Dropshipping is a unique retail and present-day online shopping method where the retail house does not keep their entire product in stock. When a store is selling the product using the Dropshipping method, then the store itself purchases the product from the third party who actually has the stock of the product, and then the third party itself ships the product directly to the customer. This prevents the seller from not handling the product directly.
Online Dropshipping courses can give you an insight into the most significant difference between the Dropshipping model and the traditional retail model. In the traditional retail model, you will need to keep a huge quantity of the product in stock, whereas, in the Dropshipping model, the same is not required. Thus, warehouses and sellers save a lot of money by having small warehouses and even the manpower and the maintenance cost also gets reduced.
Benefits of Dropshipping
Dropshipping is a highly profitable and beneficial model in the present day. Many entrepreneurs even with limited expertise and capital can start this model and gain. One of the biggest pluses with the Dropshipping model is that it helps to ensure that the business house is well aware of the products which are in stock and thus they can analyze and benefit from the market demand at the same time.
Let’s have a look at what are the biggest plus of this model –
- Less capital requirement – Since you don’t need to keep maximum products in stock, you can manage with a smaller warehouse and even less manpower. Maintenance cost also gets reduced and thus this is a huge cost-saving area.
- Easier to Start – Running an eCommerce business becomes quite easy because this is where you don’t have to deal with physical products, checking their expiry, handling returns and shipping, and all that. Thus, we can assume that the paperwork would also be much easier and less time-consuming.
- Lesser overhead costs – You won’t believe but in the Dropshipping model, the overhead costs are also much lesser. Many Dropshipping models are working as the home business models where they only have a laptop and minimum recurring expenses to take care of their business. Once the business progresses, the remaining costs are to be taken care of.
- No Location restrictions – The best part with the Dropshipping model is that there are no location restrictions. You can operate your business from anywhere and to anywhere. Another great cost-saving way. Right?
- Wide choice of products – Since you don’t need to keep a ready stock of products with you, you would be able to deal with a wide variety of products. Yes, that’s the biggest plus. With Dropshipping ads, you can also gain affiliate revenue as well.
- Internet Usage – Video ads for dropshipping can be made, like good quality introduction videos. This will help you connect with the right set of audiences and thus earn a good customer base for its online business.
- Scalability – Another good point with Dropshipping is that since the capital cost is quite low, you gain good business experience. In case you are successful, you can think about the scalability option. This allows you to scale your business without investing too much capital easily.
- Testing of a product – With the Dropshipping model, it is quite easy to test a product as well. Since you don’t need to keep the physical stock of the product, you only need to keep the products displayed on your website. This will allow you to analyze the market demand for a new product quite easily without putting too much of a cost.
But of course, all is not that easy. There are some major disadvantages also about the Dropshipping model.
Let’s have a look at what they are–
- Extremely low margins – Since you are not putting up a huge capital and you don’t even have a physical warehouse, you would be tempted to sell products even with extremely low margins. That is where the business suffers the maximum easily.
- Inventory issues – Since you are not keeping the physical stock of products, it can get a bit difficult when you receive the actual order.
Example- You might have displayed a product on the website some weeks back. You got an order now. When you ask the third party about the product, he/she might say that it got sold out and will take some time to restock it again. This leads to customer trust issues and is not beneficial for a stable business in the long run.
- Supplier errors – Since the third party who is shipping the product is not directly involved with the product; thus, he/she might not take the order that seriously. He/she might be ignorant in checking the validity of the product. This, again, might lead to returns and customer trust issues and a bad name to the business.
Published by Lavismichel Inkel