CALCURATES BLOG

Dropshipping Guide for Beginners

Jun 2020
business woman looking at dropshipping guide for beginners
Nikolay Pasholok
Product Owner, Calcurates
Dropshipping frees you from having a warehouse, pouring resources into production, and dealing with shipping. When a client makes a purchase, it automatically goes through your store to the supplier's store. The supplier, usually a manufacturer or a wholesale seller, then ships the product straight to your customer. E-commerce that uses the dropshipping model invest much in customer support, overall service quality, and marketing. That is what the dropshipping business is really about.

How Dropshipping Works

A standard dropshipping operation can be broken down into several steps:
1
The e-commerce owner creates a list of trusted suppliers. These suppliers are usually manufacturers or wholesale sellers. E-commerce can work even with a retail seller.
2
The product portfolio is selected and displayed on the website. Although e-commerce does not manufacture its own products, it is not uncommon to put its brand name on the products.
3
When the customer places an order, the order gets relayed to the supplier. This can be handled through special dropshipping apps or be done manually.
4
The supplier receives the order and ships it to the customer, following packaging and branding guidelines agreed upon with the store.
5
The client receives the product. Although it is the supplier who ships the order, this party remains anonymous to the customer. Receipts, packaging, and branding usually feature only the store's name.
To accept payments, you will need to sign a contract with your supplier. Remember that the e-commerce store serves as a reseller, the income from dropshipping mainly derives from the margins on pricing.

What are the Benefits of Dropshipping?

  • 1
    Smaller Initial Investment
    You don't have to rent out a warehouse, cover recurring expenses or rent an office. The most money will go to marketing and website at the beginning.
  • 2
    Less Financial Restrictions
    Finances do not restrict dropshipping stores from growing or scaling up. All items are handled by the supplier and order processing is highly automated, little is required from the store owner when the clientele increases.
  • 3
    No Physical Inventory
    There is no stock management so you don't have to deal with packaging, shipping, or restocking the inventory.
  • 4
    No Location
    Dropshipping is more flexible, you don't need a physical warehouse or office.

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What are the Disadvantages of Dropshipping?

  • 1
    Lower Profits
    The profits are usually lower than those of traditional e-commerce as dropshipping is a more saturated and competitive market. To compete, many sell their products at the lowest price, pulling down the market value.
  • 2
    Little Control over Products
    Design and functionality are mostly in the hands of the supplier. Although you can brand the product, there will be zero input from your side about the production.
  • 3
    Trustworthy Supplier
    Connect with a reliable supplier. You don't want to constantly answer for suppliers' mistakes and deal with customer complaints. Any mistakes in packaging and shipping can lead to an increase in complaints.
  • 4
    Shipping rates
    It might happen that one order will be sourced from multiple locations. You will need a single shipping rate instead of multiple ones. So that you don't charge customers separate shipping fees. You will need shipping software to help you calculate those rates correctly.

Where to Find the Best Dropshipper for Your Business

Having the right dropshipping supplier is critical. Wholesale sellers and manufacturers don't market their products much, don't rely on direct B2B contacts. As the industry is booming, they might simply resell someone else's inventory with a significant mark-up and extra fees.

Instead, ask yourself "where do I find the best dropshipping products?", deciding on a product and tracking down its manufacturer is one of the best ways to obtain a reliable supplier. Manufacturers can give you the contact of an official wholesaler who works with them or even offer to handle the dropshipping directly.
  • 1
    Go to trade shows
    Manufacturers go to worldwide trade shows to make new contacts. On trades, you can interact with the manufacturers, check out the product, and take a look at the competition.
  • 2
    Use supplier directories
    Use supplier directory for new ideas for product line-ups. Directories serve as an excellent overview of the market, pricing, and competition. Access to directories often comes with a paid subscription or a one-time purchase.
  • 3
    Place an order with your direct competitor
    Place an order to find information on their suppliers or manufacturers. Finding him after that requires little work and you will gain some insights into dropshipping from a customer's perspective.
  • 4
    Google it
    Ultimately, you can find a supplier just by web browsing. Wholesalers don't pay much attention to digital marketing, their websites are usually way below the first couple of search pages. The key is to try out different keyword combinations and always look through more pages. It is more work, but it's free.
The dropshipping business model requires both parties to be legal entities, so you won't be able to deal with a supplier as an individual.

What Makes the Supplier Right for Your Business

  • 1
    Up-to-date
    The right manufacturer is up-to-date, following the latest innovations, trends, and embracing modern forms of communication.
  • 2
    Production of quality goods
    A decent manufacturer should have a high standard for its products. Many dropshippers fall for low prices and as a consequence are forced to deal with flawed items and returns.
  • 3
    Convinience of warehouses
    The more warehouses the supplier has across the country, the cheaper the shipping will be.

Dropshipping with Magento

Magento is widely used by droppshippers, as it allows for a wide array of customization through built-in utilities and third-party extensions. Make your business routine much smoother by using the Calcurates shipping software to manage dropshipping. Calcurates makes working with several warehouses more convenient through its multi-origin shipping feature and use of shipping rules. When you set up multiple origins for dropshipping, the Magento extension optimizes the number of warehouses for each order, bringing it down to the minimum necessary. Applying custom attributes to your products allows you to create custom rules for shipping and handling each category. Such an option is especially valuable when dealing with multiple suppliers that use different carriers and therefore charge differently for shipping.
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