When it comes to starting your own online business, one of your biggest decisions will be how to source your product. While you may be able to create some of the products yourself, you may find yourself needing to find suppliers to help out with some of the items you sell, or risk being unable to completely solve your customers’ problems.
What is Dropshipping?
Dropshipping is an innovative system in which business owners sell products to customers, but they do not create or stock these items personally. Instead, they order these products from a supplier, who ships them directly to the customers as they are ordered.
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Some shop owners strictly sell items that are dropshipped from other vendors, while some others choose to supplement their own inventory with related products that come from outside their company.
The customer is unaware of the process. As far as they know, the order is placed through your business, and they receive the item they ordered.
What they don’t see behind the scenes is that when the order is placed through your site, you turn around and order that product from your vendor, to be shipped to the address the customer provided.
We’ve looked at dropshipping before. You can learn more about how the process works here, and get a feel for how dropshipping vendors are chosen in this page.
The Main Idea Behind Dropshipping
Dropshipping has become a popular business model that helps you to sell a full range of products without having to stock every single item they sell.
By contracting with other companies to create and ship your customers’ purchases on behalf of your company, you allow yourself many opportunities and advantages.
At the same time, there can be a few extra challenges that come along with choosing dropshipping as a manner of meeting your customers’ needs and expectations.
Let’s take a look at some of the pros and cons of dropshipping, so that you can investigate fully whether this option may be feasible for expanding your own business.
The Pros of Dropshipping
Upon first glance, dropshipping seems pretty ideal.
You have the opportunity to offer your customers a full range of products, but you don’t have to fill your stock rooms with bins upon bins of items that may or may not be required of every customer.
These are the biggest advantages
In fact, the lack of inventory and inventory management is typically one of the biggest advantages of dropshipping.
Many suppliers require sellers to purchase products in bulk. Then you have to pay shipping and handling to have the products sent to you, and then you need to find a way to store them that keeps them safe and tidy.
You may end up devoting valuable storage space to a product that won’t sell, which then prevents you from stocking up on a product that sells very well.
The lack of those high-selling products means lost sales, while you continuously lose money on the product that is in stock instead.
Additionally, renting or owning enough space to maintain a huge warehouse for all of your products can be cost prohibitive.
And what about the unsold items?
Comparatively speaking, using dropshipping as a method to deliver your products to your customers is incredibly cost effective.
Not only do you save on expenses and losses due to stocking tons of products that may or may not sell well in a large space, but the risk associated with those expenses and losses is eliminated, too.
If a product you’re dropshipping doesn’t sell at all, you simply stop offering that product. You don’t have to have a major clearance event to get rid of your stock.
You simply delete it from your product listing and go about your day.
The Cons of Dropshipping
Of course, dropshipping doesn’t come without its fair share of challenges.
When it comes to having products dropshipped directly to your customers, you will have to become comfortable with the idea that you have no control.
You do not get to see the product before it is shipped to the customer.
Since you will not be physically pulling the product off of the shelf, packaging it, and sending it off in the mail, you will simply have to trust that the company will do an adequate job of quality control, and ship the package in the amount of time and via the shipping method they have promised.
Since the customer has no idea that another company is involved, you are responsible for ensuring their overall satisfaction with the purchase.
You and your business will be the point of contact for all of their interaction, and if they are unhappy with the product, do not receive it in the timeframe they have paid for, or find their purchase damaged, you will have to make things right.
This entails coordinating with the customer and the vendor, and may result in a loss, depending on how things play out.
Satisfying customers can be somewhat difficult when the final step of the purchase: the product ending up in their hands is out of your control.
This is why it is important to choose the right suppliers for your products. You can read here how to minimize this risk and find the best companies for your dropshipping business.
Competition can also be rough in the world of dropshipping. You are likely not the only person ordering a specific product from a vendor.
You may want to keep an eye on competitors’ pricing: if you’re offering a product from your vendor at a 50% markup, but another business is offering the exact same thing from the exact same vendor at only a 20% markup, it’s not hard to understand why a customer would pass on yours to order from your competitor.
The benefits of dropshipping can be extremely valuable, especially for those looking to start or expand their existing business with minimal risk.
You have the opportunity to offer greater solutions to your customers, and even increase the value of your own products through accessories and additions.
At the same time, you can encounter a few difficulties along the way. Coordination and communication are key, but there will be several factors out of your hands, such as the quality and delivery of the products.
Still, there are some very compelling reasons why you should continue to make dropshipping part of your daily business strategy: it is one of the easiest ways to start an online business and it is still a rentable solution for earning money on a consistent basis.