Dropshipping is a form of retail fulfillment strategy. This is where a retailer does not store the items they sell. Instead, they buy the item from a third party and have it delivered directly to the customer. As a consequence the seller does not deal directly with the items.
The difference between dropshipping and the regular retail model is that the inventory is not supplied by the selling merchant.
In order to stock a warehouse it takes a lot of money. You can eliminate the risk of getting into debt by using dropshipping to start your company. You can start a dropshipping company with zero inventory instead of purchasing an extensive inventory and hoping it will sell, and start making money immediately.
Low Inventory and Overhead Costs
Since you don’t have to handle products or manage a warehouse, the operating expenses are very small. Indeed, many successful dropshipping stores are run as home-based companies. As you expand, those costs are likely to increase but remain small relative to conventional brick-and-mortar businesses.
Cheaper To Ship And Package
Usually, order fulfillment requires you to warehouse, arrange, log, mark, and pack and dispatch your stock. Dropshipping lets a third party take care of everything. Your only role in this arrangement is to ensure that they get orders from your client. They’ll do everything else.
Flexible Time And Location
With an internet connection a dropshipping company can be run from just about anywhere. As long as you are able to easily interact with suppliers and customers, you can run and manage your business.
Sell And Test Products With Ease
Without the limitations of a physical warehouse and the associated costs, dropshipping allows you to upgrade your inventory quickly. Thus you can instantly give your customers a product without waiting. Dropshipping helps you to check new products without bearing the burden of expired inventory. You pay only what you’re asking for.
Lack of bulk pricing is the drawback “fee” of dropshipping.
You’ll probably pay more for each item you sell compared to paying less for a large inventory of goods – which would result in less income. If you want to use dropshipping to gain a lot of money, then you would have to sell more goods than you would otherwise have if you owned and warehoused them yourself.
An significant advantage of dropshipping is being able to deliver new goods immediately or to avoid selling slow-moving items. The downside to that perk is that you are not managing the inventory of your supplier. When stock runs out, You run out of money. This would lead to longer waits and consumers missing out.
Less Knowledge, Poorer Customer Service
If your manufacturer delivers goods late, breaks them, supplies the wrong things, or somehow ruins the order of your client, you will be called down by the consumer.
You won’t be able to retain the personal contact that consumers will get from retailers who handle their own products. Without supervising the product yourself, you won’t be able to fix customer problems easily – you’ll have to work with your suppliers to fix your customers problems.
This way of serving your customers will lead to issues with your vendors and with your consumers, who can soon grow sick of waiting long for their issues to be solved.
Dropshipping is promoted as a risk-free marketing strategy. And it’s true that the upfront risk is very low, because before you start selling you don’t have to buy inventory. Fiscal risk is implicit in all industry, however, and dropshipping is no exception.