Want to know the differences and resemblances between dropshipping vs drop servicing to start a new business?
There is no doubt both of these business models are now trending for one reason- They are relatively easy to start and they can be both very profitable.
But how do you know which one is best for you? After all, each online business requires a different skillset to make it work since one involves working with products whereas the other involves services.
In this post, I will examine both models to help you determine which one might suit you best, including:
- Main differences
- and more!
Let’s dive in!
- What is the Dropshipping Model?
- What is drop servicing business model?
- What do you need to start drop servicing?
- How to start drop servicing
- Dropshipping vs drop servicing: How Are They Similar?
- Dropshipping vs drop servicing: How Do They Differ?
- Dropshipping vs Drop servicing: Which is Better?
What is the Dropshipping Model?
Dropshipping allows you to sell products from different merchants on your website. This business model allows you to influence the final cost of the products by setting your price. Therefore, you determine your final commission or profit from every transaction in your online store.
This is an example of how dropshipping works:
- You set a price for a product on your website. Let’s say a product worth $20, which you then re-sell for $30.
- Your consumer places an order on it and pays your asking price of $30.
- You forward the order to the retailer and pay them the wholesale price of $20.
- The wholesaler ships the product to your customer, and your sales commission of $10 is yours to keep.
- You run your dropshipping store and sell the product on your eCommerce store.
- The transaction with your customer is completed at the retail price.
- You order the product at the wholesale price from the merchant once the customer has paid you for it.
- The wholesale vendor ships directly to your customer, under the impression it has come from you.
- You keep the profit.
Dropshipping might be the best business model for you if you don’t have money to invest in the inventory and storage space required by a regular eCommerce business. It allows you to go into business with a minimal budget.
Another advantage of dropshipping is it allows you to test the demand of a product before investing money in storage and inventory.
It is a great solution for entrepreneurs willing to build an eCommerce store.
You will be busy creating your brand from the moment you decide to become a dropshipping business. Therefore, it is imperative to find reliable merchants with good quality products for the best marketing business.
A good supplier allows you to grow your sales instead of wasting time dealing with customer service issues. The more reliable your supplier and the better the product, the fewer problems you will have.
One of the best options, especially for beginners without experience, is to use tools designated to this end. Not only they will help you find the best products to sell on your dropshipping store, but they will also connect you with trusted buyers.
My personal recommendation and the top dropshipping tool right now is Spocket. It offers a free plan so you can start using it without compromise.
However, if you already have a website and you are looking for the fastest solution I suggest you check Alidropship. With this plugin, you can add products from Aliexpress just in seconds!
Low Ticket Dropshipping.
When you upload products from a website with questionable services, you may face shipping delays and customer issues.
Also, expect lower sales because of the type of products you are selling. Here you need to push for volume if you want profits, so expect to implement aggressive and costly business marketing.
High Ticket Dropshipping.
This is the best way to build a sustainable business because you use established brands and distributors.
As opposed to campaigns where you actively target people, you target customers actively searching for your products, so you don’t have to create traffic. You have a more considerable profit margin and a very reliable supply chain.
Shopify is easy to use for a flat monthly fee and integrates with automation and email marketing tools, making it easier to reach customers. It is the most popular option used by drop shippers.
With WordPress, you may pay less but need to have a better understanding of how it works. Therefore, there is a more significant learning curve, and you will need to put in a bit more effort to create your eCommerce store. However, you have much more control and can implement different marketing strategies.
There are more pros than cons to owning a dropshipping website, but minimize any risks by researching products well before selling them.
My personal advice is to use a dedicated tool for finding the best dropshipping products to sell. Check my review about Spocket vs Oberlo, which are currently some of the best dropshipping services.
What is drop servicing business model?
Drop servicing is an online business model in which you hire a freelancer or agency in order to deliver a service to clients/ customers.
For instance, a client wants a service and is willing to pay you $50. You find a freelancer or an agency that does the work for you at $30. Now, without letting the client know you outsourced the project and pocketed the profit, you can be the intermediate between them. This process is called drop servicing.
Drop servicing, also called service arbitrage, is a highly lucrative business model in which you sell a service that you don’t essentially create by yourself. In short, you play the role of middleman between the receiver and provider and take the price difference as profit.
This is an example of how dropshipping works:
- You offer SEO (search engine optimization) services on you site.
- A client hires you for this job and pays you $500.
- You hire a freelancer to perform this job for $300, so you can keep a margin profit.
- Once the job is done by the freelancer, you just need to review it and inform your client the job is done.
That is drop servicing. You hired someone to do the job for you while you’re in charge of selling the service to a client.
What do you need to start drop servicing?
After you decide if drop servicing is your career path or future, there are still some more things that you need to know, consider and have, to get started with drop servicing.
How to start drop servicing
In order to start a profitable drop servicing business, you will need:
- Do a thorough market research for drop servicing business niche/ideas.
- Build your team of freelancers and agencies.
- Make an optimized profile or website and keep it updated.
- Define your services and approximate your rates.
- Search for clients and build networks.
- Direct and train your team.
- Use convenient and flexible payment tools and methods.
- Market/advertise your services.
- Offer credible services, customer support, and reliability as much as you can.
You can also check my step-by-step guide to drop servicing to learn how to do it in detail.
Dropshipping vs drop servicing: How Are They Similar?
Many entrepreneurs get confused about these two “new” terms in the digital marketing business.
Whether you are dedicated to living the life of a digital nomad or are just looking for a profitable online business, these are the main similarities between dropshipping and drop servicing:
- You are the face to the final customer for both.
- You need to study which products and services provides best margins to keep a healthy profit.
- They carry a relatively low-risk business model.
- The earning potential is high for both.
- You can start working immediately with either of these online businesses.
- Startup costs are low for both business models.
Dropshipping vs drop servicing: How Do They Differ?
So, both these business models allow you to make money online. If you have a laptop and good internet, you can make money from anywhere. These are the main differences between dropshipping vs drop servicing are:
- In dropshipping, you are selling products, whereas in drop servicing you are selling services.
- When dropshipping, the retailer does not handle the goods and is delivered directly to the customer. However, in drop servicing, the retailer needs to accept the service from an outsourced freelancer and finally deliver it to the client.
- The way you receive money also differs because, with dropshipping, you receive your payment on completion of the transaction, and with drop servicing, you can ask for payment in advance.
You might want to read next:
Dropshipping vs Drop servicing: Which is Better?
When comparing dropshipping vs drop servicing and trying to ascertain which one is better is not an easy question to tackle. Each business model is different, so it will depend on your preferences.
The reality is that both business models come with their pros and cons, and both will offer challenges along the way. So it’s also worth factoring in where your knowledge lies.
If you want to start as fast as possible, drop servicing requires a bit less time and experience, so that it might be the best option for beginners. You still need to work hard on finding customers for both of them.
However, if you have some experience with eCommerce and would like a business model that can make you money on auto mode once it is established, dropshipping should be your choice.
Now it is your turn!
Will you be creating a dropshipping or a drop servicing business?
Leave a comment with your answer below.
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