Drop Shipping: What It Is, How It Works, Advantages and Disadvantages – Full Guide 2019

by | April 3, 2019
Drop Shipping: What It Is, How It Works, Advantages and Disadvantages – Full Guide 2019
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Drop shipping – anyone who has ever searched on the online business you’ve probably encountered this term. But few people really know what drop shipping actually means and how it works.

In this article you will learn everything about drop shipping!

For someone who is new in the world of online business and want to enter in the field of ecommerce, the process of drop shipping can seem a little intimidating, because it is difficult to find the information that really matters on the subject in Portuguese.

Your problems are gone! You have found the definitive guide to make drop shipping! It covers everything from the meaning, how this business model works, if the drop shipping is really for you, how to find the right products and the right suppliers to have an ecommerce dropshipping successful. Let’s go!

What is Drop Shipping? Meaning

The Drop shipping is a business model online that allows a business to operate without inventory, without the need for a warehouse to store their products or even having to send your products to customers.

Drop Shipping means stock in the source or direct shipping, when translated to Portuguese.

As stated earlier a technique of management of the logistics chain in which the retailer does not keep products in stock, and he sells products that are in stock from the vendor and the vendor makes the process of packaging and shipping directly to the end customer.

How does the Drop Shipping?

The Drop Shipping works in the following way:

The retailer (who makes the sale to the end customer) is associated with a supplier drop ship that manufactures and/ or stores the products, wrap the products and sends them directly to the customer from the retailer, all in the name of the retailer (Who makes the sale to the end customer).

That is how the drop shipping works in practice:

  1. The end customer purchases a product in an online store of the retailer.
  2. The retailer forwards automatically or manually the details of the request from the client to the supplier to dropship.
  3. The supplier of dropship wraps and sends the request directly to the client on behalf of the retailer.
  4. The end customer receives the goods purchased from the retailer, without the retailer to have if you want to touch the merchandise. Interesting, isn’t it?

The business model of drop shipping is extremely attractive, because it eliminates the need for the owner of the shop have a physical location, such as an office space or warehouse – instead, all that the retailer needs is a laptop and an Internet connection.

How to Start a Business of Drop Shipping on the Brazil – Domestic Suppliers

In this video, you can learn the step-by-step to create an online store to sell products by drop shipping in 15 minutes using domestic suppliers.

National suppliers drop shipping has delivery times of the products are smaller than the forncedores international, but the cost of the products is usually a little bit bigger.

You can get your shop to test your ideas for free, because Shopify offers 14 days free for you to create your store ecommerce drop shipping.

How to Create an Ecommerce Drop Shipping – International Suppliers

In this Guide, you will learn the step-by-step to create an ecommerce Shopify of dropshiping using international suppliers AliExpress.

International suppliers has the best prices for those who want to do drop shipping. However, due to this being an international delivery, the products take more time to reach out to customers.

To reduce the time of delivery of the supplies drop shipping from international vendors, use the shipping E-packet whenever possible.

The shipping E-packet, in addition to not be taxed in Brazil (the rate of 15 reals), he is on average two times faster than the freight cheaper offered by the vendors at Ali Express.

You can get your shop to test your ideas for free, because Shopify offers 14 days free for you to create your store ecommerce drop shipping.

Advantages of Drop Shipping

As a business model online, the dropshipping has several positive aspects, such as:

It is Easy to Start an Ecommerce Drop Shipping

It is not necessary to be a computer genius to set up an ecommerce dropshipping, since it basically involves only three steps: find the provider, set up your website and start selling the goods!

For someone who is beginner in the industry of ecommerce, drop shipping is relatively easy to understand and implement.

The Costs To Get started in Drop Shipping Are Low

The cost of setting up your online business using the model of drop shipping is low

In the models of traditional businesses, the majority of the cost is related to the configuration and execution of the operations, online retail, namely the purchase of the stock. As the dropshipping eliminates this step and, therefore, the cost to the d stock, all your investment will be associated with the creation of your ecommerce website (hosting, theme, applications, etc.).

You do not need to worry about overhead costs, large

As mentioned previously, the owner of the ecommerce drop shipping is not obliged to buy stocks, therefore, the costs of rental or purchase of office space / office and the other minor costs are also practically zero. The fixed costs of management of the site are all that a business owner needs to worry about if you opt for an ecommerce drop shipping.

Drop Shipping What It Is, How It Works, Advantages and Disadvantages – Full Guide 2019 1

The Drop Shipping is a Business Model of Low Risk

The risk of drop shipping as a business model is significantly lower than a physical store.

If the company does not sell products, she still does not lose anything, since you don’t have stock or thick physical. Therefore, there is little or no pressure on the entrepreneur to sell all your stock to recover part of your investment.

