Dropshipping: what it is, how it works and where to start

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The online sales modality grows more and more in Brazil due to its low initial investment.

The dream of many people is to enter the job market and be able to work in the comfort of their own home, without having to travel in traffic, being the owner of their own business. For most, the solution is found in e-commerce models. However, there are always many doubts about how it works, if the initial investment is high, if it is necessary to have stock, and so on. 

Eventually, many doubts are resolved in the process of starting to undertake. But a great solution to start a career in the online market with low initial investment and without the need for stock is the dropshipping modality, which is increasingly proving to be a preferred option among new entrepreneurs. 

This model is the ideal business format for those who want to start a business without the logistical complications and without available space for stock. The modality still offers many advantages and becomes attractive for beginner entrepreneurs.

But what exactly is dropshipping?

Dropshipping is an online business model in which the merchant is not dependent on a physical space, let alone inventory, to sell the advertised products. 

The entrepreneur plays the role of intermediary between the product manufacturer and consumers. Usually, this intermediary is for specific products or products that are difficult to find on the market, functioning almost as a way of ordering products.

The storage, packaging and shipping processes, in this modality, are the responsibility of the product manufacturer, and the shopkeeper plays the role of promotion, marketing and dissemination. This modality has the characteristic of being completely digital and without the need for a physical space to act as a stock.

Unrecognizable woman shopping online using her tablet computer

How does dropshipping work?

Attractive for the ease with which the processes are done and for the low initial investment, dropshipping has a very simple operation. The entrepreneur will use his own website or another sales channel to expose the products as a virtual showcase for other companies, which are the manufacturers of that product, which may be national or international producers.

The merchant, in his role as an intermediary, will then link transactions between customers and manufacturers. And while it sounds complex, the process is simpler than it sounds. The main point of dropshipping, in the end, is to attract consumers, either by serving at all stages of the consumption journey, or by the relationship created between the storekeeper and the supplier, or by offering a platform that passes security to the end consumer.

Step by step of a dropshipping purchase

The entrepreneur or shopkeeper, in contact with the manufacturers, will supply his website or platform with a list of products supplied by those suppliers. This list must be constantly updated so that more products are not sold than are stocked. 

When a customer decides to make a purchase on this site, he will make the payment in the usual way – the amount stipulated by the merchant –, as on any other platform. The shopkeeper, in turn, will receive this order and his payment, and place the order with the product supplier, passing on the amount charged by him, along with all shipping information to the customer's residence. 

The supplier receives payment for the product and delivery information, separates the stock, packs the order and properly sends the package, either by carrier or by the Post Office. 

The amount paid by the customer to the shopkeeper is greater than the amount passed on to the supplier, so that a profit margin is possible. In this modality, everyone wins.

It is worth mentioning that the customer, at the time of purchase, does not know if he is buying in dropshipping mode and will place all his trust in the intermediary merchant of the transaction. In other words, for the process to be successful, it is necessary to choose reliable suppliers that meet the stipulated deadlines, so that the customer is not harmed.

What are the benefits of working with dropshipping

As is easily perceived, this modality is easy to implement and relatively simple to maintain, and, for these reasons, it has become very attractive and is being increasingly used by Brazilian entrepreneurs. In addition to these advantages, the modality has:

Outsourced inventory and logistics

The logistics of an inventory can be a nightmare for many beginners and entrepreneurs with little experience in the business, so starting with a modality where logistics is outsourced is much more advantageous. As in the dropshipping modality this process is in charge of the suppliers, who, in turn, are already consolidated and are more experienced in this area, the whole operation, for the entrepreneur, becomes simplified, which gives time for it to be studied and The possibility of having its own stock is gradually implemented, if the entrepreneur wishes to take this step.

Can be done anywhere in the world

As the modality is purely digital and online tools are used, it is not necessary to use a permanent physical space for all transactions and operations to take place. Precisely because it does not need a physical space, it is possible to carry out the process of a house, apartment, either on the beach or in the countryside; anywhere with a reliable internet connection, you can become a dropshipping entrepreneur.

Initial investment is very low

As the biggest hurdle, inventory, for selling products online has been removed from the equation, the entire cost of operation and maintenance is greatly diminished. The only investment is a computer and an internet connection.

Thus, all the shopkeeper's efforts are focused on the promotion and dissemination of products and to serve customers in the best possible way.

Great variety of products

As each store can use more than one supplier, the product mix is natural. Thus, the store is not limited to just a few types of products or with a very narrow niche of customers. For example, a shopkeeper who has adopted a geek goods store might choose one supplier for hero pillows, another just for custom t-shirts, a third for patterned mugs, dolls, slippers, lamps, collectibles, etc.