Dropshipping is a popular method of starting an online business.
Drop servicing is becoming increasingly popular because it promises a steady stream of income without huge investments.
You may be wondering what drop shipping is and how it compares with dropshipping.
This guide will teach you everything you need to know about drop service. To ensure a profitable and sustainable business reselling services, you’ll learn about the most common pitfalls.
Let’s get started!
Drop Servicing: What does it mean?
Drop Servicing is a business model that allows you to sell services you don’t provide. Instead, you outsource the work and hire a freelancer to complete the project. You’re responsible for selling the service to the client.
It’s also known as “service arbitrage” or outsourcing. This is a fancy name for reselling. The role of the middleman is to market and sell the service to clients. Behind the scenes, the service provider completes and finishes the project.
Drop servicing is essentially dropshipping, but it’s for services and not products. This model is not new. It’s actually been around for many decades.
A few examples will help you understand the drop servicing model.
- Dry-cleaning companies may take your jacket, but end up sending it to a factory instead of washing it in store. Drop servicing is what you’re referring to.
- A local bakery may expect fresh baked goods when you visit. However, they get their pastries from factories rather than baking them in-house. Drop servicing is also available.
Drop servicing can be used with tangible and intangible results. However, it is most commonly associated with online services such as digital marketing or web design.
You have probably bought products from dropshippers before.
That’s the tricky part!
You may not be able to tell the difference between a service provided directly by a service provider or one offered by a drop-service business.
Drop servicing: How does it work?
It is very easy to start a drop-service business. First, you need to create a website that sells the service you are offering. Then you have to find the right person to do the job.
Drop servicing is a popular business model in modern times.
- A website that offers marketing services is designed by you
- Next, promote the service and get clients.
- Next, forward the details of the project to a service provider for them to complete the work
- Once the work is complete, you will deliver it to the client
Drop Servicing is selling a service for a high price, then finding someone to perform the work at a low cost while you keep the difference.
What service can you drop?
Drop service is so popular because everyone wants to claim that they can drop any type of service.
Drop service companies usually offer digital marketing services, such as logo design and SEO. However, you can drop any service as long as the two elements are present.
- A person who is willing to work for X amount
- A client who is willing to pay more
Drop servicing is it legal?
Drop servicing is legal. It is legal to resell services of others and make money from the difference.
Drop servicing is just like any other type of business model: Buy low and sell high.
Drop service is legal as long as the client will pay the asking price and the person will do it for a lower amount.
It is sustainable, however.
In a later section, I will show you how to create a profitable and sustainable drop-service business. Let’s now get to the point.
Drop servicing: What to do?
Drop service businesses are being promoted everywhere on the internet as a way to make quick money. It’s simple to convince people to give it a try.
Many “coaches” or “gurus” will try to sell you the idea. They may offer tools and training, as well as affiliate links that provide hosting services.
You don’t need to be a part of such schemes!
To start a drop-service business, you will need to identify a service you can offer for a premium and find someone willing to work less. Then, you’ll need to set up a website to advertise the service.
It’s possible to choose to invest in Facebook ads or Google ads. However, it is completely optional.
These low entry requirements mean that all you really need to start a drop shipping business is dedication and a strong mentality.
Dropshipping and drop-service differ
Dropshipping is different from drop servicing. It involves products that are physically shipped to buyers. Drop servicing is a service.
Dropshipping and drop service are very similar business models. This is true, as we stated at the beginning of this guide. Drop shipping can be thought of as a spinoff from dropshipping.
Both have been around since the inception of online commerce.
You may get distracted by the details of how a drop-service business might produce a product, such as a bakery that buys from a factory.
Dropshipping is actually shipping the product directly to the customer.
Let’s say, for example, that you buy a tee-shirt online. Dropshipping is where the shop doesn’t have the tee-shirt in stock.
Instead, once they place your order, they will either purchase it from the seller at Alibaba or another retailer’s site where they first found it or may ship it directly to them.
