Drop Shipping is a criteria where the person who sells a product doesn’t actually owns it but purchases that particular item from a third party and then have it shipped directly to the customer. The seller need not stock the product which is the biggest advantage as the inventory cost gets cut down to a great extent.
Though every model has its own advantages and disadvantages, it also has a few. Take a look:
Little capital is required: As already said, dropshipping requires a little capital owing to the fact that no real stock or inventory is needed to create an online store. Just setting up the contacts with few vendors or third parties keeps you up with all the work. No need to purchase a product on your own rather let the customer order the item and pays for it directly after keeping your profits.
Easy to Start: Starting with a dropshipping model is much easier than that traditional ecommerce store. You don’t have to care about managing a warehouse, packing the items, delivering the products, preparing accounts to keep the track or dealing with the refunds or returns.
Less Overhead Expense: People involved in the dropshipping retail business don’t have to incur the overhead expenses. A laptop and a stable internet connection are all set to rock the stage without having to deal with the real inventory stock.
Huge Array of Products: Now because there is no such thing to bother about the inventory, you can offer a wide assortment of products to the customers. Just pick an item that your vendor deals in and list it on your website. Take orders and have the item shipped to the customers at no additional cost.
With all these luring benefits, there are some disadvantages adding to this amazing retail model:
Lesser Margins: Margins are very less in the dropshipping model as the profits get divided between the seller and the third party. Also, to bring more customer attention, the sellers keep the margins to a low level. To cope up with the rising competition, keeping lesser margins is important which turns out to be a disadvantage.
Cannot Keep the Stock Record: Dealing with the own stock or inventory is easier as when a third party is involved, it gets difficult to keep a track of the stock. The vendors you have the tie-up with don’t give the record of the stock and the inventory changes regularly. So when a customer places an order, you don’t know whether or not that product is available to be shipped.
Hike in Shipping Cost: If the customer places the order for 4 or 5 products and each of the products is available with the different vendor, it will increase the shipping cost that has to be incurred by you. Expecting the customer to pay the shipping cost for every individual product is not justifiable.
However, dropshipping is not a cool and perfect way because of its noticeable disadvantages that cause problems to your business. But, no doubt this is a good business you being a dropshipper, don’t come in the scene. It’s the third party and the customer who are dealing.