8 Dropshipping Concepts & Terms Defined

Side hustles are everywhere these days. But most side hustles leave you feeling like an overworked employee sans the benefits. If you’re a go-getter and want to be your own boss, then dropshipping may be the business for you. In this article, we’ll demystify key dropshipping concepts and terms.

 

1. What Is Dropshipping?

Dropshipping is a retail model in which a third-party supplier stores, manages, and ships inventory. As a retail business owner, you focus on growing your online store and providing customer service. The advantages of a dropshipping business model are low upfront costs and the ability to focus on activities that grow your business.

 

2. Definition of Dropshipping Supplier

A dropshipping supplier, also known as a distributor, stocks inventory from various manufacturers. When you sell a product from your online store, the distributor will package and ship the product directly to the customer.

Your dropshipping supplier is, in many ways, a partner in your success. You’ll depend on your supplier to stock quality products and ship them on time. A reputable distributor will stand behind their products if an issue arises after shipment. Additionally, a distributor should offer loyalty points and other programs to help defray your costs.

 

3. Dropshipping Overhead Explained

The expenses you incur in your dropshipping business is also known as your overhead. Common costs associated with dropshipping include website and hosting fees, marketing costs, distributor fees, and miscellaneous supplies.

 

4. Gross Profit Defined

The proceeds from the sale of your products is known as your gross profit. Say your price your products 20% above the price you pay the distributor, then that 20% represents your gross profit. It’s important to note that your gross profit does not include your expenses from your overhead.

 

5. Net Profit Defined

Net profit is the earnings you have left after paying all your business expenses. It’s the money you have left after you pay all of your overhead expenses and distributor fees from your gross profit earnings. This money becomes your income from your dropshipping business.

 

Website Platforms

You have several options for the type of website you use to sell your products: a custom website, a commerce platform, or a third-party platform. There are pros and cons for each of these website options. A quality dropshipping supplier will offer integration services regardless of the type of website you use.

 

6. Custom Website for Your Dropshipping Business

A custom website for your dropshipping is an e-commerce website you build from scratch. You can build the website yourself, or you can hire a professional website developer to build the site.

Building the website yourself would be the most time-consuming option; however, there are plenty of resources to help you along the way. The downside is that a website you build yourself won’t look as good or perform as well as one built by a professional.

Hiring a professional website builder is expensive, but it’s a surefire way to have unique website that makes your brand stand out. A professional website builder can also make sure your website is mobile ready, will load quickly, and is secure.

 

7. Using a Commerce Platform for Your Dropshipping Business

A commerce platform is a third-party “website builder.” Commerce platforms offer software that make it easy to build your website. And if you run into trouble, commerce platforms offer technical support. Shopify, Wix, Big Commerce, and Weebly are just a few examples of commerce platforms available.

Commerce platforms are convenient, fast, and easy to use. The downside of using a commerce platform for your dropshipping website is that you’ll be limited in how much you can customize your site.

 

8. Third-Party Platforms for Dropshipping Explained

Third-party platforms are large online shopping sites that offer a wide variety of products. Common examples are Amazon and Walmart in the U.S. and AliExpress for global consumers.

You can list your products on these sites. The main advantage of using third-party platforms for your dropshipping business is that you benefit from the larger site’s traffic. The downside is that you usually pay the third-party platform a percentage of your sales.

 

Find Dropshipping Success with TVCMALL

Dropshipping is big business that, according to Statista, will reach over $372 billion USD by 2025. Thanks to its low start-up costs, you can get in on this profitable industry. Despite being a straightforward business model, dropshipping has a learning curve. That’s why you need to be a go-getter to THRIVE as an e-commerce entrepreneur. TVCMALL is committed to helping you get there, which is why we have an Excellent rating from over 1,600 reviews on Trustpilot.