When an order is placed, the seller purchases the item from a third-party supplier or manufacturer, who then ships it directly to the customer. This allows the seller to avoid costs associated with warehousing, shipping, and inventory management. Several factors have fueled the growth of dropshipping:
- Low startup costs – Launching a dropshipping business requires very little upfront investment compared to traditional retail.
- Convenience – Managing a few supplier relationships is easier than stocking and shipping products yourself. Dropshippers list a wide selection of products without overhead costs.
- Better cash flow – You only pay suppliers after receiving payment from customers, so there’s less tied up in inventory. This improves cash flow for early-stage ecommerce businesses.
- Global reach – Using dropshipping suppliers and fulfillment services makes it easy to sell globally since you don’t have to manage international shipping yourself.
While the fundamental model of dropshipping remains unchanged, new technologies and strategies are evolving to improve various parts of the supply chain and customer experience:
- Automation software
Order and inventory management automation helps streamline supply chain operations. These tools automatically sync product listings, inventory counts, and order information between e-commerce platforms, suppliers, and other channels. This eliminates manual work for drop shippers, so they better focus on sales and marketing efforts. Artificial intelligence also promises to make predictions about optimum inventory levels, unbiased look at dropship for sale locations, and other data-driven decisions to optimize the dropshipping process. Automation will become more prevalent as the model scales up.
- Supplier management platforms
Sourcing and managing relationships with suppliers is one of the key difficulties of drop shipping. Supplier platforms help aggregate vetted suppliers, simplify ordering, provide shipping discounts, and give insight into supplier performance. These platforms essentially act as dropshipping middlemen to handle backend logistics. They allow online sellers to easily compare and integrate suppliers into their operations.
- Social commerce integration
Social platforms are becoming vital sales channels, especially for targeting younger demographics. New tools are emerging to help drop shippers leverage social media for marketing and sales conversion, such as links to instantly check out advertised products. Integrating e-commerce storefronts with social platforms improves the customer experience. Dropshippers who capitalize on social selling will gain an advantage. The lines between content, community, and commerce continue to blur.
- Focus on brand-building
Successful dropshipping isn’t just about sourcing products and fulfilling orders. Retail is becoming less anonymous, so customers connect more with the people and stories behind brands. More dropship for sale evaluation are investing in branded content, influencer partnerships, remarketing, and building engaged communities around their online stores. Focusing on branding allows drop shippers to differentiate, improve conversion rates, and foster loyalty.
Changes for marketplaces
Large online marketplaces pioneered early dropshipping practices. These platforms remain major sales channels, but may face new challenges as the model evolves:
- Product saturation – The ease of listing products means marketplaces are flooded with competing drop shipping listings, making it harder to differentiate.
- Commoditization – Customers may become more loyal to brands rather than marketplaces if sellers focus on branded content and experiences.
- Longer delivery – Marketplaces optimized for speed may push sellers to keep local inventory as customers expect faster shipping.
- Platform fees – Some sellers may look to direct channels (own website, social platforms) to avoid marketplace fees. However, marketplaces still provide unrivaled access to huge customer bases.
Marketplaces will likely adapt by providing new value-added services around supply chain management, fulfillment, and targeted advertising to attract dropshipping businesses. Dropshipping continues to lower barriers for small businesses ready to build global brands.