Dropshipping: Definition, Benefits + How to Drop Ship in 2024

This is a definitive guide to dropshipping. It covers everything you need to know about dropshipping in 2024.

Dropshipping is an easy and popular way to start a business. It removes typical retail issues like buying, storing, and shipping products.

When a dropshipping store receives an order, it sends it to a supplier, who then ships it directly to the customer. This allows store owners to focus on other things, like marketing and building their brand.

Let's dive deeper to see how dropshipping can work for you this year.

Dropshipping 101

If you’re just starting out in e-commerce this year, dropshipping is a GREAT delivery business idea.

In fact, the dropshipping industry is expected to reach $557.9 billion before 2025, with a CAGR of 28.8%. Even more so, it is projected to grow at an annual rate of 23.4% from 2023 to 2030.

So with minimal starting capital and some equity, you can start with dropshipping.

There’s only one problem:

Before you get into it, you need to know what dropshipping is.

So in this part of the article, we cover the basics to give you a better understanding of how it works:

What Is Dropshipping?

Dropshipping is a type of fulfillment method where retailers don’t keep inventory of the products they sell.

Rather, the online merchant purchases goods from third-party vendors and then delivers them directly to the customer.

As a result, the vendor is relieved of direct product handling. This also allows stores to avoid investing in warehouse space or dealing with unsold inventory. It means that they can direct more resources toward other retail activities like marketing.

What Does a Dropshipper Do?

A dropshipper is a person or business that takes customer orders and sends them to a supplier to fulfill.

Most dropshippers run online stores to market and sell products. When a customer makes a purchase, the dropshipper places an order with the supplier.

For example, if a customer buys a cat collar from your online pet store, you (as the dropshipper) pass the order to your cat collar supplier, who handles the product and shipping.

What Are Dropshipping Suppliers?

Dropshipping suppliers handle orders placed by retailers for customers. They store products, package them for shipping, and arrange package delivery to the customer’s address.

You might work with a specific supplier or use a platform with a supplier directory, like AliExpress. Some manufacturers, wholesalers, and independent creators also act as dropshipping suppliers.

In the pet store example, the supplier is the company that receives the order, packages the cat collar, and ships it directly to the customer.

How Does Dropshipping Work?

The biggest difference between dropshipping and typical retail is that the B2C seller doesn’t own or keep any inventory.

Instead, the seller executes orders by purchasing items from a wholesaler or a manufacturer.

Dropshipping retailers rely on wholesalers or manufacturers (dropshipping suppliers) to produce, store, and transport products on their behalf.

In theory, the drop shipper acts as a middleman between wholesalers and customers.

The procedure is straightforward:

It starts by partnering with a supplier who stocks, packages, and ships the products you want to sell. You can work with an individual supplier or use a dropshipping app to access products from multiple suppliers.

Next, you set up an online store with your selected products listed at prices you choose. Adding a dropshipping app, like DSers, Zendrop, or Spocket, helps keep listings updated and automates order forwarding.

When a customer places an order on your store, they pay, receive confirmation, and wait for delivery. You forward the order details to your supplier, or this can be done automatically through the dropshipping app. The supplier then prepares and ships the item directly to the customer.

Finally, the customer receives their order from the supplier, and you handle any follow-up customer service.

The Advantages of Becoming a Dropshipping Business

Dropshipping allows entrepreneurs to enter the e-commerce market in a relatively simple manner.

To enter the market, you don’t need a business degree or a large amount of money.

Dropshipping allows you to rapidly test several business ideas with little risk.

This enables you to learn a lot about how to select and promote in-demand dropshipping products.

But that’s not all.

Here are seven other benefits of dropshipping you should be aware of:

#1 Easy to Set Up

To get started with dropshipping in 2024, you don’t need any prior business experience.

You can start a business quickly and learn the rest as you go along.

And with dropshipping, you don’t physically have to store the products you sell.

So unlike other e-commerce business models, you only have to spend money on setting up your online store and marketing.

Your supplier covers all of the costs associated with manufacturing, transportation, delivery logistics, and e-commerce fulfilment.

This demands significantly less upfront investment, as you buy only what you sell.

Due to a large online client base and the lack of costs associated with storing products in a warehouse or store, retailers report a 50% cost reduction when they get into dropshipping.

Retailers can also start selling things faster because they don’t have to buy inventory initially.

You also won’t have to deal with inventory or shipping. Once you’re up and going, it’s amazingly hands-off.

As a result of all of this, you may get started on your business right away.

In fact, everything could be up and operating in a couple of hours.

#2 No Shipping

One of the most appealing aspects of dropshipping is that you don’t have to worry about storing or delivering the goods yourself.