Dropshipping does not touch your product in any way. They are merely a middleman. They look for clothes for X price and then put photos up on their website to sell them for Y. The middleman makes a profit by selling them clothes for more than what they are being sold elsewhere.
This is similar to our earlier drop service model example where the drop business is charging $39 to clean your suit, while they are only going to ship it off to a factory for $18.
They get $21 for selling the service and you’re content to just get your suit back.
Dropshipping and drop service are both very similar. If you are trying to start your own business, it is possible that you will be confused about which model is best.
Dropshipping or drop shipping? Which is better?
Dropshipping and drop service can be a profitable option for those who are just starting an online business.
Despite being similar models, one model is more likely to fail. Which model is more risky?
Drop servicing businesses typically pay upfront. You’ll then use the money to hire a freelancer to complete the work. The client then receives the work.
This is where the risk lies. The service provider may not do the work according to client specifications, or the client may not be satisfied with the work of the third party (possibly leading to them asking for a refund even though they have already paid you).
Drop servicing is a low-risk option. You can ask the third party to refund you if they aren’t satisfied, and maybe tell clients that they don’t offer refunds. If your third-party isn’t up to the mark, you might have unhappy clients, but ultimately, you will still be profitable.
Dropshipping on the other side of the coin can lead to logistical problems that are not shared by the “top sellers” in YouTube or video courses.
Did you know that dropshipping is a popular business model?
It’s probably because it’s much easier and safer to teach others how to dropship than it is to do it yourself.
Let’s now take a closer look into the dangers of dropshipping.
Remember the steps. Locate items on Alibaba and other direct-from manufacturer websites. Then, list them in your store at a mark-up price.
The buyers will pay upfront for your products, and you’ll be responsible for shipping costs. But that’s where the trouble begins. Expect to experience major delays when shipping from manufacturers directly.
Your buyers are furious and you’re stuck paying all the fees for refunds, returns and reshipments.
It is even more difficult to operate a dropshipping business because of the COVID-19 Coronavirus and many delays and uncertainties with international transportation.
You also have to be aware that both these businesses can expose you to chargebacks. Customers are entitled to a refund from their credit card provider or payment processor if they are unhappy with the order or if it is late. This applies regardless of your refund policy.
After we have discussed the downsides and risks of each, let us now look at the benefits of each. Dropshipping is often the better option due to its shorter sales cycles. This can be achieved by carefully selecting products and using tools that automate parts of the ordering process.
Drop servicing, on the other hand is often a B2B business service. This means that you are a business paying another company to perform the service your client needs. As with many digital marketing services, your client could also be a company. All that business means communication is required to find clients and partners.
What is the biggest advantage? The greatest advantage?
Don’t forget to mention that drop servicing businesses typically have very low startup costs, and don’t need to pay shipping or transaction fees.
Instead of relying on freelancers, why not partner with a white label agency?
Drop shipping has many risks, but drop shipping is relatively low-risk, so why not make it a business model?
A drop-service business is less likely to lose money, but it has a lower chance of making a profit.
This is because most drop-service businesses turn to Fiverr and UpWork to find freelancers to perform their services.
This is the first problem. These sites have some very talented people, but they charge a high rate. This means that you would lose a lot of your profit margin if you charged a higher rate to clients.
To make a profit, you will need to hire the lowest-paid workers on these platforms. This generally means newbies, which may be great but will eventually rise in the ranks and increase their prices, or people who do minimum work and put in minimal effort.
The biggest challenge in running a drop-service business is finding reliable freelancers at an affordable rate.
Even if freelancers are able to deliver the quality that you require, they might not be around long. These freelancers are often able to move on as they seek better-paying jobs and work environments.
It’s only a matter time before they discover that they can charge more for their work.
Bad reputation could be a risk
Outsourcing to freelancers can also pose a risk. Reputation of your business or brand. Even worse if you are outsourcing the service and adding your name and face to it.
