Dropshipping is a business model that allows businesses to sell products without having to keep those products in stock. In the traditional sales process, a product is generally sold by a retailer to the customer from their own inventory. This means that they have bought and paid for the item before they are able to write up or take payment of any kind.
Let’s say you want to sell handbags or shoes online. You can find suppliers of these goods who will be able to dropship the items directly to your customers for you, meaning that you don’t need to carry any stock. This is a very beneficial business model for people who want to sell online without buying or managing inventory.
Benefits of the dropshipping model
You can start with little or no investment
In the dropshipping business, you can start your online store or business through a very small investment. All that is required of you is to register with an online wholesaler and choose from their catalog selection. Your orders will then be shipped directly to your customers; this means no holding costs for you as a vendor or retailer.
Using this business model, you do not need to bother with storing your products in a warehouse or any other place. The goods will be shipped directly from wherever they are originally produced to the customers that have ordered them. This means that there is no requirement for you to arrange or maintain a storage facility specifically for your items as everything can just come directly.
This business model offers a lot of flexibility to retailers. You can choose whether you want to purchase wholesale goods from a variety of different suppliers or focus on a specific product range. The choice is entirely yours, and this means that you can run your business however you prefer.
Easy to grow
You can easily grow your business as you will not be encumbered with many problems that come from maintaining large inventories of the products you sell. This means that you do not need to create space for storing them nor purchase additional equipment such as forklifts and lorries to ship out your goods. You can easily add a new vertical without worrying about manufacturing or procurement.
So far so good. Dropshipping coaches or courses will make you think that dropshipping will change your fortune in a big way. Some of these courses are nothing but scams while some are just a waste of time. There are some legit ones as well. Some of these courses include Dropshipping titans or Simplified dropshipping. You need to do some research and read online reviews before signing up for any of these courses.
Remember that dropshipping comes with some disadvantages and drawbacks. Let’s have a look at some of them.
Drawbacks of Dropshipping
Small profit margins
One of the reasons why dropshipping is not very profitable for retailers that sell goods through this method is because they don’t have to purchase or incur holding costs for the items they sell. This means that their profit margins will be a lot smaller than when compared to conventional businesses.
You might think that you can work with low-profit margins but that makes it hard to use paid traffic. Paid traffic is incredibly important for any eCommerce business. It’s not easy to get your product pages to rank in search results. If you cannot invest in paid traffic, you will find it hard to get going.
Lack of control
You will be relying solely on your suppliers. You won’t be able to decide when and how often they send you stock. In case there is a problem with one of your dropshippers, it could take time for them to replace the inventory that they are holding. This will lead to stock-outs in your business, which will have a negative impact on sales through your store/website.
Another problem is that there will be delays in shipments. This means that you have to entertain customer queries and complaints about them having to wait for their products. You need to come up with ways of dealing with this delay as it might turn your customers against you. This can lead to complaints on social media or even a bad review. These things can ruin an online business.
Dropshipping is a convenient way to sell products online without purchasing them first. You can start with little or no investment and make it as easy to use as possible by using platforms like Shopify, which provides all the tools you need and takes care of most of the work for you. It’s also great because your business has flexibility so if one product line isn’t doing well, there are many other options available to keep things running smoothly.
The cons? Low-profit margins, lack of control over inventory, and failing to use inventory lists means that dropshippers might not be able to take advantage of higher prices but this really depends on where they source their goods from in the beginning.