What Is Ecommerce Dropshipping & How Does It Work?: 2023 Guide
The world of business is transforming faster than ever. More and more companies are now using different business models to achieve their goals. The inclusion of technology within the ecommerce space has provided new possibilities. For example, ecommerce dropshipping is one of the quickest-growing options among these models.
If you’re into finding the right online business opportunity for you and your aspirations, dropshipping may be your most profitable option. It is also very convenient, making it the go-to choice for an online business for many. According to Statista, the global online dropshipping industry is worth $243 billion in 2023, expected to reach $476 billion by 2026. This is an impressive growth from as little as $129 billion back in 2020.
Dropshipping in ecommerce can be simply explained. It’s an order fulfillment model where the online business does not need to have the products that it sells in stock. Instead, the inventory and delivery processes are handled by a third-party supplier. In this way, this business model has the potential to generate high returns without too much effort required from ecommerce entrepreneurs. It is a relatively newer approach to business but has become equally popular for businesses big and small over a brief period.
With the right dropshipping approach, you can start dropshipping with minimal investment. You don’t need much capital as you don’t have to produce or even buy products, making it the best option for new business enthusiasts.
The best part about dropshipping is its scalability. You can start small and then increase the scale of your business by resource allocation. For instance, using resources for advertising or brand building are two great options.
If this is the first time you hear about this, you might still be wondering: What is dropshipping ecommerce? And how does it work?
In this case, this article is for you as we’ll answer all the burning questions related to the concept of dropshipping in the ecommerce space. In this guide, we’ll also show you how to get started on the way to growing your online marketplace with this order fulfillment option.
Last but not least, we’ll explain how the Coretava tools can boost the performance of your ecommerce store with minimum efforts on your behalf.
Table of Contents
- What Is Dropshipping Ecommerce?
- How Does Dropshipping in Ecommerce Work?
- Does Dropshipping Actually Work in Ecommerce?
- 5 Things to Consider Before Getting Into Ecommerce Dropshipping
- Get Your Dropshipping Ecommerce Business Started
What Is Dropshipping Ecommerce?
Dropshipping ecommerce business is a retail order fulfillment method designed especially for online stores. It’s a business model where merchants purchase products from third-party vendors for customer orders. The products reach the customers directly, saving the sellers from the hassle of inventory management.
The retail store manager enjoys a hands-off process, making it the most viable option for entrepreneurs with limited inventory space and human resources. They don’t have to worry about product stocking, bulk orders, or ecommerce fulfillment in any physical way.
Instead, the suppliers send the products directly to the customers on the seller’s behalf. This method doesn’t require as much operational capital as other business models. There’s no need for a brick-and-mortar store, as you can simply use the best ecommerce platform for dropshipping.
Retailers don’t have to worry about hiring employees, overhead payments, energy costs, product stocking, etc. These features make the ecommerce dropshipping business different from other business models that require significant human and other operational resources.
Dropshipping vs Ecommerce: How Are They Different?
One of the most common comparisons you will come across in business is dropshipping vs ecommerce. Understanding this difference can help business enthusiasts pick the right options for their needs.
Both dropshipping and ecommerce have their respective market benefits and drawbacks (more on this ahead). The question is: Why are they so different?
Let’s have a quick look at their comparison below.
Ecommerce is short for electronic commerce, also known as internet commerce in some cases. The main difference between ecommerce vs dropshipping is that ecommerce is about the purchase and sale of services and goods online.
The ecommerce business model also includes financial transactions and data exchange. It’s why an ecommerce website needs to be secure and accessible. Customers should be able to skim through the offerings of the seller and pick the product or service that best suits their needs without getting lost and distracted.
Once this is done, a customer completes a payment and provides a delivery address for order placement. Ecommerce is a quickly growing industry because of the many beneficial features that it gives to both buyers and sellers.
Dropshipping is a business model involving order placement and delivery without inventory keeping. A customer places an order to the retailer, which directly goes to the supplier responsible for the delivery.
Dropshipping is a convenient option for conducting business between the supplier and the customer. It can get the job done with minimal cost and effort. But the quality of services the suppliers provide determines the survival of retailers. So, finding the right suppliers for the best customer service is important.
Once retailers have reliable suppliers for the business process, the rest becomes simple. You can start a dropshipping business with minimal capital, making it ideal for new business entrepreneurs.
How Does Dropshipping in Ecommerce Work?
