Drop shipping is a form of eCommerce where you sell products and merchandises from multiple wholesalers and sourceswithout holding a stock inventory. It is a retail fulfilment method where a store does not keep the products it sells in stock. When a store sells a product, it buys the product from a third party and ships it directly to you as a buyer. The drop shipper never sees or handles the product.
When you run a drop shipping company, you don’t own a physical wholesale inventory yourself. That means you don’t need to pay money upfront to acquire your inventory. If the business doesn’t go as you want to be, the only money you lost is what you paid upfront for you to get your website started.
It also means your business is less vulnerable to loss of revenue as a result of changes in tastes and trends. For a drop shipping company, there is no such thing as an excess inventory.
At the same time, you can sell a lower volume of niche products along-side best-selling items in your drop shipping shop.
If you are planning to sell new products, it will be at a lower cost to launch because they don’t require an investment before they can be sold.
If you are a merchant who sells products, you will oftentimes have access to better shipping rates through a drop shipper. Sometimes it is allegedly lower than shipping packages as a small business who does their own shipping.
Also to mention, the number of goods that get damaged during shipment using drop shipping is said to be lower. This is because it reduces the number of times the product has to change hands.
As a drop shipper, you can expect the packaging of the products to be taken care of. The hassle of packaging for shipment is all taken care of by the retailer.
Your drop shipping business can also offer a wide variety of products for sale that can be possible. Imagine having a brick and mortar shop to sell your items. You don’t just have to worry about having space in your warehouse, but also if you have space in your shop to sell your items.
Bigger in sized items and perishable items that are impractical to store are also easier to sell. You don’t own a warehouse of inventory anyway, why worry so much?
Disadvantages of Drop Shipping
Although drop shipping is all that, it doesn’t mean it’s all glitzy. It has its own downside you will have to keep track of. Keep in mind there are disadvantages to every advantage in everything you do or have.
Shortages in Stocks
Just because you do not hold an inventory, does not mean your supplier does not have the stock 24/7. Since your stock relies on its availability from the supplier side, this is one of the drawbacks of drop shipping.
Stock shortages are also one of the most common problems sellers face. If there is a sudden rush in demand for a particular product, you may sell out. It leaves you in a situation where you have orders to fulfil but no products to send.
Increase in Cost of Goods Sold
Stock retailers usually pay less than a drop shipping retailer who sells the same products. Stock retailers often get better pricing, marketing incentives, bonuses, inside info and whatnot from the items they are selling. This is mostly because they have a direct relationship with the product manufacturers.
Drop shippers, on the other hand, do not always have direct contact from the manufacturers. That means for the same product drop shippers are selling, they sell for a percentage higher. This is one of the aspects drop shippers lose out on sales.
High Fulfilment Cost
Drop shipping process requires you to pay the real cost of stocking, picking, packing, shipping, and a large mark-up. To put it simply, you will have to pay more for drop shipping costs as your sales grow. That’s because a drop shipperdoes notkeep stocks in the first place, so did not have the access to control pricing.
If you have your own inventory, it would have been a different story. You will have more control over those costs.
Customer Service Problems
One aspect drop shipping most likely does not let you know is the customer service experience. You will have issues of not being able to track the exact dates the products are being shipped out (most times), the tracking info, and the arrival time. At the same time, there is no way you can guarantee the products will arrive on time. Sometimes you don’t even know what or how the productlooks like in the first place!
Besides all that, when a customercontacts you to complain or ask questions about the shipments you will not be able to assist and resolve the problem immediately. You don’t have all the necessary information at hand, hence you will have to run back and forth the supplier for complete info.
Conclusion: Should I Pursue Drop Shipping?
This is pretty much up to you. As a matter of fact and in all honesty, drop shippingdepends on how popular and in demand it is where you are. At the same time, you have to see if the products you are selling are in demand and if it sells. Check and see if you have competitors doing the same thing too.
Weigh out your options. Once you already have, you can see what works best for you in drop shipping.