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How Does Dropshipping Work?

How Does Dropshipping Work?

Last modified: March 22, 2023

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Are you looking into starting your first or next business and are interested in dropshipping for the first time? Are you confused and wondering how dropshipping works? Well here are a list of questions that should help you understand more about dropshipping and the benefits to you and others.

How does Dropshipping Work?

There are three parties within a dropshipping process. The customer is the person buying the products, the seller is the website owner who advertises and takes payments for the products and the merchant, the person who stocks and fulfills the order.

When a customer makes a purchase, the seller takes the payment from the customer. They then place the order with the merchant, such as Spocket, and give them the shipping details. The merchant then packages the products and sends them to the customer with the branding of the seller, they also take payment for their share of the sale.

It is a simple process that works very well and there are numerous benefits.

What are the Benefits for the Seller?

There are numerous benefits for the seller. First of all, it reduces the barrier to entry because the seller doesn’t need to buy lots of stock. They can also save time and money by not having to store stock, do quality checks and take time out to fulfill orders. This allows them more time to market the products and manage other aspects of their business.

What are the Benefits for the Merchant?

The merchant also benefits because they don’t need to have a sales team to sell their products. They can use networks to advertise their products and get others to sell the products. They can collect the money that is owed to them from the seller and send out the product using the branding of the seller. With enough merchants selling their product, they can increase revenue, even if they lower the base price of the product.

What does the Customer See?

The customer is only made aware of the seller. They do not know the merchant will ship all orders out using the branding details of the seller. This prevents confusion of the customer receiving packages from brands that they might not know about.

The customer can also benefit from more choice. The same dropshipping product can be sold on numerous websites, so they can use coupons, discounts and price comparison to save money and ensure they get the product they want at a price they’re happy with (done via dropshipping apps).

How Hard is Dropshipping?

Dropshipping is no harder than any other business. It takes just a website and good marketing automation to get going. Many dropshipping businesses can start to build a strong revenue very quickly and never touch a product.

Do Products need One Merchant?

Dropshippers can use multiple merchants on their website to stock their website with products. If a customer purchases from several merchants, orders can be made to each and deliveries arranged. However, some businesses can collate all the orders together and send them as one to the customer with only a day’s delay.

Final Word: How Does Dropshipping Work

Above is the simple answer to how dropshipping works. It is an easy process that many people will understand and you might have experienced without knowing about it.

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