What is Dropshipping?

Dropshipping is an e-commerce business model that manages a supply chain, allowing retailers to operate their own business without maintaining an inventory. Customer orders are taken by the seller, and the details of the order are sent to the wholesalers to be processed. The product is then shipped from the warehouse directly to the customer. During this process, retailers can profit from the difference between wholesale and retail prices.

Difference Between Dropshipping and Standard Wholesale-Retail
The main difference between dropshipping and warehouse businesses is the processing of inventory. Although wholesale products are sold to known markets, these products are manufactured in large quantities and must be stored in warehouses until they are ordered by a reseller. Not to mention, there is competition when selling to known markets. Dropshipping does not require you to hold inventory. Instead, the dropshipper purchases inventory as needed from a third party—usually a manufacturer or a dropshipping company—to fulfill orders. Dropshippers do not have to handle the product directly. With dropshipping, you benefit more from having a wider selection of products to sell without worrying about where to get them from or where to store them.

Pros of Dropshipping
Dropshipping is a great business model for those looking to establish a business with a limited amount of money to start with. Dropshipping requires little investment of time and money, and it's remarkable accessibility allows anyone to start dropshipping without quitting his present job. Here are 4 main reasons why dropshipping is such a popular model.

1. Little to No Upfront Investments & Low Overhead
Probably the biggest pro of dropshipping, you don't need to invest thousands of dollars in inventory before launching your online store. There is no need to purchase a single product until you've received the order which will have been paid for already by your customer. With a minimal amount of money, it is possible to start a successful dropshipping business by selecting profitable niches. Dropshipping comes with fewer risks and less pressure because you don't have to purchase inventory. This way, you save a significant amount on warehouse maintenance fees. With just as little as a laptop or a smartphone, you can run your business within the reach of the internet. The only overhead that you might have to assume is a monthly fee for your online store, which is about $1 per day, a drop in the bucket compared to offline store rent.

2. Easy to Manage & Easy to Scale
It can't get any easier after you have successfully launched your dropshipping store because you won't need to deal with the physical products. When dropshipping, you don't have to worry about:

· Managing or owning inventory/warehouse

· Packing or shipping orders

· Handling returns and inbound shipments

· Tracking inventory, continuously ordering products or managing stock

Most of this work is done by the suppliers or the dropshipping company.

3. Flexible Working Location & Wide Range of Customers
You can communicate with customers and suppliers and run your dropshipping business from just about anywhere as long as you have access to the internet. Many successful dropshipping businesses are run at home or in small offices (SOHO). Working hours are flexible and determined by the dropshipper. Because all you need to run an online business is working internet, dropshipping allows you to travel while you make money. You will be able to sell to customers while being in different countries and continents of the world. For instance, many dropshippers using CJ dropshipping are running their online stores in France, while the majority of their customers are located in the US. 

4. Massive Product Source
Thanks to dropshipping, you can sell essentially anything without having to purchase it first. There will be a supplier for any product you can sell online, as long as they provide dropshipping services. It has never been easier to stock your online store with hundreds of potential winning products. And if you are a CJ user, you will be amazed by our sourcing services. To be more precise, if there is a specific product you are trying to sell, post a sourcing request with an image or a link to the product. Our sourcing team will search for the best suppliers and once we find your product, we will post it on the CJ App where you can access and post to your store to sell.

CJ dropshipping also updates recommendations for trending products every week. You can check out our playlist to find out more. If you are a CJ user, we send you to push emails and notifications about new trending products according to big data. Keep an eye out, you might find winning products you didn't even know existed. 

Cons of Dropshipping
Dropshipping is indeed a very attractive business model, but it doesn't come without some disadvantages. Convenience and flexibility come with a price and there are a few shortcomings you should take into consideration before starting your business.

1. Low Margins in Overcrowded Niches
Because most dropshippers invest a negligible amount into their business, they are okay with settling for minuscule margins. But, dropshipping is all about selecting the right niches. You will have a difficult time surviving if you choose the wrong dropshipping niche markets. With overcrowded niches, there will always be someone willing to sell your products for a much lower price, and this forces you to reduce your price in order to maintain shoppers coming to your online store. To avoid getting yourself stuck in this nasty situation, it is crucial that you select a profitable niche before starting your dropshipping business. For your reference, we have posted some videos on how to choose the best niches. 

There are also useful websites you can use to test products.

You can use the selling price references to anticipate your profit. The total number of stores selling this product can help you to judge if the product is saturated or not. And if you pay for senior membership, you can see more marketing information about the product.

2. Inventory Issues & Supplier Errors
Dropshipping takes away some of the burdens that come with having to fulfill orders; you don't need to own or manage any inventory. This might seem too good to be true, but in fact, it is. The suppliers that you source from are simultaneously supplying products to other retailers. This causes constant fluctuation of inventory. It is hard to keep track of which items are in and out of stock. Because suppliers are tackling tens of thousands of orders every day, even the best dropshipping suppliers may make mistakes fulfilling orders. Mediocre and low-quality suppliers will cause you consistent inconveniencies that will damage your business, including missing items, botched shipments, and low-quality packing. A piece of advice from CJ - work with reliable suppliers, make sure there is sufficient inventory for the product you are going to run ads for, and once you have found yourself a winning supplier, it is wise to buy private inventory so that you can have more control overstock.

3.Complicated Shipping
One disadvantage of not having your own inventory is needing to source from several different suppliers. If your customer places an order for things that must be shipped from separate suppliers, the total shipping price will, unfortunately, have to be the sum of their individual shipping fees. This is of course a burden you must bear yourself because it is unwise to pass the cost along to the customer. Moreover, customers will not be happy to receive 3 separate parcels which may arrive at different times, when only one order was placed. This is a problem you can avoid when using CJ. With our excellent fulfillment system, every order is shipped to the customer in one parcel. CJ dropshipping also assigns a high priority to shipping time. With CJ packet, CJ dropshippers can avoid a lot of delayed delivery complaints. Delivery is controlled within 5-15 days, depending on the destination of the package. CJ packet is faster and cheaper than e-packet, and it has more than 10 shipping methods for CJ dropshippers to choose from. This gives you more suitable shipping options for your dropshipping business!

4. Limited Branding
You're going to want to customize your own brand while you grow your business. Batches ordered from Alibaba can be customized easily, you only need to reach a minimum order quantity (MOQ) to be able to customize your own packaging and logo. With dropshipping, you don't have to buy large amounts of inventory. Most suppliers offer customization services, albeit limited. Moreover, any changes or additions to the products also require a minimum order quantity. Building a brand is a great way to sustain your business. It has become a trend in dropshipping, so CJ tries its best to help dropshippers build their brands. We have POD services if you are looking to place your brand and logos on packagings such as bags, boxes and envelopes without requiring a minimum order quantity. For further information, you can watch our introduction videos or visit our website.