You can run a retail store without ever touching the merchandise.

When a customer purchases a product from you, a third or fourth-party logistics (4PL) provider can handle all the orders.

You don’t need to rent a warehouse, pick and pack or ship the products, deal with returns, or manage inventory with dropshipping.

But you still need to evaluate the quality of the products you sell.

So you should order product samples to maintain quality control over your dropshipping business.

#3 It Doesn’t Require Big Investments

The biggest advantage of dropshipping in 2024 is that it allows you to start an online business without having to invest thousands of dollars in inventory upfront.

Typically, retailers have had to lock up large sums of money in order to purchase inventory.

With the dropshipping model you don’t have to buy a product unless you’ve already received payment for it.

That means you only spend money on setting up the web store and selecting products for retail.

And launching a dropshipping store or testing a new product line entails less risk.

That’s because, in most cases, you’re not obligated to sell through any goods you buy upfront. (Unlike a traditional retail business)

#4 Easy to Scale

As you grow, your business doesn’t have to change all that much.

As you use tactics to grow your operations, you’ll have to put in more effort in sales and marketing.

But your day-to-day operations remain mostly the same. (Aside from the fact that you’ll be processing more orders.)

One of the advantages of dropshipping is that when your business grows, your infrastructure expenditures DON’T rise.

As a result, you’ll have more resources to devote to your company’s marketing efforts.

The more you concentrate on building brand awareness, marketing products, and providing excellent customer service, the better you’ll do.

#5 It’s Flexible

You have the opportunity to be your own master and make your own rules.

Without a question, it is one of the most versatile professions available.

Working from home involves little more than a laptop and the flexibility to work whenever you choose.

This is ideal for entrepreneurs who want their businesses to work for them.

You can set your own pace.

Dropshipping is incredibly adaptable since it lets you make the best decisions for yourself.

You can add new products to your store at any time and adjust your marketing techniques on the fly.

You can automate everything to create passive money while you’re away if you’re going on vacation.

#6 Easy to Test

Dropshipping is an effective e-commerce fulfillment technique.

Both when launching a new store and testing the demand of customers for new product categories, such as accessories or entirely new product lines.

The key advantage of dropshipping services is the ability to list and potentially sell products before making a large investment in inventory.

#7 Sell Anywhere

You can manage a fully-fledged business from your laptop without having to make any high-level investments.

The most expensive part of your budget will be advertising, which you can increase as your store grows in popularity.

Your running costs will stay low as your firm grows, especially when compared to traditional business expenses.

When it comes to e-commerce, your location is irrelevant.

You can sell your products anywhere in the world as a dropshipper as long as you’re able to build trust with customers through delivery (and keep fees reasonable).

The Challenges of Being a Dropshipping Wholesaler

Despite all of the benefits of dropshipping, it still isn’t an easy gig.

And there are several downsides to dropshipping that are simply unavoidable.

These include:

#1 Slim Margins

One of the initial disadvantages of dropshipping is that you’ll have low margins at first.

That isn’t to say the business won’t be profitable. But some items have poor product margins, regardless of how much you sell them.

This is particularly true if you’re dropshipping in a market with a lot of competition.

It’s difficult to make the kind of earnings you want when you’re competing for clients’ attention.

However, if you find the correct niche and target the right audience, you’ll have a much better chance of increasing your profit margins.

You’ll have stronger margins in niches where there’s less competition, but sales may stagnate at some point.

As a result, many dropshipping sites rely on highly optimized ads to drive large volumes of sales in 2024.

#2 Order Processing Can Get Complicated

Dropshipping appears to be straightforward:

• Step #1: A customer places an order.
• Step #2: You process the order.
• Step #3: The supplier ships it out to the customer.

However, if you’re sourcing items from a variety of merchants, you can run into some complications.

It’s likely that each of your suppliers utilizes a different shipping method, causing you and your customer’s problems.

The cost of delivery can be expensive depending on your shipping setup, especially when shipping many products.

Different dropshipping suppliers will have different processing and billing structures in place.

Because of this, you’ll have to manage suppliers carefully.

You’ll constantly have to communicate with them and negotiate the right price for all of your deals.

And this may be challenging at times.

#3 Customer Satisfaction

When orders go wrong or suppliers fail to maintain order accuracy, it’s your customers and business that suffers.

It can be challenging to process orders and handle customer service when you’re only the store owner with limited authority.

There will always be delivery exceptions for when suppliers:

• Fail to deliver products on time
• Damage goods or packaging in transit
• Ship orders to the wrong customer
• Makes a mistake with an order
• And more

And here lies the problem:

Expect consumers to blame you - even if it wasn’t your fault.