If clients discover that their work is unoriginal, copied, or of poor quality, it can damage your reputation.
Dealing with foreign providers
These risks are compounded by the language barrier, time zone differences, and other complications that can arise when you outsource to cheap freelancers. You’ll quickly learn that managing projects and meeting deadlines can be very difficult when working with freelancers.
These complications can lead to poor delivery or failures, which could result in unhappy clients and a negative review.
What should you do? Drop service businesses have the biggest problem with their lack of reliability, consistency and quality in outsourcing to low-cost freelancers. This is where a white-label agency for marketing will be useful.
White-label marketing agencies may be more expensive than the “budget-friendly” freelancer who is selling only because they are cheaper, but you get what your pay for.
You have access to a whole team of professionals
They have a solid reputation and are more than one person. A whole team works for an agency, which is skilled and equipped with the right tools to complete your projects on time and with consistent quality.
Your entire business is not dependent on one person. The agency will continue to have a team that can scale up to meet your needs.
This means that you can build a long-term, successful partnership with an agency. It will allow you to streamline your workflow and possibly even automate your business model.
A white-label agency is able to help you in a way that is often overlooked.
It’s not a secret that you are reselling their services. They’re fine with that because you do all the marketing and advertising they don’t want to deal with.
A drop-service business that outsources to freelancers wouldn’t want to tell them that. This would cause them to charge more for their services which they will do anyway, once they have built their reputation.
What is a white label agency?
An agency that offers marketing services under a white-label label is referred to as a white-label agency. White-label means that they are available to drop service or reseller businesses such as yours and you use their services for your clients.
White-label agencies are a result of simple supply and demand laws. These agencies are created when there is a market for them, and drop service companies like yours stop hiring random freelancers.
There are many benefits to working with a white-label company over a freelancer. You can continue to touch on the main factors by mentioning the consistent quality, better communication, scalability and improved access to the tools and manpower needed to deliver your projects on-time and to-spec.
These are the characteristics that distinguish a white-label agency from freelance services.
What is the best time to start thinking about a white-label agency?
You can start your business by doing your research as soon as possible. Before you sell, it is the best time to find a white-label agency to help you.
It’s not too late to change if you already have clients in mind. You can deliver consistently better services to your clients if you move from being a freelancer to working for an agency as soon as possible.
What to look out for in a white label marketing agency
You’re well on your way to success if you have decided to partner with white-label agency marketing. To make informed decisions, you only need to be aware of these critical factors.
Choose a partner who has the knowledge and experience necessary to complete your project. Consider second, highlighting the importance of a partner who works in your time zone, or has a 24/7 support staff to ensure that details are not overlooked.
Next, find a white-label agency with a track record. This means that you should read reviews and check the BBB for complaints. To help you find the right partner, ask for referrals from companies in your industry.
The best agencies will provide a dedicated project manager who will ensure that your projects are not forgotten, overlooked or delayed. The project manager is your point of contact for all details and deadline information regarding your projects, and should communicate these details to the team working on them.
While it may take some time to find the right white label marketing agency, once you have, you will be able to rest assured that they will be there for your every project.
Reselling services can be a viable business model. It allows you to connect clients who are in need of quality service providers and helps you make a steady revenue stream. Drop servicing is one of the most popular global trends.
To run a profitable and sustainable business, you need to partner with a trusted white-label agency. Avoid outsourcing to overseas freelancers as they are often temporary and won’t provide stability or scale.
Find a local partner agency that has the infrastructure and team to handle any project you have. This will ensure that your clients receive a consistent, high-quality service. It will also help you build a strong reputation for your company, reduce your headaches, communicate better, and create a brand.
Our partnership page is for those who are interested in hiring white-label web design and digital marketing agencies. Get inspired by other solopreneurs and agencies who helped us scale.
As always, please leave a comment below and share our drop service guide with others.