If you’re interested in dropshipping, you need to know about the process. We have already mentioned how dropshipping is a type of ecommerce, but you should know the exact working process before getting involved. Therefore, we’ll quickly overview the dropshipping process for your reference.
The dropshipping process creates a bond between a supplier and a customer-facing store. Shopify dropshipping is one of the most common examples of how a business model like this can be highly profitable for those interested in it.
Many online marketplaces decide to seek multiple wholesale suppliers via a supplier database. Some of the most common suppliers for wholesale retail include:
- Worldwide Brands
You can use these services to offer products for sale. These websites provide customers with the products without sellers worrying about inventory.
The ecommerce dropshipping process consists of the following steps:
1. Order Placement
The customer places an order for the products you offer provided by the suppliers.
2. Order Sharing
The customer-facing store shares the order details with the suppliers.
3. Order Preparation
The suppliers prepare the order for ecommerce fulfillment.
4. Order Shipment
Once all the steps are complete, the supplier ships the order directly to the customer, completing the ecommerce dropshipping process.
Does Dropshipping Actually Work in Ecommerce?
The dropshipping business is one of the most popular models used worldwide. The dropshipping industry is expected to hit $476 billion by 2026.
But does this ecommerce model really work?
The main reason why dropshipping has become so popular recently is that it really does work for new ecommerce entrepreneurs and businesses. Mostly because it is significantly more convenient and more efficient than other models.
It saves sellers from inventory and manufacturing hassles. They can take customer orders, share them with suppliers, and complete the process in no time. A simple dropshipping business has an easy process for ecommerce fulfillment. The sellers can easily operate from around the world and make money without ever establishing a physical office. Since dropshipping is quicker and less complicated than traditional business models, almost anyone can do it.
To help you decide if this is the right strategy for you, let’s take a look at the main advantages and disadvantages of dropshipping as compared to ecommerce business models:
Ecommerce Dropshipping Pros
Ecommerce dropshipping offers plenty of benefits compared to other business modes within the industry.
Here’s a quick look at the primary ecommerce dropshipping pros you should keep in mind:
1. Scalable Opportunities
The dropshipping business is scalable, as you can start from a very small setup and expand your business over time.
2. Wide Range of Products
Dropshipping offers a wider product range, making it best for sellers aiming to target more customers.
3. More Experimentation
You can easily experiment with dropshipping as it has different niches to target and you don’t need to change production lines or open new warehouses.
4. Low-Risk Strategy
The business risks are generally low because sellers aren’t responsible for the production of goods or even inventory management.
5. Location Flexibility
Business owners can operate their online store anywhere, making it highly flexible.
Ecommerce Dropshipping Cons
Like all business models, dropshipping also has some drawbacks that interested entrepreneurs should know about before getting started.
Below we have listed the main cons for your reference:
1. Low-Profit Margins
The profit margins with dropshipping are generally low, which can be challenging in the long term.
2. Ethical Production
The sellers don’t always know if the products offered are created ethically, and this can have all sorts of various repercussions.
3. No Branding Control
Sellers have no branding control, increasing the chances of issues with the quality of products. Moreover, you miss out on the opportunity to build brand awareness and brand loyalty.
4. Supplier Unreliability
Some sellers are highly unreliable, putting the seller’s reputation at stake. That’s why it’s crucial to work only with suppliers with stable reputation and a lot of positive reviews by other customers.
5. Multiple Suppliers Management
You will need more than one supplier as your dropshipping business grows. It can be challenging to manage multiple suppliers simultaneously. It will require setting up robust processes and sticking to them at all times.
6. Customer Support Issues
As a dropshipping seller, you might need to deal with customer issues that are beyond your direct control. That’s why it is important to work only with reputable suppliers and high-quality brands to avoid problems that will ruin your own reputation.
Considering these pros and cons, there are various types of ecommerce businesses you can set up, but dropshipping is probably a more viable one. It is more convenient and less hassle. Customers can easily manage their sales by outsourcing them to third-party suppliers.
The profit margins may be relatively lower, but it’s still a great option for long-term operations. You can collaborate with multiple suppliers and sort out your sales in no time. You can share the orders placed with the suppliers and get the best value delivery possible.
Dropshipping is also great for sellers not wanting to indulge in inventory management hassles. It is a straightforward business with lots of industry scope. Working for it today will unlock many new possibilities for you.