This problem goes beyond order fulfillment and lead times because you won’t be able to provide the same branded dropshipping experience as traditional shops. Or you’ve accustomed your customers to.

Issues can’t always be fixed promptly if you don’t have total inventory and customer service control.

When consumers have to wait a long time for delivery issues to be rectified or for missing products to be delivered, even little errors can have a negative influence on their experience.

#4 Shipping Can Get Complicated

Calculating shipping expenses is simple if you buy all of your products from one supplier.

Dropshippers, on the other hand, frequently use many suppliers to source various products.

When a single transaction comprises items with varying delivery charges, calculating transportation costs, for example, becomes tricky.

Moreover, different invoicing systems may be used by different suppliers.

Using supply chain management systems or delivery management software like eLogii can help you stay ahead of these unexpected challenges.

#5 Lack of control

One of the drawbacks of reseller dropshipping is that you have no control over key areas of the last-mile delivery process.

This can include anything from inventory and order processing to fulfillment and delivery.

You must trust your service providers to complete tasks correctly and on time.

The lack of control may discourage some entrepreneurs, although it isn’t usually a problem.

This simply means that if something goes wrong, dealing with it can be challenging.

While supplier concerns can sometimes cause customer retention issues, with the right damage control, you can minimize these problems and keep customer turnover low.

How Much Money Do You Need to Invest to Start Dropshipping?

Though it’s difficult to estimate the expenses for any given company, there are a few things that any dropshipping company will need to purchase in order to get started.

Here’s a quick rundown of the most important charges:

To develop and host your online business, you’ll need to find an e-commerce platform.

The monthly cost of an e-commerce platform is estimated to be $30 on average.

Then, you’ll need your domain name.

Without your own domain name, it’s difficult to gain customer trust.

While there are a variety of top-level domains, if one is available, we suggest looking for a.com that fits your brand.

This will cost you up to $20 a year.

Although dropcommerce allows you to have a low level of engagement in managing your entire product catalog, you should set aside money and time to test the products you intend to sell.

The biggest investment that you’ll have is advertising.

For most product-based firms, advertising is usually a crucial channel to get started.

Search engine marketing (SEM), display ads, social media ads, and mobile ads are the most typical channels.

How Does Dropshipping Make You Money?

In exchange for distribution, dropshipping companies mark up individual products.

This is why dropshippers are fine with suppliers marketing their products for them: dropshipping stores bring in additional sales that the supplier would not have received otherwise.

In order to make a profit with your dropshipping business in 2024, find out how much it costs to “obtain” a customer and price your products accordingly.

Is It Worth It Get Into Dropshipping In 2024?

Dropshipping in 2024 isn’t a flawless, stress-free approach to develop a profitable online business.

Starting a dropshipping business always requires hard effort.

The approach has a lot of benefits, but it also has a lot of built-in difficulties that you’ll have to deal with.

Most of these obstacles can be overcome with proper preparation and consideration, especially when it comes to how you handle delivery and shipping.

Still wondering if dropshippin is worth it for you? Here are some key indicators:

You’re marketing-savvy
If SEO and social media are your strengths, dropshipping could be a good match. Driving traffic through content is the main goal for dropshippers.

You focus on sales, not branding
Dropshipping suits those focused on high sales volume rather than building a unique brand. If you want branded items, look into private label or print-on-demand options.

You want product variety
Dropshipping allows you to sell a wide range of products without inventory concerns, though quality control is limited.

You’re okay with longer shipping times
Shipping from overseas can mean delays. If you can manage customer expectations or use local suppliers, this could work for you.

You can handle customer support
As the main contact, you’ll deal with issues like delays, returns, and product questions, even if they’re out of your control.

You want to expand your store
Dropshipping lets established stores add products without stocking them, potentially boosting order values and attracting new customers.

Why Use eLogii’s Route Optimization API for Dropshipping?

eLogii's route optimization API can be a valuable tool for dropshipping businesses by enhancing logistics and delivery management.

With this API, you can integrate eLogii’s routing features, such as driver tracking and real-time delivery updates, into other platforms you use. This helps streamline order tracking and improve visibility, keeping customers updated on delivery progress.

Additionally, the API can pull relevant data on orders, inventory, vehicles, and customers, allowing for better planning and efficient route management. For dropshippers, this means smoother deliveries and higher customer satisfaction from the start.

So, using eLogii’s route optimization API in 2024 can give your dropshipping business a competitive edge by improving delivery accuracy and efficiency. This streamlined approach not only enhances the customer experience but also helps reduce logistical challenges as your business grows.

FAQs About Dropshipping