The
e-commerce industry and online shopping have been booming in recent years — this is no secret. Any conversation about the growth of e-commerce and online shopping must also include the growth of dropshipping.
According to the data analysis firm Statista, the e-commerce market is
expected to reach US$7.4 trillion in the next four years. Statista also forecasts that the overall market value of dropshipping will grow to US$476.1 billion by 2026.
To learn more about what dropshipping is exactly today and the potential of this fast-growing e-commerce segment, we recently spoke with Lior Pozin, the co-founder and CEO of dropshipping platform provider
AutoDS.
“E-commerce is currently in its prime, and there is now a golden opportunity for dropshippers to leverage the boom in online shopping, mostly thanks to automation tools, to scale their businesses and increase profits,” said Pozin.
What Is Dropshipping?
Dropshipping is an e-commerce business model in which sellers do not keep products in stock. Instead, the sellers work directly with suppliers. When a customer places an order, the dropshipper then purchases the item from a third-party supplier, who in turn sends the product directly to the customer.
For example, a dropshipper could sell an item for $150 from a supplier that has priced the product at $100. From this sale, the dropshipper earns a solid profit of $50.
“In dropshipping, the seller is acting as a middleman in the order fulfillment process,” explained Pozin.
Since the dropshipping model does not require sellers to stock inventory, e-commerce entrepreneurs can get involved in dropshipping and launch online stores with limited upfront capital investments.
“The dropshipping business model can be described as low-risk and high-reward, opening the door for dropshippers to make attractive profits with minimal investments,” added Pozin.
Differences Between Dropshipping and E-commerce
Inventory is the main difference between the new dropshipping and traditional e-commerce models. In a standard e-commerce model, sellers must purchase and store stock, which comes with significant expenses and ongoing risks. However, in the dropshipping model, the sellers work directly with the suppliers.
“In fact, dropshipping has evolved into an easier and hassle-free way of selling online,” stated Pozin.
He notes that dropshipping allows sellers to market as many different products as possible and expand their product catalogs. This is because dropshippers do not need to invest in inventory.
“Consequently, dropshippers can cater to different demands and a larger market,” said Pozin.
According to him, this makes the dropshipping business model easily scalable, allowing sellers to test and list more items easily. Without investing in the inventory, scaling a dropshipping business comes at less risk.
“The best way to scale a dropshipping business is with automation tools. Automation in dropping allows sellers to use marketing and customer service to increase sales,” recommended Poizin.
How to Start a Dropshipping Business
According to AutoDS,
starting a dropshipping business is not as complex as it may sound. The company recommends following a few general steps to ensure that dropshippers offer attractive products in an optimized store targeted at the correct audience:
– Step 1: Find sellable products
– Step 2: Choose suppliers
– Step 3: Select a selling platform
– Step 4: Import products to your store
– Step 5: Market your products
– Step 6: Manage order fulfillment
– Step 7: Provide excellent customer service
– Step 8: Automate your business for better success
A dropshipping business is full of ongoing, time-consuming processes and tasks. From spending hours finding the best products to sell to processing fulfillment orders, managing a
dropshipping business manually can be a laborious endeavor full of room for human error.
Pozin highlights that fully understanding the dropshipping model and how the processes work is key to running a successful dropshipping business. He further notes that access to product information and selling tools are required to generate significant profits.
“Dropshipping automation tools allow sellers to automate the entire dropshipping process. Automation allows dropshippers to save valuable time and reduce errors in any of the steps. Plus, by automating dropshipping processes, sellers can optimize their businesses and boost profits,” concluded Pozin.
