What is Dropshipping and what are the pros and cons?
The traditional ecommerce practice of selling items that you keep in your warehouse or storefront is not the only way to become a successful ecommerce merchant. Some people have successful businesses that never even see the items they sell. This is known as dropshipping.
Dropshipping is a business model where the person selling the item does not house or fulfill their products directly. Instead, the manufacturer or a third party fulfillment company ships your items once an order is placed. There are a few ways to be a successful dropshipper. This piece gives you a rundown on what to look for when you are getting started with dropshipping.
What is Dropshipping?
It’s an ecommerce business model where the retailer doesn’t physically house the products they sell. Instead, they buy their inventory from a third-party manufacturer, and the manufacturer either ships the items to the end-customer or sends the stock to a dedicated drop shipper.
Manufacturer vs. Dropship Aggregator vs. Dropship Wholesaler
The manufacturer is the party that manufactures the products. While they necessarily the party that dropships the items, they can send it to
A dropship aggregator is a wholesaler who buys from multiple manufacturers—thus offering a more extensive selection of items to customers. An example of a dropship aggregator is Worldwide Brands. These aggregators offer many categories of products that you can sell on your website. For more context, Worldwide Brands has a video.
A dropship wholesaler is a dealer that buys bulk quantities of items from a manufacturer and then sells these items to retailers. There are many reputable choices that you can buy products from to sell on your website.
Is Dropshipping worth it?
The major question you are probably asking yourself now is “Yeah, it sounds easy to set up. But is it worth it?” This comes down to profit margins for the items you sell. Let’s review.
Affordable and easy to get started: Since you aren’t housing or fulfilling the orders yourself. All you have to pay for upfront is the cost of manufacturing and warehousing fees. Typically, the picking fees are only applied once an item is sold.
Requires a smaller warehouse: Whether you are just starting out in ecommerce or are growing beyond your current warehousing and staffing needs, dropshipping allows you to operate with a smaller warehouse and workforce.
There are many tools to work with dropshipping workflows: Platforms like Shipstation allow you to manage orders for items in your warehouse or at a dropshippers.
Lower profit margins. Because of additional fees associated with dropshipping, your profit margins are usually reduced to as much as 20-30% of the profits of what you could expect from housing/fulfilling products yourself.
Finding the right supplier: A lot of what makes a this business model successful is finding the right supplier. Profit margins low and if you use models like a subscription wholesaler, you’re effectively paying a middleman that takes even more of your profits.
How to Dropship in ShipStation
Regardless of if you are the dropshipper or the merchant, ShipStation allows you to dropship. Let’s discuss ways to accomplish this within ShipStation. Whether dropshippers need access to your ShipStation account or you need to export the orders to the dropshippers, you have options within ShipStation.
Option 1: Export orders from ShipStation to dropshipper
If your dropshipper doesn’t have access to your ShipStation account, the best option would be to send an exported file of your orders to the dropshipper. Here’s how to do that:
- Create a tag for the products fulfilled by your provider.
- Use a filter to display only orders that contain this tag.
- Export the orders to a CSV file.
Now, you can email the exported CSV file of orders to your drop shipper, or upload it into their preferred portal.
Once your drop-shipper has shipped these orders and sent you the tracking information, you can then mark the orders as shipped so they move to the Shipped status, and the tracking information uploads into ShipStation. ShipStation will then notify the selling channel these orders have shipped.
Option 2: Limit Access in ShipStation
In ShipStation, you can limit a user’s access to only seeing orders assigned to them. These restrictions work well for setting up a dropshipper user account. First, create a user profile for your dropshipper.
On the Permissions tab in the User Management modal, set the appropriate permissions for the user, typically users only give dropshippers permission to Order Management.
On the Restrictions tab, restrict them to only see Orders Assigned To Them and Shipments Assigned to Them.