Many would-be business owners have fantasized about the possibility of successfully operating an online store. The sheer amount of work and resources needed to make that dream a reality, however, can cloud one’s vision.
It’s a costly and time-consuming endeavor, what with stock acquisition, warehouse management, and order fulfillment. Fortunately, there is a less complicated and more affordable way for the regular person to launch a thriving online store.
Dropshipping is a distribution model that is gaining popularity among e-commerce vendors.
The Benefits of Dropshipping
When comparing the traditional method of running a retail or ecommerce business—buying inventory in bulk and reselling it individually for profits—to dropshipping, the former is clearly superior.
Here are some of the most important benefits of adopting a dropshipping strategy:
Dropshipping Exposed: The Methodology Behind the Trend(Opens in a new browser tab)
No Buying Inventory Upfront
Dropshipping’s main perk is that it eliminates the need for an initial stocking investment. After a product has been purchased by a customer, only then does it be obtained from the manufacturer or distributor.
As a result, you won’t have to worry about spending thousands of dollars on inventory and being left with products that don’t sell.
Without the need to buy stock up front, there is much less financial risk and more leeway to try out new features and see how well they perform. Putting a product up for sale is sometimes the only way to find out if it will be a smashing success.
Very little start-up costs
To launch a conventional online retailer, you’ll need to spend a lot of money on inventory, warehousing, packaging, shipping, and advertising.
With dropshipping, however, you can start your online store and sell a wide variety of products right away without spending a dime on inventory or shipping supplies. It’s the least expensive way to get your e-commerce store up and running.
No holding any stock
Storage space is saved when inventory is not required. Renting storage space and paying employees to keep it in good condition can be prohibitively expensive.
Moreover, a substantial investment of time and energy is required to successfully manage a warehouse. Warehouse efficiency improvements can take years to implement. In the case of dropshipping, your supplier acts as your warehouse, saving you the trouble and expense.
Postage is done for you
Order fulfillment, from item collection and packaging to shipping and delivery, can rack up significant expenses. It’s not as easy as just putting the item in a box and sending it out.
The shipping costs will vary depending on the size and weight of your package. In addition, you need to schedule regular courier drop-offs and pick-ups throughout the day. The shipping procedure becomes more complicated as your business grows.
Dropshipping, on the other hand, allows the supplier to handle all aspects of order fulfilment, freeing you up to focus on marketing, sales, and customer service.
Returns are easier to process
E-commerce cannot function without a reliable returns policy. It will become the norm to accept returns, whether because the customer changed their mind or because the product was damaged in transit.
In conventional online retail, losing money on a sale due to a customer return is commonplace, especially once shipping costs are factored in. Using the dropshipping model makes it much simpler to handle customer returns.
You can get a refund or a new one by sending the product back to the store from which you bought it. You play the role of intermediary, communicating the return details to the buyer and providing them with any relevant return postage labels.
Expand the business rapidly
Due to investments in stock, storage space, and order fulfilment, most start-up retailers are limited to slow business growth. Therefore, it may take a long time before any profits are seen.
However, by leveraging the dropship model, you can eliminate the most time-consuming and money-consuming components of running an online store, allowing you to expand your business much more rapidly.
You can easily add new products to your lineup without worrying about running out of money, running out of stock, or running out of storage space. The money you save by dropshipping can be put toward expanding your business’s marketing efforts, which will in turn bring in more customers more quickly.
Run the business from anywhere
As a result, a dropshipping company’s operations can be run remotely. Your supplier will handle processing and shipping your orders regardless of where you are—be it relaxing on a beach in Barbados or jetting around the globe.
A personal computer, an internet connection, and an entrepreneurial spirit are all that’s needed to launch and maintain a successful dropshipping enterprise. Some helpful dropshipping how-to guides and tutorials, as well as software for automating repetitive tasks, would be a great asset.
The Disadvantages of Dropshipping
While there are many advantages to dropshipping, there are also some drawbacks that should be taken into account. There is no foolproof business plan or magic bullet for making money online.
These are some of the most typical problems that arise when dropshipping, as well as suggestions for fixing them.
No control over dispatch times
The biggest problem with dropshipping is that you have no say over when your order is shipped. Customers expect prompt shipment of their orders.
When selling on online marketplaces like eBay or Amazon, your business could suffer if your supplier takes too long to process and ship orders.
Working with a dependable supplier and processing orders the same day are the best ways to guarantee on-time delivery to your customers.
No control over picking & packaging
The lack of involvement in the picking and packaging process is another drawback of dropshipping. The supplier is responsible for quality control checks, but may also include promotional materials like flyers or coupons with the order.
Once you’ve built up a good rapport with your supplier and begun to see a steady stream of sales, you might inquire about the possibility of packaging your orders with promotional materials.
Profit margins are lower than bulk buying
In comparison to bulk purchasing, the profit margins for dropshipping can be quite low. It is only natural that retailers would not charge the same for a single item as they would for a bulk purchase.
While it may seem more cost-effective to purchase in bulk, remember that doing so entails a higher level of risk and calls for a sizable initial investment in addition to adequate storage space.
Items running out of stock or changing in price
Dropshippers frequently face problems like stockouts and price fluctuations. If an item is sold but is no longer in stock, the transaction must be canceled.
Cancelling a customer’s order on a marketplace like eBay could result in poor ratings or a failure to deliver the product. Dropshipping automation software provides a viable solution for inventory management.
For more info, check out our recommended dropshipping apps.
Reliable suppliers are hard to find
Finding a trustworthy supplier with high-quality products at reasonable prices and rapid shipping times is the most effective way to sidestep the most frequent problems associated with dropshipping.
Finding such a reliable vendor, however, is not always easy and frequently calls for an extensive independent investigation.
To your relief, we have a whole section dedicated to the best dropshipping suppliers for selling on marketplaces like eBay, Amazon, and more. We have many manuals that will help you locate suppliers for anything, whether you’re looking to sell clothing or electronics.
Despite some drawbacks, dropshipping is generally seen as a good practice. If you’re short on time or capital, this is the ideal business model for you.
It’s also perfect for established companies that want to broaden their offerings rapidly and cheaply.
However, there is a short but real list of drawbacks to dropshipping, including not having command over things like shipping schedules and stock levels.
The good news is that all of these drawbacks are surmountable with the right supplier, rapid order processing, and a stock/price management system in place.