Let's emphasis this explanation:
Dropshipping is a way for sellers (or entrepreneurs that are thinking of starting an eCommerce business) to leverage the meaning of arbitrage and make a profit on a product that they do not own by themselves.
What is arbitrage?
Arbitrage is the practice of taking advantage of a price difference between two or more markets.
When referring to drop shipping - arbitrage is talking about how you as a seller can make a profit from the difference between two different stores for example - Amazon to eBay.
How? The Drop Shipping Model
When using the dropshipping model to empower your online eCommerce store you must understand that you are just an information middle-man and a service provider.
You as a middle-man need to do your best to provide valuable, sincere information to your customers, these information includes the title, images, price, quantity, and the item specifics (which are different and are based on the chosen category - such as color, package size, screen resolution).
Dropshipping as a business model talks about how you sell and from where you source your product. These are the phases to get your business running with the dropshipping model:
- Finding a source product to list - the first step is to find a good profitable product to sell. This includes validating that a product has a good potential profit margin.
- Listing your product - once you have decided on a product you would like to sell you need to collect all the information that will form your final listing. To do so start by copying and pasting all the data of the source product including title, images, description, item specifics, quantity. Once you have finished inserting all the relevant product data all that you have left to do is to decide on the price - this is the part which is important as it is crucial for your potential customers to make their decision on whether to buy your product or not.
- Wait for your products to sell - Once you list your product, let the internet do it's magic - with 3.2 billion people on the internet, and estimation of 1.66 billion people shopping online for goods, trust, that you will reach the audience and make a successful sale to your potential buyers.
- A customer bought a product and the order received - Buy the product at a source price from a variety of sources (Amazon, AliExpress, Alibaba, DHGate or any other source you can find on the internet), send the goods to the customer from the source warehouse.
- The supplier sends the goods - to your actual customer and you make money from the margin.
The Advantages of a Dropshipping Business
Using the dropship model to empower your eCommerce business is astonishingly easy, for a newcomer to the eCommerce scene it provides the following comfortabilities:
- You don't need to hold anything in an inventory warehouse.
- No need to make what-so-ever connections to the wholesalers, buy from anywhere you like.
- The easiest way to start selling online and creating your first eCommerce business.
- Any non-successful product can be changed and easily replaced with a different one.
- If your source no longer has a stock - easily find stock on a different marketplace.
- If the business isn't going well - you can easily close your seller account.
- Requires little to no money/cash flow available at hand.
Advantages of Starting an eBay Dropshipping Business
eBay is the easiest platform to start dropshipping due to multiple reasons, some of them are:
- You are going to list products on one of the biggest marketplaces in the eCommerce world, traffic of millions of people that get into eBay just to come and buy products (whether unique, original, useful or whatever the product may be), this means that you don't have to do SEO (search engine optimization), PPC (Pay Per Click) ads on some advertising platform like Google or Facebook, the customers are already there.
- There is no monthly subscription requirement for creating a store (unlike Amazon).
- eBay provides 50 free listings every month, which means that anyone can start by trying out and see if it works for them (put in mind that free listings mean that eBay and PayPal get a percentage from your sells).
- You can grow gradually - eBay has different pricing for different store sizes. The prices start from free, starter until reaching enterprise level, you can read more about the store types in here: https://pages.ebay.com/seller-center/run-your-store/subscriptions-and-fees.html.
- They are connected with PayPal. Most people these days have a registered PayPal account - this means you can easily start a business, receive money to your personal account and send it easily to your bank account, More-over you can use the received money and use it to your own buyouts (which means you don't need to pay the fee for transferring the money).
- No hassle on creating your shop - while other platforms (such as Shopify) require you to have some programming knowledge when you want to grow (for creating your shop website, for the SEO process) - you don't need that when selling on eBay.