Dropshipping is a type of retail business model in which a business owner doesn’t need to build an inventory, or even handle the products that he’s intending to sell to his customers. Instead, he simply buys the product from a third party and has that third party directly ship the product to the customer. The key facet of this type of retail model is that the business owner doesn’t own any inventory of his own, and has no need for things like warehousing.
What are the benefits of dropshipping?
There are a number of benefits which follow dropshipping, some of which are:
Ease of beginning: It is easy to get started with your business if you opt for dropshipping, primarily because it requires next to no capital. With this method, there is no requirement to purchase a product in order to sell it, and you have the option of claiming it only when you have made a sale. Especially for start ups or ventures with a small capital, dropshipping poses as the perfect option.
Provide a wider variety of Products: As you don’t have to build an inventory before selling it, dropshipping provides you with the flexibility of providing a much wider variety of products to your customers. You can add a new product at almost no additional cost to your website.
Flexibility: Dropshipping provides great flexibility in terms of both location and cost, as you incur no overheads related to warehousing and you can operate your business from any place of your convenience by simply connecting with your suppliers with a cellular or internet connection.
What about the cons?
Sounds too good to be true? There are a few disadvantages as well that you need to be wary of if you’re considering taking the route of dropshipping:
Low profits: As there is next to no investment required in a dropshipping-oriented market, prices tend to run on extremely competitive scales and a result of this is low margins for profit. You will have to constantly fend off other vendors who will be providing the same products at you, but at cheaper costs.
All the control lies with the suppliers: Whether its inventory, shipping charges or even scope for human error- all the agency lies with your supplier. There is only so much you can do without any inventory of your own, and often times it becomes a hassle to constantly negotiate and coordinate with suppliers to deliver the products your customers require.