5 Things to Consider Before Getting Into Ecommerce Dropshipping
Dropshipping offers many advantages over other ecommerce business strategies. However, there are still some inherent risks and challenges that you need to take into account before beginning. Making the wrong move in dropshipping can land your business in some serious trouble.
To help you avoid these issues, we have compiled the 5 main things you should keep in mind before getting into ecommerce dropshipping:
1. Choose a Niche Store Over a General Store
The most common decision you’ll make in your dropshipping career is the type of store you want to set up. It determines the number of sales, repeat purchases, profit margins, and other business metrics.
The biggest mistake most sellers make is setting up a generic store. They believe that by covering multiple niches from a single website, they can earn more . That may sound logical and straightforward, but it can get overcomplicated. Most business owners end up in serious trouble when they cannot cater to various customer needs properly.
Moreover, launching a specialized niche online store allows you to target your ecommerce personalization and ecommerce marketing strategies. This can lead to much better results than trying to attract many different customers without any specific focus.
2. Pick the Right Products to Sell
Dropshipping offers a variety of products to choose from. However, not all of these products are the same. Therefore, it’s necessary for professionals to pick the right ones.
Most products on an ecommerce store sell well, but there are some product types you should avoid. These may include copyrighted products, leading to legal issues and complications.
They can also be fragile products because they have a higher breaking possibility. Don’t sell heavy products because shipping them may be harder for the suppliers and might cost more for you. Carefully assess available products and select the best ones for your dropshipping business to ease it.
3. Choose the Right Suppliers
We already discussed how the right suppliers make a big difference for dropshippers. It is what your whole business structure will depend on. The right suppliers will be more reliable, easing issues with customer support as well.
These professionals cater to thousands of customers and can handle the order pressure which may build as your business grows. If you have the right suppliers, you can also expand the business structure further without worrying about fulfillment problems.
If you don’t make the right decision, the whole dropshipping venture could be at risk. We also recommend considering the type of operations they use. For instance, using efficient tracking tools is a must for business owners wishing to grow.
4. Use the Best Ecommerce Platform
The ecommerce platform for dropshipping determines the ease or complexity business owners will need to handle. You need to choose the right platform for your business operations to avoid unnecessary risks and troubles. Your online platform will also determine the tools and apps, analytical options, and other details you can access.
Most ecommerce platforms demand an operational fee from sellers, which you must add to the operation cost. Shopify, Magento, WooCommerce, VTEX, Nuvemshop, and Zid are some of the most popular choices among dropshippers for the many benefits they bring.
Once you have set up your store on your selected platform, you can choose the ecommerce tools and apps that you need to automate and grow your business operations. These will depend both on your platform and your specific niche as well as on your skills and needs.
5. Deploy the Top Ecommerce Tools
To make your ecommerce dropshipping journey as smooth and profitable as possible, you need to make use of the best tools available on the market. There are many aspects of the business process that you can optimize with the help of the right tools, and it’s key to do so in order to grow your business and maximize profitability.
You can find some of the best tools for this purpose on the Coretava platform, including:
- Core Personalization to deliver intelligent search, instant predicts, and personalized recommendations to convert more customers and increase sales
- Core Marketing to bring customized pop ups, emails, and SMSs to engage customers and get them to shop more
- Core Loyalty to launch a customer rewards program to drive repeat purchases and boost revenue
Importantly, the Coretava tools integrate seamlessly with all the biggest ecommerce platforms listed above.
Click here to get immediate access to the best ecommerce dropshipping tools!
Get Your Dropshipping Ecommerce Business Started
Ecommerce dropshipping may sound like a lot of work, but that’s not really the case, especially if you set up the right processes and use the best tools. Indeed, dropshipping brings many important benefits over other ecommerce business types, allowing entrepreneurs to start making money without producing anything and without worrying about maintaining inventory.
Meanwhile, it’s important to start optimizing the performance of your dropshipping ecommerce store as soon as you launch it. The Coretava products can help you with personalization, marketing, and loyalty with the ultimate effect of generating more sales at lower costs.
Schedule a demo to learn more about how Coretava can boost your ecommerce dropshipping business right away.
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Daniela has 6 years of experience in digital marketing for ecommerce businesses.
Aws is the Co-Founder of Coretava, a complete retail ecommerce growth platform. He has 6+ years of experience in managing and growing ecommerce businesses.