Drop shipping is an eCommerce fulfillment business model where merchants purchase products from third-party suppliers, usually wholesalers or manufacturers, as customers make orders instead of warehousing inventory.
Dropshipping is ideal for entrepreneurs, solopreneurs, internet entrepreneurs, and nimble startups and brands because starting and running a dropshipping store is not as costly as the traditional retail model.
Like most business models, dropshipping has benefits and downsides:
The Pros of Dropshipping
- It’s very startup and solopreneur friendly as starting does not require trucks of capital
- It is easy to manage
- Easy to start
The Cons of Dropshipping
The disadvantages of drop shipping include:
- Lack of control over products and inventory —and, therefore, product quality
- Delayed order processing and shipping-related cases —only in some cases
- Challenging customer service
Although dropshipping is one of the most popular online business models, it is not the only one, and if dropshipping is not something you’d like to do, you can try the following online business models that are just as good as —if not better than—dropshipping
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7 Online Business Models That Are Can Work as Alternative to Dropshipping
The following online business models are similar, alternative to, and in some cases, better than drop shipping, depending on your present situation and the kind of online business you want to start:
1: Drop Servicing
In the modern world, the internet has become one the most used tools since its invention, and more and more people are resorting to buying things online. As an eCommerce business owner, there is a constant search for better ways to present unique value to your customers.
Drop service involves selling a service carried out by someone else. In simple terms, you sell a service you have outsourced from an agency rather than doing it yourself.
How it works
- Find a service that goes hand in hand with the business model and is in demand on the market.
- Find a service provider, agency, or freelancer who will work with you to provide the service under your name.
- Find customers or even pay someone to find customers for you.
- Set your price and get paid —you can do this before or after service delivery; it all depends on your policy. Make sure the price is higher than what you will pay the service provider.
- Engage the service provider. Look out for quality and handle any questions from the service provider to the client and vice versa.
- Pay the service provider and keep the difference between the price you charged the customer and what you paid the service provider.
- Do a follow-up required by the customer.
Pros of Drop Servicing
- No order fulfillment involved
- No returns or refunds
- No shipping involved
- Minimal overhead
- Getting your first client may be challenging, especially since you won’t have a positive reputation at the beginning
- When it comes to time, you have very little control over TAT for service delivery as the service provider is responsible for the tangibles.
- Because you are not the one doing the service for your client, you have minimal control over the quality of services rendered.
2: Affiliate Marketing
In affiliate marketing, the affiliate —you— earns a commission for marketing another person’s/company’s product(s) through your affiliate links, earning a percentage of each successful sale—average commissions are 5-30%.
How it works
- For starters, look for an affiliate program/network that offers some of the services or products you’d like to offer. Look at the overview of the program: the type of product or service, payment methods, and the commission they give.
- If it’s something you want, sign up and wait for acceptance confirmation. From there, create content and add your custom affiliate links. The links will track when one of your users makes a purchase, which will earn you a commission. Ensure you promote your affiliate links on different platforms, such as social media, your website, newsletters, and any other platform that allows link sharing —preferably sites that offer do-follow links (for SEO and backlinks).
- Affiliate marketing is easy to scale because it’s easy to introduce new products and build campaigns for more products while your existing work continues to earn revenue in the background.
- Affiliate marketing is relatively easy to start as it does not require a lot of upfront investment.
- Enough effort and hard work can easily turn it into a passive income business.
- Easy to execute. You only get to handle marketing and selling the product; you do not have to develop, support, or fulfill the offer.
- It is commission-based. You only get your commission when someone purchases a product through your link —which doesn’t bode well if your customers use cookie clearing tools that can delete the cookies affiliated to your affiliate links.
- You must follow the affiliate rules set by the company offering the affiliate program. You have to get creative to meet the standards that work for the company and sell the product
- You need patience. You have to go through several programs and go for the one that works for you and also when it comes to growing your audience and platform.
3: Private Drop shipping Agents
How it works
A private drop shipping agent is an agent, person, or company that offers various services, including but not limited to helping you source products from the best suppliers, warehouse these products, and fulfill/dropship orders to customers.
- Sourcing and fulfillment services
- Sourcing directly from Chinese manufacturers and suppliers
- 1-1, friendly and fast customer service with English-speaking associates
- Personalized services to meet any business needs
- Dropshipping agents offer consistent product pricing
- You can get faster shipping times than using the conventional dropshipping models because private drop shipping agents have established fast, convenient, and affordable shipping partners
- You get a 1-1 contact with your agent for quick responses in case of any problems
- The agents can offer high-quality products at a lower price
- When it comes to branding your store, agents like Bestfulfil can help with various aspects such as custom photography, product branding, etc
- Some agents may require you to maintain a minimum order per day
- Success with this business model usually boils down to finding a trustworthy and professional private label dropshipping agent, like Bestfulfill.