An Ecommerce Drop Shipping can be played from anywhere in the World

Your business drop Shipping can be performed in any place of the world, therefore, the owner of the company is independent to travel or live anywhere: no office, no warehouse, no employees and no hassles.

Little or no commitment to a physical space means that you could be sitting on a beach, while still profiting from your lija virtual. All you need is your laptop and the internet.

There are Many Products To Sell Using the Model of Drop Shipping

There is a lot of variety when it comes to the products that you can sell.

There are suppliers of drop shipping for almost everything that you want to sell! You can sell a few products or to sell several in your online store. Everything is in your hands. Find your niche favorite and the probability of no suppliers that meet your niche is high.

You have more Time and Resources to Scale your Business

With drop shipping, you will have more time and resources to scale your business.

In traditional models of retail business, if you want to more profits, need to work harder and invest much more of their resources.

With the dropshipping, all you need to do is send more requests to your suppliers, drop shipping, and then let them take care of the rest while you earn a good profit and still leaves you more time to think about ways to scale your business even more in the future.

Reduction of Losses with the Damaged Goods Before Sending to the Client

As the products go directly from the supplier to the client, there are fewer steps of shipping involved, which dramatically reduces the risk of damaging your products with the price movements in a physical space to the other.

Disadvantages of Drop Shipping

Like everything in life, there are some disadvantages that come along with the many advantages of the business model of dropshipping. Here are some disadvantages of drop shipping:

The Profit margin of Drop Shipping May be a Little Smaller

Profit margins slightly lower in comparison with the purchase of products from a wholesaler or manufacturer.

Depending on your niche, place of delivery or specific requirements for suppliers, drop shipping charge higher prices for the products and the freight, which consequently consume your profit margins of each sale.

Greater Responsibility With the Client

Full responsibility when something goes wrong, even when it is the fault of the supplier.

As the customer is buying the product on the retailer site, if the provider is messing up something, it is still the fault of the retailer, since the brand is the beginning of the process of retail. This is one of the reasons why it is extremely important to choose the vendor of drop shipping right.

Drop Shipping from a Control Level of Brand Less

The brand has a level significantly lower than the control in drop shipping.

Customer satisfaction is often closely linked to the details – custom packaging and branding of the products sent, gifts and notes that accompany the application are almost always those small details that count.

Unfortunately, the model of drop shipping rarely provides retailers with the opportunity to control how your brand is displayed during the process of delivery of the goods, because the supplier is the one who sends the products. However, there are some providers that may be willing to customize the deliveries of the products that your store sells.

Problems May Arise Depending on the Complexity of the Freight Drop Shipping

Some problems may arise due to the complexities with the transport.

Sell many different products may seem like a good way to increase sales and generate a bigger profit, but this can be counterintuitive if the retailer has multiple different vendors for these products.

Different vendors will charge you the shipping costs differ depending on factors such as location, types of products, etc.

If a client ask for several products that are sent from different suppliers, the retailer will have to work and pay the shipping costs separately for each product.

The transfer of these shipping costs varied for the client can negatively affect conversion rates, affecting, in turn, the profit margins of your ecommerce.

The Competition in Some Niches Drop Shipping Can Be High

The level of competition is relatively high for some niches drop shipping.

The attractiveness and popularity of the business model of dropshipping mean each time more retailers in all segments and niches. Unless a retailer is serving a segment or niche is extremely specific, the competition can be high. To combat the high competition, check out all the tips of the Mafia in the Marketing!

May Occur Communication Problems Between Retailer and Supplier

Maintain inventory control of the provider is almost impossible. The lack of communication can cause problems, such as cancellations of orders. This aspect can, of course, be managed with software nowadays, but these also have a price, and can increase overhead costs and fixed your ecommerce drop shipping.

How Profitable Drop Shipping Can Be?

Generally, the profit margins of retailers dropshipping ranging from 15% to 45%.

However, profit margins for consumer durables and luxury items (electronics, jewelry, etc.) can generate a profit margin of over 100%.

It is to find the niche and the supplier certain and find a market without much competition.

A good way toincrease your margins is to have you as a supplier the manufacturer of the products, instead of a supplier, effectively eliminating the middleman and increasing their profit margins.

Once business gets a little traction, it can quickly become a machine of making money that only requires a bit of work to keep it.

For those Who the Drop Shipping is Recommended?

The Dropshipping is an excellent business model for anyone starting in the world of business on the internet.

It is attractive to beginners, as it is a way of low risk and low investment to start their own business.

As the amount of capital that needs to be invested in this business model is quite small, it is also ideal for those who already is the owner of a shop with a stock, but is looking to try specific products on the market to see how it works before you invest in buying your own stock.

There are some types of entrepreneurs in the drop shipping is perfect. Let’s list some of them:

Entrepreneurs who Are Testing the Possibilities

Drop shipping can be a great way to test new products, or even a new startup, before you invest heavily in inventory that might not sell, making this model perfect business for the entrepreneur who wants to test their ideas, business models and products before making a large investment.

