What Is Drop Shipping and How Does it Work?

In the world of retail, dropshipping is a method of fulfillment where a merchant has no products or stock on-hand. After an order is placed the merchant purchases it from their vendor who then sends it to the customer.

The difference that remains is the inventory whereas a drop shipper maintains none. What they do is purchase a product as needed from a vendor who then sends it to the customer.

Just like all processes, there will be a few benefits and disadvantages attached.

Benefits

Capital Is Almost Nonexistent – The best advantage of dropshipping is that you can easily conduct an e-commerce business with almost no investment. Normal store retailers have to fork out thousands to maintain an inventory.

Simple to Start – It’s always easier to run a business when you’re not worried about the products that you sell. Dropshipping takes the hassle out of:

Warehouse management and upkeep
Shipping and receiving
Inventory tracking
Product returns
Managing inventory

Remote Location – Running a drop shipping business means you can run it anywhere you want. All you need to make sure of is to have an internet connection and the ability to talk to your customers and suppliers.

Product Selection is Vast – This benefit is great because every product that your supplier has for sale can be placed on your website for sale. So you’re not limited to what you would normally pre-purchase.

Disadvantages

Margins are Low – Having low margins can easily create havoc on a dropshipping business. Because of the little investment at the beginning, sellers feel they will turn a big profit at low prices.

Issues with Inventory – Having a brick and mortar store will allow you to easily monitor your inventory. But if you are relying on a third-party supplier keep in mind that you are not going to be the only merchant that they do business with. Things can get even worse if all of your
suppliers happen to be out of stock of the same item that you need. Although you can easily coordinate your virtual inventory with your supplier, the supplier almost never seems to support this.

Errors Among Suppliers – If you have ever been blamed for something that wasn’t your fault, then you know how it feels when having to take responsibility for it. No matter which supplier you go with, they are not exempt from mistakes as they fill the thousands of orders they receive each day.

Just make sure you give your most sincere apology to your customer. Having a supplier with poor attention to detail will do nothing but continue to give you problems and leave you and your customers frustrated.

In the end, dropshipping is not the best way to run a successful business. Not only will a lot of stress occur, but there is no guarantee that you’ll be successful.

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