What is Dropshipping?
As an aspiring e-commerce entrepreneur, there are many factors to consider. One of the first questions you may ask is where you’ll be getting your products, and this includes everything from sourcing to inventory management.
Order fulfilment and shipping is also an important aspect that online store owners must consider, not forgetting marketing and customer service which is crucial for a successful online business.
Do all these sound like a hassle already?
Dropshipping may be the solution for you. It’s a supply chain management model where online retailers partner with manufacturers or wholesale suppliers to directly fulfil orders. Simply put, store owners can now sell products without having the items. Instead of having their own product inventory, e-commerce retailers transfer customer orders and shipping information to the wholesale suppliers, who then ship the goods directly to the customers.
If you’re afraid that your customers will find out that a wholesaler supplier has been shipping their items, fret not! Dropshipping wholesalers often include customised packing slips with company name, logo and contact information to make it look like the retailer fulfilled the order. Plus, your customers will only be able to get in touch with you should they face any issues with their products.
Should I choose dropshipping?
There are a number of advantages when it comes to dropshipping and it is particularly beneficial to small scale e-commerce businesses.
The low startup cost is one of the most attractive factors as to why entrepreneurs love dropshipping. Additionally, not having to deal with shipping and inventory management also allows you to focus on bringing in new businesses. Lastly, product sourcing will never be an issue anymore as wholesale suppliers have hundreds of products for you to choose from instantly.
However, there is always two sides to a coin. Although the benefits are plenty, there is always a drawback.
Especially for startups, the competition is stiff. It is important to research on the items you intend to sell and the potential target audience, otherwise, it may be difficult for you to develop your brand and stand out from the crowd.
Using a dropshipping wholesaler can also mean that you have to trust them with your products and reputation, which is a potential risk. If they sell poor quality products, it will reflect badly on your business.
One of the reasons why not everyone is into dropshipping is because of the low-profit-margin. Your dropshipper will always take a cut and when you set a retail price, you have to take your dropshipper’s base price into account. This is where businesses get a lower profit per sale.
Finally, most e-commerce retailers work with multiple wholesale dropshippers. This makes the logistical coordination complicated. With so many things going on at the same time, human errors are bound to happen. There will be times where your customers will receive damaged goods or someone else’s items. Handling these situations and communicating well with your customers would be key.
Dropshipping – yes or no?
Like every other matter, dropshipping isn’t always black or white. It is essential to assess the needs and preferences of your business to decide if dropshipping is a good choice. Weigh the pros and cons to see which model profits your business the most.