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Some believe that dropshipping is a great way to get started with eCommerce business. Others due to scams related with such businesses choose to discount this response. It might leave you with mixed beliefs too. That’s why this article will help you get the honest truth.
Dropshipping is a term used to define retail type businesses where the store doesn’t have inventory or stock. Instead, when a customer places an order for a certain product, the store purchases the item from a third-party supplier – who also ships/delivers the product to the customer. Meaning, the store doesn’t see or handle the product.
For example : Store A which is based in South Africa, may be selling luxury watches from Switzerland, on their online shop. If a customer from Brazil places an order via the Store A’s website; the store owner will contact the supplier or who makes the product in Switzerland, with instructions that they make a direct delivery to the customer in Brazil. This means, the product does not touch South Africa neither does the store owner travel to buy the product in Switzerland.
This type of business has its benefits and some drawbacks as well.
It’s a very easy business to start.
Running an online business with this method is very much easy. Because you don’t have to worry about paying for store/ physical shop since you don’t handle the products. No packing or delivering orders. Neither do you have to continually order and manage stock levels or even handle inbound shipments.
Can be operated from anywhere
Dropshipping kind of business can be ran from your bedroom. All you need is to be able to communicate with your suppliers and customers. The only thing you need is a reliable internet connection to enable you manage the online chats and website.
Wide products selection
Since there is no pre-stocked inventory associated with this business, the store owner can even create an online shopping mall! As long as a supplier manufactures or stocks what the customer needs, you can list the items as part of sale products on your shopping website, all for FREE.
Easy to expand
Since most of the work is handled by the supplier, such as processing the orders and handling returns/shipments, you as the business owner have less pains associated with the business especially in regards to expansion.
Since the business is not a perfect stress-free investment, it might be attractive type of business but it also comes with its share of thorns. These include:
Delivery Complications
Automating shipment calculations especially for orders made by one customer yet from different suppliers can be a challenge. You’d incur extra charges for sending each product to the customer. If you opt to pass over the delivery charges to the customer, they might retract back, due to overcharged delivery fees.
Inventory Shortage
A store that stocks its own products can monitor the in and out inventory. Since dropshipping relies heavily on third-party suppliers; who might be delivering to other stores, their stock changes on a daily basis with no prediction; could land you in a quagmire with a customer concerned about delayed/late shipment.
Supply Mistakes
If you choose this type of business, be ready to take responsibility and apologize to your customers for faults that aren’t yours. It could be due low-quality products, or wrong products, botched and broken fragile pieces, or even mismatched colors.
If not handled carefully, this could be a contributing reason that might damage your business’ reputation.
Low Profits
Since the business is on a very high competitive field, most store owners would love to do anything that would bring customers to their online shops. Some might lower the prices of the products to cut the competition. But due to heavy investment, especially for covering the delivery costs and suppliers fees and minimal customers turnout; the business might realize low revenue.
Tip : Instead of dealing with general merchandise; choose a niche. Target a certain customer segment and location as well.
Bottom-line : Everything isn’t roses. Even a rose lies on a bed of thistles and thorns. The good news is that when planned carefully, all these challenges associated with this business can be prevented; and out of it build a profitable business.
