Now imagine if I told you, there is a way of starting your own online business with no inventory costs and no fulfilment operation. Sound too good to be true? It’s not, if you know about dropshipping.
Dropshipping is a business model and a retail fulfilment method in which the store doesn’t keep the products it sells in stock. Instead, when a store sells a product it purchases the item from a third party and has it shipped directly to the customer. The merchant never sees or handles the product.
Many people fear starting an online business because of start up costs and fulfilment stress.
Dropshipping isn’t something new or unheard of Zappos started dropshipping back in 1999 and Amazon and Sears also use this business model. Nowadays, up to 33% of the entire ecommerce industry uses dropshipping as a primary inventory management model.
How dropshipping works:
- A visitor arrives at your online store (YourStore.com) and makes a purchase.
- You receive the order and either manually or automatically forward that order on to your drop shipping partner.
- Your drop shipper packages the order and sends it to your customer on your behalf.
Benefits of Dropshipping
The start-up costs are smaller
In order to set up an online business, a good chunk of capital is usually required to buy your inventory of products. But this can be guesswork, as there’s no saying how much stock you’ll sell for that month or year. Drop shipping avoids this problem, eliminating the risk of spending your money on unsold stock.
Easy to get started
With dropshipping you don’t have worry about:
- Managing or paying for a warehouse
- Packing and shipping your orders
- Tracking inventory
- Handling returns and shipment
- Stock management
- Affordable: Drop shipping makes it easy to get started selling online. You don't need to invest heavily in inventory, yet you can still offer thousands of items to your customers.
- Convenient: Not having to worry about fulfilment is incredibly convenient and frees up your time to concentrate on your market plan, customer service, and operations.
- Mobile:Allows you to operate your business anywhere you can get an internet connection.
- It's a Trusted Model: You might be thinking that this sounds like some sketchy, fly-by-night model – but it's not. Plenty of online stores and major retailers use drop shipping to offer a wider selection of products to their customers without having to deal with increased inventory hassles.
- Reduced Risk: Without thousands of dollars invested in inventory the risk involved with starting an online store is dramatically reduced. If things don’t work out you aren’t stuck with thousands in inventory you have to sell at a loss.
Disadvantages of Dropshipping
1. Less control: You won't be able to manage the customer's expectations as well as you could if you were to take care of your own shipping. Some of the problems you may run into include manufacturers running out of stock, or late deliveries – which could fall back on your store.
- Lots of competition: One of the biggest challenges with drop shipping is using a supplier means that the products you are selling are not unique, so there will be a bunch of other people selling the same stuff as you. The trade-off for easy access to products is that many people will flood the most popular marketplaces with popular items.
- It can be harder to sell : Customers like to buy from people who are experts in what they do. The problem with selling products that you have never seen is that if a customer comes to you with a question, you may not be able to answer it straight away, and the customer will have to wait until you have spoken to the manufacturer.
- You can’t check quality : As you are not the person putting the product into its package, you can never really be sure whether it's of a good quality. Even the best dropshipping suppliers make mistakes fulfilling orders – mistakes for which you have to take responsibility and apologize. And mediocre and low-quality suppliers will cause endless frustration with missing items, botched shipments and low-quality packing, which can damage your business's reputation.
- Inventory issues: When you're sourcing from multiple warehouses, which are also fulfilling orders for other merchants, inventory changes on a daily basis. While there are ways you can better sync your store's inventory with your suppliers', these solutions don't always work seamlessly, and suppliers don't always support the technology required.
Dropshipping is not the answer to over night success and, there is no right or wrong answer – it really depends on what you think is right for your store. It definitely provides an easy way to get your shop up and running, and testing different methods is definitely the way to go to succeed with your online store.
If you do decide it is the method you would like to adopt for your shipping needs then make sure you do your research and find a good supplier. We will be righting how to find a dropshipping supplier in future posts, in the mean time take a look at our eCommerce Directory we offer a list of certified drop shippers that you can trust.