Learn about the dropshipping industry
What Is Dropshipping?
Dropshipping is a method where a store doesn’t keep the products it sells in stock. In the dropshipping model, store purchases the item from a third party and has it shipped directly to the customer. As a result, the store doesn’t have to handle the product directly.
Benefits of Dropshipping
1. Easy to get started
Probably the biggest advantage of dropshipping is that an e-commerce store can be launched without having to invest thousands of dollars in inventory up-front. In the dropshipping model, you’ve already made a sale and have been paid by the customer without having a product in stock.
With drop shipping, you don’t have to worry about:
- Packing and shipping your orders
- Tracking inventory for accounting reasons
- Handling returns and inbound shipments
- Ordering products and handling stock
Low overhead you don’t have to deal with purchasing inventory, your overhead expenses are quite little. As you grow, these costs will likely increase but will still be low as compared to other traditional businesses.
2. Flexible Location
A dropshipping business can be run from any place around the world with an internet connection. As long as you can communicate with suppliers and customers easily, you can run and manage your online store or business anywhere from the world.
3. A wide selection of products to sell
You don’t have to pre-purchase the items you sell, so you can offer multiple ranges of products to your customers. If your suppliers stock those products, you can list it for sale on your online store at no additional cost.
4. Easier to test
Dropshipping is a useful method for both launching a new store and for business owners looking to test the additional product demand in the market.
Drawbacks of dropshipping
1. Little margins
Little margins are the biggest drawbacks in a highly competitive dropshipping. Because it’s easy to get started, and the overhead costs are so minimal, many competing stores will sell items at very low prices to compete. This increase in competition and quickly hurt the potential profit margins.
2. Inventory issues
It’s relatively simple to keep track of which items are in and out of stock if you own all the products. When you’re sourcing from multiple warehouses, inventory can change daily, it gets complex to maintain track.
3. Shipping complexities
If you work with multiple suppliers the products on your online store will be sourced through several different drop shippers. This complicates your shipping costs. When it does make logic to include these charges, automating these calculations can be difficult.
4. Supplier errors
Average and low-quality suppliers will cause endless frustration with missing items, ruined shipments, and low-quality packing, which can damage your business’s reputation.
5. Limited customization and branding
Dropshipping doesn’t give the seller control over the product itself. Usually, the supplier has more control over the product as the product drop shipped is designed and branded by the supplier.