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For any eCommerce entrepreneur, dropshipping is an essential skill to master. Most people start with this strategy because it's a fast way to start a business.

Even though anyone can make money with dropshipping, you should not assume it's going to be easy all the way. For long-term and sustainable success, you need to stay on top of your game.

Understanding the basic principles and setting up a good strategy will help you build a business that you can keep profitable through the highs and lows of the market.

What is Dropshipping?

In the dropshipping business model, you distribute products without using traditional inventory and storage. In a traditional business, a shop owner or retailer store inventory locally and ship it when a customer orders.

In dropshipping, the following happens:
• The customer places an order using the online shop.
• The shop owner or retailer forwards the order request to the product supplier.
• The supplier delivers the product directly to the customer.

The shop owner or retailer doesn't have to deal with product inventory management.

Popular Models for Dropshipping

Of course, dropshippers use various strategies to operate their businesses. Here are the three major ones:

1. Online Retail Arbitrage

In the arbitrage model, dropshippers find products that have varying prices on different online retail stores. They take lower priced products from one store and sell it for a higher price in another one.

For example, if dropshippers see that a shirt is cheaper on Walmart, they can take an order on Amazon at a higher price and then use Walmart to fulfill that order.

Online retail arbitrage is an easy and low investment business. However, you are at the mercy of the market. If the shirt price changes on Walmart, you’ll have to find a new product to stay profitable. When you get an order for a shirt, there isn’t any guarantee that Walmart will have that shirt anymore.

Also, if you sell the product on Amazon, it will arrive at the customer’s doorstep in a Walmart packaging which leads to customer satisfaction issues. So it’s not a sustainable business model and not a recommended strategy.

2. Using Overseas Suppliers

It’s a lot like the above model. However, instead of using another online retail store to fulfill your orders, you are going to use overseas suppliers. The most popular way to find overseas suppliers is through AliExpress.

AliExpress is a large marketplace with a great selection of products. It’s Alibaba’s online store that sells and delivers throughout the world.

The advantage of this strategy is that it has a better profit margin than online retail arbitrage. But you’ll run into customer satisfaction issues with this model too.

Suppose you are selling your products on Amazon. You’re your supplier is in China, you can’t deliver the product in few days like Amazon Prime requires. So you’ll run into customer complaints and get banned from Amazon.

Another problem is if the customers don’t like the products, the returned shipments will come to you. So you might unwillingly end up with an inventory in your house.

Because of the risk of getting banned on Amazon, most dropshippers who use this model, sell their products on Shopify where the rules can be a little bit lax for customer service.

3. Using Local Suppliers

Dropshippers directly get in touch with local companies and become certified distributors for the products. Sold items go directly from the local company to the customer. If there’s a problem, the product is returned to the company.

In this model, a dropshipper is building a long-term business relationship with the local company or supplier. The relationship is mutually beneficial. The dropshipper is responsible for bringing traffic and the supplier is responsible for inventory management and delivery.

New entrepreneurs should be aware that a lot of local companies have policies against dropshipping to Amazon or eBay. Companies adopt this strategy to avoid price wars on their products.

Which Strategy to Adopt for Dropshipping?

Using local suppliers is the most reliable way to build a profitable long-term business. If there are restrictions about selling on Amazon or eBay, you can create your own retail store on Shopify and sell directly.

For the best results, build relationships with multiple local vendors and list their products on your Shopify store. It diversifies your retail portfolio and improves your chances of creating a reliable and sustainable business.

At Wholesale2b.com we already do all the research work for you so you can instantly gain access to many local dropship suppliers that have been verified by Wholesale2b.

You can then decide where to sell the products or sell them from your own website. Wholesale2b can also create a website for you and host it as well, or you can create a store with either Shopify, BigCommerce, WooCommerce or Weebly and use Wholesale2b’s App to import products to your store.

Suggested links

Dropship Website plan
Shopify Dropship App
BigCommerce Dropship App
WooCommere Dropship App
Amazon dropship plan
eBay dropship plan

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