You also don’t need to worry about technical maintenance since everything comes included.

While Shopify is a good example, other similar eCommerce store builders work equally well for Dropshipping. 

Dropshipping on Facebook

For those who don’t want to run a website, then Facebook is another excellent platform. The Facebook Marketplace is a ready-made channel you can leverage to sell products. It’s slightly different, but you get access to similar product listing capabilities.

For Facebook Dropshipping, you’ll list products and sell them as usual. However, once customers buy from you, you have to buy them from a supplier who will ship them to the customer. There’s no automated mechanism, so you need to do some grunt work.

eBay and Amazon Dropshipping

eBay and Amazon support Dropshipping better than Facebook. These platforms come with the advantage of ready-made potential customers who use the platform to search for things they want to buy.

However, you pay a small price for using the platforms. Be prepared to pay a percentage of each sale (between 10% to 30%) to them. The need to pay this “cut” to Amazon and eBay might mean more difficulty charging competitive rates for your Dropshipped products.

Final Thoughts

Although the Dropshipping business model may seem easy, it takes lots of discipline and dedication to build a successful business. If you’re hoping for a no-effort road to financial freedom, Dropshipping is far from ideal.

Despite this caution, Dropshipping represents an opportunity for many who may be out of work, seeking side income, or simply looking for a change in their lives. Done correctly, it can be incredibly lucrative, with some Dropshippers earning hundreds daily.

Ready to find the right Dropshipping business for you? Search for Dropshipping businesses for sale on Flippa.