Have you ever thought about running your own online fashion boutique, but felt uncertain about the financial and logistical demands of inventory? For many aspiring business owners, the costs and time commitments associated with inventory management are the biggest hurdle when it comes to establishing a thriving business. Dropshipping is a great way to overcome the challenges of inventory management, whether you’re just starting out as a retailer or an established business looking to streamline your daily operations. We recently posted an overview of how to get started with a dropshipping partner, and why dropshipping is a great fit for many online boutique owners. Today, we’ll be sharing the answers to seven common questions about dropshipping models.
1. How does dropshipping work?
Let’s start with the basics: what is dropshipping, and how can it work for your business? In a dropshipping model, the retailer (that’s you, the online boutique owner) partners with a wholesaler or manufacturer (that’s us) to provide merchandise for his or her business. That wholesaler or manufacturer becomes the dropshipping partner; they produce or procure the merchandise, store it in their warehouse, and ship it out when the retailer makes a sale. Dropshipping allows retailers to offer a wide selection of items and ship them efficiently, without the overhead needed to invest in inventory, storage space, shipping supplies, and additional labor.
2. Is dropshipping legal?
Yes, dropshipping is completely legal. Most furniture businesses rely on a dropshipping model, and many fashion websites that offer a wide array of brands also use dropshipping to fulfill their orders. (Zappos is one famous example.) Taxes are one of the most challenging legal aspects of working with a dropshipping partner, especially if the partner is located in a different state or country. Many online business owners who use a dropship model choose to work with an accountant to make sure they’re meeting the tax demands associated with their country and state.
3. How do I earn money with dropshipping?
Retailers earn money on dropshipped items based on the difference between the wholesale cost and retail price of the item. When a customer places an order for a dropshipped item, the retailer pays the wholesale cost to their dropshipping partner. Anything left over after the wholesale cost is profit.
4. Will orders look like they shipped from my boutique?
When you work with Wholesale Fashion Square, the answer is yes—this is the case for many dropshipping partners. Dropshipped items are usually “blind shipped,” meaning that they are sent to the customer without any information about the wholesaler. This assures that there’s no confusion about the difference between the dropshipping partner and your boutique.
5. What are the startup costs of dropshipping?
Many retailers, especially those establishing a new business, choose a dropshipping model because it has minimal startup costs. If you’re just starting out, your biggest costs will likely be related to website design and marketing. There’s no upfront cost for inventory or shipping in a dropship model, because the retailer isn’t charged until a customer makes a purchase.
6. Why choose dropshipping over fulfillment from my own inventory?
Dropshipping provides several unique benefits for online boutique owners. As we mentioned above, this model allows you to establish a new business without investing in large quantities of inventory. You’ll also save on inventory storage costs and labor costs associated with shipping and inventory management. In addition, dropshipping allows you to offer a larger assortment of products and test out new products without financial risk; you won’t have to worry about leftover inventory if an item turns out to be unpopular with your customers. Finally, dropshipping means that you don’t have to worry about the logistics of inventory management—no stock taking, markdowns, or orders to process. All of this means that dropshipping frees up money, time, and resources, so you can focus on aspects of your business such as website development, merchandising, customer service, and marketing.
7. Who provides customer service for dropshipped orders?
Most dropshipping partners, including Wholesale Fashion Square, do not have any direct interaction with the customers who receive their products. As an online boutique owner, you’ll be responsible for providing customer service support. So, you’ll need to manage questions, complaints, social media, and other forms of customer interaction.
Interested in working with Wholesale Fashion Square to offer dropshipped clothing and accessories? Learn more about our dropshipping program and how you can become a partner here. Additional questions about dropshipping? Let us know in the comments below!