Gone are the days when you need to have a brick-and-mortar store and a warehouse for your inventory and pay a large sum upfront to start and run a Business. Today, you can have a company without any of these components by using dropshipping. Drop shipping is a business model that allows companies or sellers to purchase products in bulk and send the products to a third-party manufacturer or retailer, who will then be responsible for picking, packing, and shipping customers’ orders. This business model takes off a lot of responsibilities from the business or seller, which is why many consider dropshipping as a convenient and easy way of starting a business.
There are a lot of companies that offer drop shipping services. Fulfillment by Amazon, for example, uses this business model. Sellers will send their products to one of Amazon’s fulfilment stores, and they will take over the wheel afterwards. They will be responsible for preparing the customers’ orders and make sure that these will arrive at the customers’ doorsteps. They will also handle the customer service and product returns and exchanges on behalf of the seller. Aside from being a straightforward process, drop shipping also has the following benefits:
- Low startup costs: Usually, you either need to rent or buy your warehouse to store your products. This can be very costly and can delay your progress as a business. Using drop shipping eliminates this requirement because another party will handle your business’s inventory. They will be responsible for storing all of your products in their warehouses or facilities.
- Low order fulfilment costs: An order has to go through different processes before it can reach a customer. For starters, the product should be picked from the warehouse, appropriately packed, and shipped to the right address. When you use drop shipping, you don’t have to worry about any of these. A third party will accomplish these tasks for you, leaving you with more time to handle other aspects of the business. All you have to do is pay for their services and take customers’ orders – that’s it.
- Increased product variety: Because you don’t have to think about your inventory, you can choose to sell products from different niches. If you’re currently selling apparels, you can branch out and start selling shoes as well. More choices mean more chances of increasing your sales and customer base. Just make sure that you’re using marketing strategies from reliable sources, such as journalreview.org - Marketing, when you’re offering new products to your customers.
- Low risks: When you have a hundred products in your inventory or warehouse, you would feel pressured to sell all of these as soon as possible. Unsold products mean lost money for sellers like you. So instead of earning from your business, you’ll end up losing. This pressure can also become the reason why changing the inventory or revamping your online store will require a lot of time. Dropshipping eliminates these risks. Your products are stored in another warehouse or facility, and you’ll only pay for what you sell. You’ll have the opportunity to frequently change your inventory just to align your products with customer demands.
- Less control of fulfilment orders: Dropshipping might save you a lot of money from buying or renting a warehouse, but when a customer is dissatisfied with your business’ service, the consequences can be grave. They will choose to purchase the product from your competitors, which can result in secondary sales and decreased customer base in the long run. With drop shipping, it’s crucial that you pick a manufacturer or retailer who is reliable and well established. Several sources on the Internet, such as coaching journalreview.org, can provide information on the things that you should consider whenever working with a third party for your business.
- Reliance on other people’s stock: Since your products will come from a manufacturer, you can easily place orders based on the demands of the customers. If customers need more of your products, you can order the same quantity from the manufacturer. This can be seen as a double-edged sword: convenient since you can easily satisfy the demands of your customers but risky because you will rely on other people for your products. When they run out of stock, you run out of stock, too. This can lead to idle times and more dissatisfied customers.
- Less profit: All of the advantages you can enjoy from dropshipping comes with a price. To make things worse, most drop shipping services don’t offer bulk pricing. This means that as your sales increase, so will the costs and fees you’ll have to pay to a third party. You’ll end up earning less profit.
- Poor customer service: This is also another reason why you should be careful about picking the manufacturer or retailer you work with. When they deliver the wrong product, damages the product, or makes a late delivery, customers will take these out on your business. Because these manufacturers and retailers work in the middle of the buying process, you’ll lose engagement with your customers. You won’t have any idea what they want in a product or the issues they’re having with your products. This limitation will hinder you from providing products that suit your target audience.