Dropshipping is an order fulfillment method that doesn’t require a physical store and a warehouse to keep products in stock. All you need is an internet connection and you’re good to go.
Your store sells the product and passes the sales order to a third-party supplier, who then ships the order to the customer. It saves you from the difficulties of maintaining an inventory, order fulfillment, shipment process, and deliveries.
Like every other business, there are some advantages and disadvantages to dropshipping. Let’s take a look at the pros and cons of drop shipping.
Pros:
#Cost-effective:
Dropshipping gives you an opportunity to eliminate the need for a warehouse. You don’t need any start-up money.
Your only job is to make sure that once you make a sale, your supplier gets your customer’s orders with correct shipment details. Everything else will be done by your supplier.
#Eliminates the Expense of Inventory:
Buying, stocking and storing inventory is one of the most costly parts. In drop shipping, you don’t have to worry about having an inventory or maintaining it.
It allows you to escape the burden of handling your own inventory so that you can focus more on growing your business.
#Low Order Fulfillment Costs:
To fulfill an order, it requires you to have a warehouse, organize your products, create a label, add tracking info, pack them and ship.
In dropshipping, the supplier and distributors do all the fulfilling of your orders, which means you’re not burdened by the process and costs of fulfillment.
#Less Risk:
As a drop shipper, you don’t need to maintain an inventory so the risk of the product not being sold is eliminated. You can also test new items without the risk of carrying obsolete inventory. You only pay for what you sell.
#Quick Start-up:
In the dropshipping business, stocking an inventory, finding a warehouse, hiring people to manage, pick and pick products are fulfilled by the suppliers. So a drop shipper can start and run their business without any hassle.
#Increased Product Variety:
Many suppliers offer their customers many variations of their products. It gives retailers to offer more to their customers and increase sales more likely.
Cons:
#Less Control:
As the order fulfillment and shipment is being done by the supplier, you have to let go of some control which comes with a risk. If the supplier makes an error or delays the process of fulfillment and shipment, that will be harmful to your business.
It leaves your customers displeased which may lead your business to make a bad reputation. If you start a dropshipping business, make sure you work with professional and reliable suppliers.
#Reliance on Stock:
Sudden stock shortages can be a major drawback of drop shipping. if your store isn’t in sync with the latest inventory data from your suppliers, a customer could order out-of-stock items.
It may bring disappointment and will probably hurt your reputation.
#Less Profit:
Dropshipping usually has lower profit margins than products you purchase wholesale. You pay more for each item you sell as compared to paying less for a large inventory of items – leading to less profit.
But once you’ve really scaled your business and built up customer loyalty, then you can increase prices enough to see big financial gains.
Dropshipping is one of the easiest ways to sell items online – it requires less money and you don’t need an inventory which reduces risks also. Choose the right supplier for you, use inventory management tools, minimize other issues with dropshipping and you’re ready to start your online store. Just do your research before starting!
