People often ask us: what’s the most important reason to start their own dropshipping business?
There are lots of obvious answers to this question:
But there is actually much more than this, you know?
In a way, dropshipping business is a starting point to a larger and bolder venture. Think about it if you ever dreamt of building a gigantic e-commerce empire. To illustrate our point, we will tell you this exciting story.
You’ve probably heard of Zappos. It is a huge USA-based online store specializing in selling various types of shoes, bags, and clothes. It is well-known all over the globe thanks to its incredible customer service (and we will cover this part later).
According to D&B Hoover’s data, Zappos currently stocks about 3 million pairs of shoes, handbags, and apparel and accessories of more than 1,000 brands that you can’t easily find in a regular offline store. The company also has around 7,000 affiliate partners and easily makes over $1 billion in gross sales per year. The financial success of the company never went unnoticed — in 2009, Amazon purchased Zappos for more than $1.2 billion.
In other words, there is no surprise that Zappos proudly hold the title of #1 seller of shoes online.
Importantly, all this became possible thanks to the dropshipping business model.
Tony Hsieh, the Zappos CEO, remembers getting involved in this business back in 1999 when the company (with a different old-fashioned name) had almost no sales and was basically fighting for life.
At that point of time, he decided to base the company’s activity on the dropshipping model. Operating as middlemen, the workers started collecting orders from customers and transferring them to suppliers or other sellers. Everyone got kind of happy with it because such a model meant no need to manufacture products, or to manage stocks, or to be responsible for shipments and delivery. And actually, in those conditions, it was the only possible model of running this business.
Due to the lack of sales, the company had almost no circulating capital and couldn’t afford to buy products in bulk and store them. Therefore, the dropshipping model allowed the company to minimize storage and delivery costs, and to invest the hard earned money into client support. Still, everything changes in due time. The right approach to the business promotion resulted in the higher turnover, and this boost of profit helped the company get their own storage facilities and purchase products from suppliers in advance.
By 2003, only 25% of the company’s revenue was originating from dropshipping activity. It was time for Tony Hsieh to transform this business into something larger than a humble dropshipping store. To stand out from the competition and create a totally unique brand image, the company board has made a decision to walk away from the familiar business model and take the full responsibility for this venture.
This decision has led Zappos to the incredible current state — it’s safe to say that the company has one of the most impressive success stories in the whole history of e-commerce business.
Quite obviously, none of this could have ever happened if it wasn’t for this right starting point.
The dropshipping model allowed the Zappos team to start developing this business with minimal entry costs, and save enough money to launch a full-scale e-commerce venture. It also helped the team get the necessary experience and understand what exactly works well for this business.
Aren’t you thrilled with such an opportunity to start a potentially booming business with the minimal effort?