Are you planning to start an online venture? Sending your products to your buyers is one of the challenging responsibilities you must face. Don’t worry. There are various ways to do it, like dropshipping. Get your answer why choose dropshipping in your eCommerce business.
Dropshipping is one method of fulfilling orders. But, there’s no need for you to keep track of the product stocks. Instead, it involves a third-party supplier responsible for shipping the customer’s order. Some of them use Red Stag expedited shipping.
Basically, your store sells the items online. Then, pass the order sales to a third-party supplier. So, there’s no need to pile up stock in your storage room.
Dropshipping is a business model not to earn easy money. Instead, it follows a specific procedure to fulfill an order on time.
The Process of Dropshipping
The success of a dropshipping operation relies on the collaboration of different parties. Here is a scenario of how they work hand-in-hand.
A water bottle manufacturer produces items in bulk to sell to suppliers and wholesalers. Suppliers and wholesalers buy-in size once the bottles roll off the production line. Then, look for retailers like you to resell them.
Also, you can prefer bonded warehouse for your goods storage while shipping.
A customer browses your online shop and places an order to pay for a retail price of $200.
Your Store Sends It To The Dropshipping Supplier
Your shop recognizes the order and forwards it to your supplier. However, you get to keep the $50 profits while you pay a wholesale of $150.
Supplier Prepares The Order
Afterward, the supplier processes the customer’s order. Finally, pick and pack all the items within the order.
Dropshipping Supplier Sends Out The Order
Once the order is complete and ready, they ship the product directly to the customer.
As you look into the dropshipping model, keeping products stock on hand is no longer necessary. It is the most significant difference from pursuing the standard retail model. Instead, the selling merchant purchases inventory from a third party. For example, it can be a wholesaler or supplier who can fulfill orders.
Advantages of Dropshipping
It’s no surprise why many prefer drop shipping for their eCommerce business.
Minimum Capital Needed
Investing thousands of dollars for an upfront inventory is not a must-have with dropshipping. There’s no need for you to purchase a product ahead of time. Instead, you have to wait until you have already made a sale paid by the buyer. As a result, there’s less risk of spending too much on your inventory. It’s far different compared to the traditional retail business.
Favorable to New Business Owner
If you’re new to the eCommerce business, dropshipping is genuinely beneficial. So many business responsibilities are off your shoulders since you don’t deal with physical products.
You don’t need to look and rent a warehouse. You won’t tire out packing and shipping orders. Plus, there’s no stressful accounting and tracking inventory. Instead, a third-party supplier handles the returns and inbound shipments.
Lower Overhead Costs
Since most of the inventory and warehouse is not your task, it lowers the overhead expenses. You can push through with the business without making high-level investments. You can run and make your business thrive even if you stay at home.
However, you need to invest in a computer or laptop. Also, you need to be ready for recurring expenses while the business operates. Plus, you have to focus on advertising to make your online store known. So the costs will most likely increase as your online shop grows. But it is still low than the traditional retail business.
Online business with dropshipping comes with lesser requirements. The entire shop works wherever and whenever you are. As long as you have a laptop with a stable internet connection, you can push through with the business. Unlike the traditional business where you have to be physically present, you can be anywhere and still earn with dropshipping.
Wider Options of Products
Without pre-purchase your store products, your selling items can vary. Serve your prospective clients with trending products. Change it based on which is top selling in the market. If your dropship supplier has stocks, list the items on sale in your online shop. Remember, there’s no extra cost for you to worry about.
Disadvantages of Dropshipping
There’s always a downside, no matter how good dropshipping is in your eCommerce business.
Slimmer Profit Margins
Managing your inventory is unnecessary if you put your eCommerce business in dropshipping. As a result, it lowers the overhead and the returns as well. You place less money in, so you get less money out. Your funds primarily go to the supplier, while the remaining keeps your business afloat.
Afterward, it affects the profit margins. There are hardly enough funds to cover the expenses. Advertising, website maintenance, and sales management tools are costs, too. It’s common if it is the beginning of your store and involved in a competitive niche.
As a solution, it’s best to learn about the product margin. Then, choose a niche with lower competition. So you can have a better profit margin in return. Also, get to know your target audience. Then, with proper optimization, you can drive a high sales volume.
Stock monitoring is easy if you keep track of it on your own. However, when dropshipping, your source of products comes from multiple warehouses. As a result, you don’t have first-hand experience of how order fulfillment and stock replenishment works. Also, these suppliers provide for other merchants, too. Therefore, the inventory may change every day.
Luckily, there are various apps available. It allows sellers to have access and be in sync with the suppliers. So you can see in real-time the actual number of inventory your supplier has.
The Trouble with the Supplier
With the traditional business setup, customers address their complaints directly to the sellers. And you can resolve the issue immediately. However, you have no power over the supply chain in dropshipping.
Most store owners fall under the mercy of the wholesalers. You have hope and faith that the supplier does its job to process every customer order correctly. All the while, you are responsible for reassuring every client.
In addition, a delay is inevitable since you go back and forth between the buyer and the supplier. If one responds slowly, it halts the entire dropshipping process.
Complex Shipping Process
You communicate with different suppliers as you publish products in your online store. And working with multiple suppliers complicates the shipping costs.
For example, a buyer placed an order of five items in your shop. However, these are available from three different suppliers. Thus, it will incur three shipping fees. Sad to say, it’s not advisable to pass such an expense on the customer’s shoulder. You may include these costs but automating such calculations is tricky.
More Challenging Customer Care
Negligence on the part of the dropshipping supplier reflects on the performance of your eCommerce business. If a transaction goes wrong, you have no control over it. But you still need to handle the customer support. As a result, you take all the blame for the customer’s complaint.
Always have constant communication with the dropship supplier. This way, you are more aware of the current situation. So you can take half of the responsibility. Therefore, you can explain the current situation to your client. Customer service is challenging with dropshipping.
Dropshipping in your eCommerce business is indeed profitable, even if you’re only starting. It lowers the risk of spending more yet earning less. A third-party logistics company takes the order, prepares the products, and ships it to your customer’s doorstep. Contact them and see how prepared they are to help you. Here is why you can choose Stowfly, a network of shops and stores that offers out-of-home delivery options. Orders are safely received and handed over to your end customers avoiding the problems of theft and missed packages.