Dropshipping

Contents

• What is dropshipping?
• Advantages and disadvantages of dropshipping
• How to start dropshipping
• Challenges of dropshipping

What is dropshipping?

Dropshipping, derived from the English term dropshipping, is a unique business model in the field of e-commerce where an online store does not keep products in stock. Instead, products are stored with suppliers who ship them directly to customers. The profit of the online store is formed from the difference between the retail price on its site and the wholesale price offered by partners.

In Russia, one of the popular dropshipping services is the company 4Partners, which provides online stores with an opportunity to avoid logistics complexities, using their sites solely as showcases for products.

The dropshipping process works as follows: the online store attracts customers through advertising, after which they place orders. Information about the orders is passed to the supplier, who then sends the products directly to the customers. As a result of this process, the online store receives a commission or pays the cost of the product, keeping the difference for itself.

Advantages and disadvantages of dropshipping

Advantages of dropshipping

Dropshipping has become a popular choice for about 30% of online stores due to its many advantages:

• Low entry barrier for entrepreneurs, as startup costs are minimal—just create a website and attract customers without needing to invest in logistics or purchasing products.
• Reduction of operational and time costs, as the entrepreneur does not need to worry about storing products or renting warehouses.
• A wide range of products available through partnerships with various suppliers, allowing for an expanded target audience.
• No need to manage logistics processes, as these tasks are handled by the supplier.

Disadvantages of dropshipping

Despite all the advantages, dropshipping also has its drawbacks:

• Low level of control over processes, which can lead to issues with product quality and delivery, negatively impacting the business's reputation.
• Limited profitability, as profits are based on the difference between wholesale and retail prices, which may not be sufficient to cover all expenses.
• High competition among online stores, making it difficult to build a brand and attract loyal customers.
• Financial risks associated with returns and shipping products from different suppliers, which can lead to additional costs.

How to start dropshipping

If you have decided to start dropshipping, follow this step-by-step guide:

1. Define your niche: Research which products interest you, analyze market trends using tools such as Yandex.Wordstat and Google Trends.
2. Find a supplier: Research manufacturers and platforms offering dropshipping, such as 4Partners and Aliexpress.
3. Create an online store: If you do not have the resources for a full website, start with social media and add products from supplier catalogs.
4. Launch promotion: Use available advertising channels to attract customers, considering the low margins of the products.
5. Track results: Analyze customer feedback and optimize processes as needed.

Challenges of dropshipping

One of the main issues faced by dropshippers is ensuring quality service and customer support. To address these challenges, it is recommended to:

• Discuss potential problem-solving methods with suppliers before signing a contract.
• Set clear timelines for resolving disputes between the supplier and the online store.
• Have backup suppliers in case of issues with the primary partner.