Drop Shipping Basics: What You Need To Know

Drop Shipping Basics: What You Need To Know

What is Drop Shipping?

 

Drop shipping is a form of eCommerce where you sell products and merchandises from multiple wholesalers and sources without 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.

Dropshipping
Image via Pixabay

 

In summary, a drop shipper does the following:

 

  • A customer orders a product or item from a drop shipping merchant
  • The drop shipping owner contacts the supplier for the order information
  • The supplier will then proceed to deliver the items to the buyer
Dropshipping
Image via Pixabay

All this while the drop shipper has never seen or touch the product in person. He or she simply do not have a direct hand in managing the products explicitly.

 

Advantages of Drop Shipping

 

Though drop shipping is nothing new, here are some advantages for your referral.

 

It Minimizes Risks

Dropshipping
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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.

 

Lower Costs

 

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.

Dropshipping
Image via Pixabay

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.

 

Convenient

 

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.

Dropshipping
Image via Pixabay

On top of that, you can add new products to your existing offerings quickly.

 

Offers Practicality

 

As mentioned before, as a drop shipper you do not need storage or warehouse to store your products. All you need is a website where you list the items you are selling.

dropshipping
Image via Pixabay

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

dropshipping
Image via Pixabay

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

 

Dropshipping
Image via Pixabay

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

 

dropshipping
Image via Pixabay

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 shipper does not keep 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

Customer service dropshipping
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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 product looks like in the first place!

 

Besides all that, when a customer contacts 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?

Dropshipping
Image via Pixabay

This is pretty much up to you. As a matter of fact and in all honesty, drop shipping depends 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.

 

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