Entrepreneurs with Little Initial Capital

The drop shipping is definitely the most inexpensive method of online sales because you don’t need to buy stock in advance.

Because of this, the model drop shipping works well for entrepreneurs who have a limited budget or prefer to keep the initial costs as low as possible.

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Beginners in the World of Online Business

The model of online sales of drop shipping is also great for people who are starting to sell online.

The fact is that selling online is not easy. Drive traffic and convert that traffic can be difficult for a beginner.

Due to the low costs associated with starting a business of dropshipping, it allows new entrepreneurs to begin to learn about the tricks and the difficulties of assembling an online store, how to generate traffic and optimize for conversions before you invest thousands (or more) in stocks with which you can get stuck if not being able to sell.

For those who want to Sell Many Different Products Online

The drop shipping is also for people who want to sell a large variety of products or products with range of high prices.

Depending on the price range of the products that you want to sell, or if you want to sell hundreds or thousands of different products, it is almost impossible to start a business without a huge initial investment to buy all this stock.

In this case, the dropshipping would be the appropriate model because, again, you do not need to buy the stock in advance.

For those Who the Drop Shipping is not Recommended?

There are also some types of entrepreneurs to which the model drop shipping is not recommended. we’ll list some below:

Entrepreneurs Focused on High Margins

Probably the biggest problem with the business model of consignment drops are the margins narrow.

Generally, to the traditional products, its net margins (the price you sell it for minus the cost you paid by the sender, advertisements, and fees) are around 10-20%.

It is clear that some entrepreneurs drop shipping the most experienced and trained, achieve greater margins, such as 40-50%.

Your margin will depend on so competitive is your niche, and how you can differentiate your “brand” of the other stores drop.

Entrepreneurs Focus on Trademark and Branding of Your Brand

Build a brand that is sustainable in the long term is difficult, but the advantages can be worth the trouble and the costs in the long term.

However, to build a brand at the same time that uses the business model of ddrop shipping is much more difficult, as there are several elements of the customer experience that you will not be able to control.

For example, many times you discover that, after a client has purchased something from you, they are out of stock with the supplier. This leaves you in an uncomfortable position, and frustrating because many times when this happens, you have to cancel the purchase and return the money to the client.

Therefore, to succeed in drop shipping, you need to have good communication with your suppliers.

Another point to take into account is that, as you’re not sending the product on its own, does not have control over the experience of the client that will receive the package. Almost 100% of the time will be the product in a brown box without free.

You need to ask yourself if this is the experience you want your customers to have. By the end, as you don’t send the products on their own, do not have the relationship with companies of freight.

When something goes wrong and your client does not receive the package, you can’t simply connect to the Post office and fix the situation. You need to coordinate this with your vendor.

Which can take days to resolve, again, leaving your client dissatisfied with your brand.

Entrepreneurs with Little Experience with Digital Marketing

The majority of the suppliers (which can also export its own products to the customers of them) have sales targets in which 20%-30%% of sales must come from direct sales to the consumer, usually by means of your own e-commerce site.

In Brazil, the majority of suppliers sell to consumers by Ali Express and other Chinese sites like.

This means that if you are selling your products, will be competing directly with your own supplier, a supplier that can have margins much higher than you on the same products.

Any chance of competing directly against the suppliers is useless. They almost always win because the prices are much lower.

To win of the suppliers, you will need to be creative and explore the channels that they are not using to acquire clients, such as for example: Sell to the followers of Instagram for your ecommerce, sell with ads on Google, ads on Facebook and Instagram, and using advanced SEO techniques.

Errors of Drop Shipping To Not Commit

The following are some common mistakes that should be avoided when you are choosing your products to sell using drop shipping:

Do not choose products based only on his likes and dislikes: Always base your decision of product in facts, research, evaluation, and validation of the demand of the market and the niche in which it will act;

Not sale fake products or replicas: This is illegal in most countries! To avoid this type of products to avoid serious problems. Only use products drop shipping from reliable vendors. Nothing to sell Nike Sneakers fake in your store, dropshipping!

Not to be a Mary go with the other of drop shipping: “If everyone is selling, I should I also take the opportunity to sell also”. Don’t fall in this hole! The market of products of trends is typically very saturated, therefore, there will be high levels of competition.

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Conclusion – The Drop Shipping is that Cool?

Yes! The drop shipping is legal. In Brazil the drop shipping happens every day, and you are a user of this practice, if you make online purchases on sites such as Shoptime, ponto Frio, Walmart,etc.

In practice, the drop shipping fits in with business intermediation, for a time, who does drop shipping provides the service to find and offer the product from a supplier to the end customer.

Around the world, thousands of people earn their living with a laptop to the front, at home or anywhere in the world with the internet, brokering sales.