Online retailers today are engaged in dropshipping because it eliminates inventory stocking and warehousing. These aspects of a business are complicated and tedious. That’s why dropshipping is a convenient way to do business without the manual tasks and expensive overhead costs involved in the manufacturing, packing, and shipping of products.
In this post, you’ll learn the pros and cons of eCom dropshipping business. By doing so, you’ll be able to determine if this business is suitable for you.
Pros of An Ecom Dropshipping Business.
1. Simple and Streamlined Order Fulfillment.
Dropshipping refers to a fulfillment method that forgoes manufacturing, stocking, and inventory. When a customer buys a product from your store, you (the retailer) buys that item from your supplier, who’ll then ship it directly to the address of the customer on your behalf. Dropshipping fosters a faster and easier startup without hiring people and taking out a lease. It means that you can get your business off the ground quickly.
While it may seem easy, being successful in a dropshipping business takes time and hard work. That’s why you have to equip yourself with the right knowledge, skills, and attitude to ensure you’re always one step ahead. Know the latest trends and how to value your customers and suppliers. Learn about the ins and outs of dropshipping at http://ecomdropshipreview.com/.
2. Low Startup Costs.
You need a significant amount of capital to manage a warehouse. Since a dropshipping business no longer needs to have a physical warehouse, you can reduce the risk of wasting too much money. Also, you reduce experiencing bankruptcy by starting your business through dropshipping. The high costs of warehouse stocking may end you up, forcing ways to reduce your obsolete inventory or end up without stocks at hand.
You don’t have to purchase an extensive inventory and hope everything sells. Dropshipping allows you to start a business without worrying about inventory. Immediately begin your ecommerce business and make money. Dropshipping enables you to focus more on building your brand, growing, and engaging with your customer base.
3. Low Costs of Order Fulfillment.
Dropshipping is a simple way to do business without worrying about shipping or stocking the products. Order fulfillment requires warehousing, organizing, tracking, labeling, picking and packing, and shipping your items or stock. Eliminate the expensive cost associated with these processes involved in fulfilling orders.
With dropshipping, a third-party does all of these. All you need to do is to make sure that you get the orders of your customers. Your supplier will handle the rest. With little overhead cost, you can even run your business at home or out of the office using your laptop.
4. Sell and Test Products with Less Risk.
With dropshipping, you can test new items and only pay for the items you sell. By testing the products, you can offer them to your customers even before they arrive in your supplier’s warehouse. While you only buy the items that the customer orders, you’re guaranteed a form of profit margin.
Another good thing about dropshipping is that it’s easy to find good products to sell. The best dropshipping products are typically found on AliExpress, but you can also try other retailers such as Alibaba, Tao Bao, etc.
Dropshipping is relatively easy to scale when it comes to business operation because the majority of work rely on your suppliers. It means that when you have more orders, you need to order more products. It means that the supplier needs to pick the product, pack, and get it from one point to your customers.
Cons of Ecom Dropshipping.
1. Less Control Over Lead Times and Order Fulfillment.
If your supplier or wholesaler screw up sending the order on time, you may end up paying and handling dissatisfied customers. That’s why it’s crucial to deal with high-quality partners. Also, if your supplier runs out of stock, you may lose a lot of customers.
2. Poorer Customer Service.
Because you don’t see the items yourself, there’s a chance that your customers will have more complaints. This includes late products, damaged items, or wrong items sent. It means more complex and poorer customer service.
Some suppliers are not responsive or genuinely concerned about maintaining customer relations because they’re more focused on manufacturing, packing, and shipping. Also, a personal touch is reduced or eliminated with dropshipping.
Here are some tips to take good care of your customers and avoid major problems when you’re on a dropshipping business:
- Send a personalized message via email or chat about order confirmation. A ‘thank you’ email will mean a lot.
- Ensure your dissatisfied customer that you’ll address the issue. Provide a specific time frame to expect positive results.
- Using a cloud-based inventory management software is a good idea. It can be integrated with the software of your supplier so that you know the status of your stock inventory at any time. It’ll also allow you to synchronize your sales and marketing with the stock of your supplier.
3. Low-Profit Margins.
The low entry barriers and the competitive space of Ecom or online shopping usually force the dropshipper to price low, thus resulting in lower profit margins. You’ll see greater financial gains once you already have scaled your business and established customer loyalty.
4. Inventory Issues.
Keeping track of inventory levels is difficult when you’re not the one managing them. If your store is not synchronized with the latest inventory data of your suppliers, your customer could end up ordering out-of-stock items. It’ll result in disappointment and frustration, that’ll hurt your credibility and reputation.
5. Complicated Shipping.
With dropshipping, shipping becomes more complicated. Some suppliers are located outside the country or abroad. Also, the weight of the product, the location of the customer, and other factors can affect the shipping process. You can be forced to eat some of the shipping costs or charge your customers high for shipping. These are not good for business and may run the risk of losing a customer.
Dropshipping, like any other business, has pros and cons, and you have to find a perfect balance between the two. By equipping yourself with the right information, you can learn the ins and outs of this business, along with experience. The benefits outweigh the drawbacks, bringing new entrepreneurs hope and better business management.