The eCommerce industry has grown exponentially ever since the dawn of the COVID-19 pandemic. In 2021, global eCommerce sales amounted to over $5.2 trillion, and current trends predict that this figure will balloon to $8.1 trillion by 2026. Luckily, the shift from brick-and-mortar shops to online stores means an influx of opportunities for both veteran and aspiring entrepreneurs.
If you’re planning to start an eCommerce venture, you should know that shipping services will be one of your vital needs. Whether running a retail store or a food and beverage brand, operating your business online will be difficult without a reliable logistics partner.
The good news is that the local logistics industry has seen rapid development recently, with players like Grab asserting their relevance for businesses and consumers in the Philippines. Today, businesses in the country now have a wider range of options for addressing their logistical needs. One option that’s gaining massive traction in the Philippines and other countries would be drop shipping.
What is Drop Shipping?
Drop shipping is a way of fulfilling orders without the business owner managing their inventory. Instead, drop shipping companies buy products from third parties and send them to customers. On the other hand, as the entrepreneur, you oversee the order processing and generate profit by marking up the items you’re selling.
After processing orders, the third-party suppliers do everything on your behalf. That means you don’t have to stock or bulk-buy products, significantly reducing operational costs. All you need to do is buy wholesale from existing vendors with the inventory and space before they ship them off.
How Does Drop Shipping Work?
- Owner and drop shipper finalize the agreement
Before attracting customers to your online store, you need to find a drop shipper first. Ask how much the wholesale price is for products, how the shipping process works, if they have a handling fee, and how they’ll charge you for using their services.
Shop between drop shippers and compare their fees to see which ones fit your business and your costs. Also, check if the shippers provide live tracking for customers, returns, and refunds. These are quality-of-life necessities that can have customers coming back to your store.
Once you’ve decided on your partner, you either register for their services using an app or sign an agreement with them.
- The customer makes a purchase
Now that you have a drop shipping partner, customers can visit your store. You can serve different industries depending on your expertise level or the potential profits you can get.
Once a customer finds a product they like, they make an order. They pay the set price determined by you, which is the wholesale price plus the markup. Depending on your agreement with the drop shipper, the price may include a handling fee.
- Owner sends an order confirmation to the customer
Upon completing a transaction, the customer will get a confirmation receipt. The confirmation lets the customer know their order is acknowledged and on the way. You can also send the customers’ order confirmations through email. - Owner forwards the order to the drop shipper
Depending on what you use to host your store, you can receive the customer’s order through email, on a dashboard, on a spreadsheet, and more. You can then forward the orders to the supplier and pay the wholesale price. Whatever markup you charged the customer are your profits, which you keep. - Drop shipper send the order to the customer
Once the drop shipper confirms payment for the product, they can start shipping it. At this stage, the drop shipper is in charge of getting the product to the customer safely. As the shop owner, you’re absent in this process and can attend to attracting other customers and forwarding more orders. - Customer receives the order
If all goes well, the customer safely receives their order. Depending on your shop’s platform, they may leave a review and a rating, encouraging future users to purchase the same product.
5 Benefits of Drop Shipping
- Less starting capital
Because you don’t need to buy any inventory and rent warehouse space, partnering with a drop shipping company allows you to start with less capital. You also save on shipping costs since the drop shipping company handles everything as soon as you send them the customer’s order. - Flexible and scalable
An online business with a drop shipping partner allows scalability, as sending out orders isn’t reliant on the warehouse or the number of employees. You can manage your online store anywhere since you don’t have a brick-and-mortar store. - Multiple product offerings
Because you don’t have to manage any inventory, you can cater to different industries and markets by offering various types of products in your store. You can add any trending items to your store or change your product offerings without clearing out stock. - Less monetary risk
A drop shipping company shoulders a lot of responsibility for you, especially when shipping a product. Since they’re in charge of their stock and shipping, you reduce the risk of losing money through lost items or overstocking an item. - Selling through multiple channels
Drop shipping works through various channels like your website or social media. Since you’re in charge of consolidating and sending orders to the drop shipper, you can use different platforms for marketing your store and the products you’re offering.
FAQs About Drop Shipping
- Is drop shipping profitable?
Drop shipping is profitable depending on several factors. You need to look at your competitors within the space, the fees the drop shipper asks for, and the products in demand. Many products sold by other businesses using drop shippers have low prices, so you must ensure you keep up with them while still pulling a profit.
- Can you start drop shipping with no money?
Yes, there are drop shipping sites that offer free trials to let you test the service. Some sites may charge a small fee whenever you sell an item, but you won’t need any upfront investment.
- Is drop shipping good for beginners?
Yes, drop shipping is a good business for beginners because it requires minimal costs, allows you to work anywhere, and doesn’t require you to manage any inventory. Start as small as you want, with only a few items for sale, then scale up as you gain more experience.
- Is it legal to use drop shipping?
Yes, it’s completely legal to use. Just ensure that you’re following any laws regarding online selling. Because you have an agreement with a drop shipping business, you’re selling products with their permission.
- Can drop shipping companies ship worldwide?
Yes, some drop shipping companies ship their products around the world. You’ll need to ask the drop shipper you want to partner with about their international shipping process, timelines, and fees per country.
The Easiest Path to eCommerce
Drop shipping opens many opportunities for entrepreneurs starting in the eCommerce industry. These companies shoulder many responsibilities that would typically take a lot of time and money for you to set up. Start building a successful business and launch products with extensive research and careful planning.
If you’re looking to get started with online selling, then consider Rush’s all-in-one eCommerce solutions. We help organize your website, provide you with an ROI calculator for your business, and handle logistics as you get started with drop shipping.
Book a demo with one of our Sales Champs to get started!
