Setting up an eCommerce store often requires significant capital investment for stock and warehouse space. That poses a barrier to entry for many who would like to start a small eCommerce business. Drop shipping is an alternative to the traditional eCommerce process where retailers purchase their products from a wholesaler and then sell items from their stock to customers. Instead, drop shipping allows retailers to have products shipped directly from the wholesaler to the customer.
Drop shipping has a number of advantages:
- Less upfront investment — products are bought from the wholesaler after the customer has paid the retailer, reducing the need to borrow or spend existing capital.
- Reduced logistical complexity — without drop shipping, the retailer has to warehouse their products and implement fulfillment processes themselves. Drop shipping allows them to bypass the requirement for fulfillment and rely on the wholesaler.
- Reduced price — the lower costs of drop shipping can be passed on to the customer, helping eCommerce stores compete with other retailers.
That said, drop shipping is not without its problems, and it isn’t a get-rich-quick scheme that will allow anyone to create a thriving retail business from their own home. It takes a lot of work, profit margins may not especially impressive, and some drop shipping wholesalers are less than completely reliable. But, with care, an eCommerce store based on drop shipping can be a viable business.
If you’ve determined that drop shipping is right for your business, the first question you need to consider is which retail platform is right for you. Many drop ship retailers rely on platforms like eBay and Amazon, but there are distinct advantages to building your own store on Magento.
Magento is fairly straightforward to use, and the community version of the application is
free. You will need web hosting, but there are excellent web hosting companies that specialize in high-performance Magento eCommerce hosting, so most of the difficulties associated with installation and initial setup will be taken care of.
Once you have a Magento store, you will need to make some modifications to make it suitable for drop shipping. Magento is similar to content management systems like WordPress in that there are many extensions that can be installed to add specific functionality, including a number of drop ship extensions. The best of these are premium extensions, but the cost isn’t prohibitive and they should pay for themselves on even a moderately successful store.
- Dropshipping — Dropshipping is probably the easiest drop ship extension with the simplest set of features. It will forward orders to configured vendors via email, allows for separate templates for each vendor, and can split orders between multiple vendors.
- Ultimate Vendor Dropship — Ultimate Vendor Dropship is a little more expensive, but it offers substantially more configuration options, which include order splitting; sending of orders to suppliers by email, XML, or CSV; and an intuitive management interface.
- Unirgy_Dropship — This is by far the most expensive of the options we’ll examine at $950, but it is feature-rich enough to support substantial drop shipping retail operations, with integration into vendor APIs for stock checking, ordering, and tracking; customer shipment notifications; support for multiple checkouts; and a comprehensive vendor control panel.
Drop shipping is an excellent way to get into the retail business, and with Magento and a good specialist eCommerce web hosting company, the technical side of things won’t be nearly as difficult as you might have feared.