Dropshipping is a type of retail where the retailer does not stock products, rather the retailer goes into partnership with a wholesaler that keeps its inventory stocked.
The retailer then transfers orders made by a customer including the shipping details to the wholesaler who then sends the goods straight to the client. This is called dropshipping. With dropshipping the retailer never physically touches or sees the product.
Like every other thing, dropshipping has its pros and cons, so if you intend to go into the dropshipping business, here are some things you should know about it.
Knowing how burdensome and expensive managing inventory can be. Many retailers have the habit of stocking up the inventory aka buying in bulk. with large quantities of products because they often receive massive discounts for bulk ordering.
Dropshipping affords your company the opportunity to get productive with the money that originally would have been thrown into expensive bulk purchases of inventory.
A retailer goes through a lot of pressure to move the entire inventory after holding on to it for too long. When products are not sold, it amounts to money lost.
Delays in inventory can arise at any time. However, dropshipping expunges the risk because payment is only made for what is sold.
Depending on your dropshipping provider and platform your selling on. Dropship inventory can be easily updated and changed.
Inventory Hassle Reduced
We all know handling stock inventory can be really burdensome. If you run a big successful store, aside from needing lots of space for inventory. It will also be tedious trying to maintain the quality of the inventory and keep track of it.
Dropshipping, however, relieves you of that responsibility. Freeing up your time to invest in marketing or any other activity that can grow your business.
Dropshipping takes away the limitations of space. This makes it easy for the retailer to have a large dynamic inventory where every customer will get whatever they want.
Because you are not limited to the geographic location of a physical building, you can sell whatever you want to anyone anywhere in the world
Low Cost of Entry
This is one of the most attractive things about of dropshipping: No payments for brick and mortar to build a store, no employees, no rent, no inventory, no insurance, no licenses etc.
The ability to do business with multiple third parties makes it possible to expand the inventory with new products.
Maintaining control of inventory holding costs and inventory becomes easy, due to the fact that there are fewer sources, with an accumulation of less stock over the network.
The responsibility of managing and handling stock is in the hands of the dropshipping supplier. This saves the retailer a whole lot of time which can be used to deal with other issues.
Drop-In Competitive Pricing
Dropshipping invariably translates to the elimination of bulk inventory which in turn eliminates bulk pricing.
This means there will be a drop in the competitiveness of your prices because you are most likely to pay exorbitantly for each product.
Reaction to customer demands is one of the cons in dropshipping, but it also means abrupt stock shortages will have a negative impact on your business.
Imagine what would happen if an item suddenly became popular, chances are you won’t be able to sell if your supplier was out of stock.
Because the shipping process is in the hands of a third party, you have no control over the shipment.
If your customer is displeased as a result of an error caused by the dropshipper. The customer will blame you because you sold him the product. A poor supplier can affect your business.
You have no control over late shipments; neither do you have over items that are out-of-stock. This leaves you unguarded to upset customers with little or no ability to set things right. So it is imperative that your dropshipper is verified and safe.
One of the most attractive things about dropshipping is its low-cost entry. But it comes with possible low-profit-margins.
Also, there is competition from various online stores. Some of them actually selling the same items.
Many suppliers offer white label and private labeling. So you have the option of branding so you can stand apart from the competition with private labeling.
The pro’s of drop shipping greatly outweigh the cons. If your planning on jumping into the world of dropshipping. Understand that building an established and successful e-commerce store takes time. If you stick in there you will reap the benefits