The world of e-commerce is growing at a rapid pace and there are more than thousands of e-commerce sites and online stores where customers can shop online.
Truths & Benefits Of Dropshipping
E-commerce has developed to such an extent that there are even sites that do not maintain any inventory at all but simply display products and then arrange for the ordered items to be shipped from a third-party supply or a store.
This is the essence of dropshipping. Dropshipping is different from retail sales in that the company or business doing dropshipping does not need to maintain stocks of any kind and simply ties up with suppliers, manufacturers, and retailers and arranges for ordered material to be shipped.
Dropshipping business is good for starting entrepreneurs as there is not much expenditure and there are low overheads. A dropshipping business needs to have an extremely robust network and an efficient software system to handle transactions including frequent money transactions and payments.
There are some disadvantages of dropshipping as well. The biggest disadvantage is low margins and low profitability. High competition and low overheads lead many operators to offer products at the lowest prices and a new entrant into this business will need to keep his or her costs at par in order to compete.
Customers will always hop to a site that offers products at lower costs. Keeping track of inventory at different locations is another disadvantage of the dropshipping business.
The entrepreneur will need to manage all the supplying agencies with whom they have supplying tie-ups and ensure there is sufficient inventory while passing orders forward for delivery. A business can suffer when a customer orders and is later informed there are no stocks.
Such a situation can be embarrassing and detrimental to the growth of the business. There are robust network systems that allow a drop shipper to see existing inventory at a partner’s warehouse while passing orders on. That way, a drop shipper can confirm to a customer whether the ordered items are available at the time of confirming the order.
There are other disadvantages such as shipping complexities. For example, a customer may have ordered 5 items that are available from three different retailers or suppliers. There will be three different shipping bills. The drop shipper cannot include three individual shipping bills to a customer and will need to provide one consolidated bill.
While there are programs available to do such computations, manual intervention is necessary to monitor such complexities regularly. Another disadvantage is supplier errors and this happens in online deliveries where there are frequent cases of wrong delivery and the material having to be replaced.
While such errors are not the fault of the drop shipper, they have to take responsibility for supplier errors and shoulder the burden. A customer will obviously not be bothered where a drop shipper sources his or her products from.
Dropshippers have a distinct advantage of having launch and market brands. Dropshippers also need to examine and test the products themselves so that they are sure of the quality and durability of products rather than coming to know about poor quality at a later stage when customer complaints begin pouring in.
This is a good business as big businesses can depend on drop shippers to market their products for them. They can depend on drop shippers to do that extra niche marketing and help them grab the extra market share that they normally would find difficult to achieve.
Dropshipping is a trend in e-commerce that benefits both the drop shipper as well as supplying agencies. The drop shipper reaches out to a large customer base with little investment and the manufacturers get access to a large customer base indirectly.
