Dropshipping is a type of retail fulfillment method whereby instead of a store keeping in stock the products it sells, it purchases the products from third party suppliers and it is shipped directly to the customer(s).
This type of fulfillment is superb for merchants because they don’t have to order inventory or stock the items they sell. The process is mostly hands-off as the merchant never sees or handles the product.
Dropshipping can be very rewarding. You can mark the prices however you want and reap maximum profits since you are the once acquiring customers and processing orders. It requires less capital to start and is sustainable in the long term requiring only a laptop and internet connection.
Advantages Of Dropshipping
Dropshipping is easy to start and doesn’t demand a lot of capital: It is possible to launch an ecommerce store without huge investments as you don’t have to tie up your resources purchasing inventory of stocking a warehouse. You don’t purchase the product until you have made a sale and have already been paid by the customer. Some of the operations eliminated by dropshipping include:
- Managing/operating a warehouse
- Tracking inventory
- Managing return orders
Dropshipping is easier to start with minimal investments and you can operate it from your home office.
Dropshipping is flexible: The key factor in dropshipping is communication. As long as you can easily communicate with your suppliers and customers, you can set your own pace, run the business and work at the times that are most convenient for you.
Dropshipping is easy to manage: Once you have everything setup and have identified your suppliers, then most of your responsibility will just be mostly working on your store.
Dropshipping is easy to grow: It is easier to scale by leveraging suppliers, as they will bear most of the work to process additional orders, allowing you to expand with fewer growing pains and less incremental work.
Low margins – This is one of the challenges if you are operating in competitive niches but can be mitigated by choosing less competitive niches where margins are good since you don’t have to fight for customers attention.
Inventory Issues – Since you do not keep inventory, it is challenging to keep track of items that are out of stock. There are solutions to sync your inventory with your suppliers. However, some suppliers may not support the technology required.
Shipping Complexities – Shipping multiple products can be quite a challenge if you are sourcing from different suppliers. They may have different shipping methods which can be quite a headache for you and your customers.
Dropshipping has some definite advantages but comes with a number of built-in complexities and problems you’ll need to be able to address.
The good news is that with some careful planning and consideration, most of these problems can be resolved and need not prevent you from building a thriving, profitable dropshipping business.