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What is Dropshipping: Detailed guide to dropship in 2023

Sellers from across the world are increasingly opting for dropshipping as a business method in 2023. Find out what is dropshipping, pros and cons, and alternative e-commerce business option for Indian sellers in this blog.

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What is dropshipping?

Dropshipping is one of the recent but popular concepts in the world of product reselling, especially in e-commerce. It is a procedure or an order fulfillment method where e-commerce businesses outsource procuring, storing and delivering products that their customers ordered. Sellers simply place an order to the manufacturing unit or fulfillment centre. Once the order is placed, it becomes the third party's responsibility to manage the product, prepare it for delivery, and finally deliver it. This order fulfillment method appeals to Indian businesses that are seeking low overhead and capital investments. However, this method has its list of cons as well. Dropshipping may appeal to businesses that intend to sell generic products, but it can limit opportunities to build a global brand or offer different products.

If you are considering dropshipping for your e-commerce business, there are many factors you must review—including a few profitable alternatives that offer similar benefits.

How does dropshipping work?

● Order placement:
The process begins when a customer places an order on a marketplace or website. For instance, consider that a customer has placed an order for a leather bag from the drop shipper’s website or an e-commerce marketplace like Amazon USA. The drop shipper has to ensure the availability of the product displayed. Once the order is placed, the drop shipper forwards the order request to the manufacturer, supplier or the fulfillment center that stores the products.

● Order confirmation:
As soon as the customer finalizes the purchase and orders a product, the seller sends a confirmation email to the customer, which includes the shipping and tracking details of the package. Simultaneously, the seller informs the supplier or fulfillment center about the product ordered. While it seems like a regular order, the difference is that the drop shipper here works as a bridge between the customer and the fulfillment center or supplier.

● Delivery:
The delivery process of dropshipping is simple too. The entire process is just like standard shipping. The package is packed from the warehouse and delivered to the customer, once the order is placed.

How to select products for dropshipping?

The choice of products play an important role in the success of a dropshipping business. With proper product research and strategic planning, it is easy to finalize a product category to export through dropshipping. Here’s the step-by-step guide to find dropshipping products to sell online:

Get product ideas:

If you do not already know what products to sell through your dropshipping business, then here are a few ideas for you:

● Find bestselling products on online stores:
Browse through and observe e-commerce stores to understand their bestselling and trending products. This will help you identify what products to include and what to not.

● Explore community sites and pages on social media channels:
Check out top facebook shopping pages and their trending products to get product ideas. Community sites also help in understanding customer behaviour, interests and choices.

● Social media shopping sites:
Customers nowadays save their preferences on social media platforms like Pinterest, Tumblr, Etsy and Instagram. Some of the customers share common interests, forming communities, which also gives you a good understanding of what products are most loved by them.

● Explore local markets:
India is known for diverse traditions and heritage, which is also seen in products being sold in local markets. Local markets in each state, city and district in India offers a range of diverse handmade products that can be exported from India to countries like the USA, UK, Japan, Singapore and Australia.

Out of the list of products that you might wish to sell through dropshipping, narrow down to top 5 product ideas. Try to choose a niche for your dropshipping business and then keep the products that can be clubbed according to the niche you chose.

Procure or manufacture products:

The next step is to get products sourced or manufactured. This also impacts the delivery timeline, which is important when selling internationally, due to the number of clearances involved.

Following are the ways to procure export products:
● Websites providing lists of suppliers for the products you are looking to procure
● Attending trade shows to meet suppliers and manufacturers
● Export Promotion Councils that have a huge database of exporters and manufacturers

Determine the price range:

Setting competitive prices is an important step to ensure that your dropshipping business becomes successful. Along with this, selling location must also be taken into consideration.
If your dropshipping business sells in the UK on an e-commerce website like Amazon, then you can set a price depending on the local price range for a certain product category in that country. If you are selling with Amazon, then you must also find a price range that remains profitable in every sale event. It must cover sourcing, shipping and marketing cost of the products.

Connect with dropshipping suppliers:

After finalising what products to sell, you need to find and narrow down on the suppliers (manufacturers/distributors) who will dropship products on your behalf. Reach out to manufacturers to source products. Having a short supply chain will help you sell at competitive price internationally.

When deciding the supplier, make sure that they maintain quality standards, a good brand reputation, and effective pricing. All these factors can directly affect your dropshipping business.

What are the pros and cons of dropshipping?

One of the key benefits of dropshipping is that any Indian seller can start sell their products to customers without much physical investment. However, before deciding what kind of business to start, it’s important to understand both advantages and disadvantages of dropshipping. In this section, we explore the potential pros and cons of dropshipping for Indian sellers who want to build a global brand.