- Some private drop shipping agents don’t offer an API integration with other eCommerce cogs for automated order processing
4: White Labeling
The white labeling business model involves reselling another company’s products under your brand name.
How it works
With white labeling, the original manufacturer must permit you to resell whichever products under your brand. After signing a white-label deal, the manufacturer sells you their product at wholesale price, and you sell at your desired retail prices under your brand.
Creating a valuable private label brand can help you earn more revenue from the brand’s perceived value even when you’re selling another manufacturer’s products.
- You save time because the product is already available; the only thing you need to do is brand the product to your liking.
- You will save money. Since you have the product, you do not need a lot of resources; you only need branding, marketing, and the other resources needed to run a successful online business.
- No competition challenges because even if other businesses decide to sell similar products, none can have a brand value that’s similar to your brand.
- You can customize your pricing strategy and sell at your desired price
- Competitors who will sell the same product using a different brand name
- Many white labeled products require a MOQ
- Difficult to find a supplier offering tailored customization
5: Private Labeling
Private labeling is very similar yet different from white labeling. In private labeling, you, the retailer, buy products from private label manufacturers and suppliers for retail resale.
How it works
- The manufacturer creates a product and agrees to let private label business owners sell the products under their brand names —often to increase production revenues
- The manufacturer then sells the product to a retailer.
- The retailer then sells this product to the consumer privately at a profitable price —after rebranding the product.
- You can fill a market gap by creating a private label brand that becomes a massive hit in its niche.
- Your private labeled products give consumers an alternative to other brands
- More control over the manufacturing process: pricing, ingredients, quality, and units made
- You advertise your brand because the products bear your branding.
- Trust is vital to this business model as you must rely on one manufacturer to create products on your behalf.
- Selling a private labeled product means you are the only one selling the product, which can stack the odds against your favor. If your product/niche research misses the target, you may end up selling niche products that don’t resonate with their intended target audience.
In this online-based eCommerce business model, the business owner purchases goods in bulk from a manufacturer —often at a lower price— then sells them to retailers at a higher price for profit.
How it works
Here is how wholesaling works:
- The wholesaler invests in buying products from manufacturers and storing products in large quantities —a higher MOQ.
- Wholesalers then resell to retailers and ultimately to consumers.
- It saves money because buying goods in bulk usually comes at a lower price, and many wholesale companies have bulk order discounts and incentives
- A reliable supply chain network: When dealing with different products and manufacturers, you can compare the prices, quality, and delivery time, to name a few and choose what fits your business brand the best.
- Brand propagation and creation: Wholesalers rebrand their products most of the time after the manufacturer has delivered the product or ask the manufacturer to brand the products for them. A good example is the supermarkets that sell rebranded products that they do not manufacture.
- High production levels.
- Pricing. The wholesaler might get goods at a lower price from manufacturers. However, the manufacturing company cannot obtain profit margins equivalate to the margins seen by selling goods in a retail setting.
Direct-to-consumer is a business model where products are sold directly to consumers without wholesalers, brokers, or intermediaries.
How D2C works
- Brands create their online shop in readiness to sell directly through an eCommerce website or store, social media, or email channels like Instagram ads. Customers make purchases by clicking on the ads and then pay for them on the same track.
- Faster feedback. Consumers communicate directly with you after getting your services, which improves customer service —great customer service is one of the secrets to online business success
- Allows brands to sell and advertise more products while keeping advertising costs minimal.
- The ability to create customized email-driven marketing pipelines and funnels that make nurturing customers using email marketing easier and more effective.
- No built-in audience
- Direct distribution cost. There is no sharing of shipping and storage costs.
The seven online business models we’ve discussed are the best alternatives to dropshipping. Some of these business models are very similar to drop shipping; others are alternative business models you can try if you want to create an online business and live the laptop lifestyle without having to do dropshipping.
Drop Shipping FAQ
Some frequently asked dropshipping questions:
Q1: What is better than drop shipping?
We can’t say that one business model is better than dropshipping because, as you have seen from this list of dropshipping alternatives, each business model has its pros and cons.
Q2: Is drop shipping easier than affiliate marketing?
No, affiliate marketing is easier than drop shipping because there’s no product handling and shipping element. In most cases, a website and affiliate links are all you need to start earning from affiliate marketing.
Q3: Is dropshipping worth it in 2022?
You can read more about everything that makes dropshipping worth it in 2022 and beyond on our blog.