Pros

● Setup & overhead costs: Sellers do not have to store the products on their own in this business model. While owning a conventional business demands buying a store, warehouse, and many additional charges, a dropshipping business demands just an internet connection. Since you don’t store or ship the products, dropshipping has the potential to lower overhead costs.

● Multichannel selling: In this business, multichannel selling is possible to attract more buyers. You can use dropshipping to sell products from your own domain, through the Amazon Global Selling program or social media.

● Global delivery: Dropshipping allows you to deliver shipments to any place in the world irrespective of your operating location. The store owner can run the business from anywhere.

● Low operational cost: In dropshipping, the supplier ships the products and the dropshipper do not have to maintain any inventory. Moreover, there is no need to purchase the products in bulk in advance, as the dropshipper only pays for the products that are purchased.

● Highly scalable: If your dropshipper or supplier can ship to anywhere in the world, you can become a global brand.

Cons

● Product quality: Dropshipping reduces your involvement in the order fulfillment process, limiting your ability to monitor and guarantee product quality to the end customer.

● Fulfillment timeline: When a dropshipping service handles the fulfillment process, you do not have control over order selection, packaging, and shipment.

● Range of offers: Since you don’t handle order fulfillment, you may not be able to place special offers and promotions, such as bundling or free shipping, to attract customers.

● Profit margins: Little to no product differentiators means your business may end up competing more aggressively on price. Selling at low prices can eat up your profit margin.

● Legal liability issues: This problem isn’t very common, but it should not be overlooked either. It is important to check that the suppliers supplying have got their IP trademarked. Maintain a dropshipping agreement contract to ensure the legitimacy of the supplier’s business.

Fulfillment by Amazon (FBA): A seamless dropshipping model

Offering similar benefits as dropshipping, FBA enables Indian sellers to reach international customers and deliver their products across the globe in a hassle-free manner. Although it is not necessary to sell via Amazon to use FBA services, with 300 million+ customers internationally and 18 marketplaces to export to, Amazon Global Selling is a great option for e-commerce exports. When you choose FBA to dropship your products, here’s what you get:

- Amazon stores your products in the Amazon fulfillment center.
- Amazon handles quick delivery to destinations across the globe with the Prime shipping option.
- Amazon offers 24/7 customer service
- Amazon FBA takes care of the returns
- Amazon FBA notifies you when you need to restock the products (if needed).

To help with shipping your inventory from India to the fulfillment centers in the US, Amazon SEND provides end-to-end tracking and shipping support.

Explore Amazon SEND

How does FBA work?

Step 1: You send the products that you want to ship to the fulfillment center.
Step 2: Amazon FBA receives the products and stores them carefully.
Step 3: Once the order is placed, Amazon FBA packs, ships and delivers the products to the customers.
Step 4: Amazon manages the customer service and also handles the returns.

What is Amazon Global Selling?

Amazon Global Selling is an e-commerce exports program that helps you take your business from India to the global markets. With 200 million paid Prime members and over 300 million customers globally, you can leverage Amazon’s global scale across the 18 global marketplaces in 200+ countries and territories. Over 100,000 Indian sellers are successfully selling globally with this program on marketplaces like Amazon USA, UK, Australia, UAE and more. Along with FBA, Amazon Global Selling offers easy registration, attractive product listing and international state-of-the-art tools to help sellers with promotions, language translation, and more.

A business where there is less investment, no shipping complications, and lower risks can be the right business to start. Start your dropshipping business with Amazon Global Selling and increase your sales by selling into new Amazon marketplaces.

Amazon export business- Amazon Global Selling benefits

Make the most of the increasing exports from India to the world with Amazon

Increase sales by participating in year-round sale events like Prime Day, Christmas and Cyber Monday

Reach 300 million+ customers of Amazon across 18 international marketplaces

Frequently Asked Questions

What is dropshipping and how does it work?

Dropshipping is a procedure where sellers do not have to fulfill the product orders. Instead, the customer gets it delivered from the supplier or fulfillment center directly. It works in three simple steps – finding a supplier, taking and placing orders, and delivering.

Can dropshipping be done with Amazon?

FBA is an easier alternative to dropshipping. The seller has to procure goods from the manufacturers or suppliers of your choice and send it over to the fulfillment center. Amazon handles the shipping, customer service and returns on your behalf.

How much does it cost to sell internationally on Amazon?

Amazon Global Selling fees depend on your selling plan, product category, fulfillment strategy, and other variables. The options are flexible allowing you to choose the most suitable export cost from India for your business goals.

Is dropshipping profitable?

Yes, dropshipping is an excellent option to make the most of the growth in e-commerce industry. To start your business using your smartphone from any part of the country, without having to manage a team or owning a physical setup abroad, is a key benefit of dropshipping.

Published on September 27, 2021.

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