If you are planning to run an online store but your budget is low in investing in the e-commerce business then dropshipping might help you in it. If you are not aware of the Dropshipment method nor about its benefits for the new entrepreneur(s) like you, in the market then read the whole blog to get an in-depth idea about the same.
Dropshipping- What is it all about?
It is a part of the supply chain retail fulfillment method which doesn’t need a business to keep the stock of the respective products. Still, the product gets sold from the online store and move on to the third-party supplier for the sales who can be a manufacturer or wholesaler. Latter, ship the order on time from its end to the consumers.
The Dropshipping can cut down the initial outlay as the e-commerce website is saving the seller inventory cost as well as warehouse pricing. This will eventually constrict the profit margins and will increase the bar of the competition.
Advantages of Dropshipping
Fast way to get set and scale
Starting an e-commerce business becomes much easier when the consumers don’t have to deal with the physical product anymore. The new vendor doesn’t have to worry about supervising the warehouse(s); packaging & shipping; tracking inventory & returns; and supervising the stock volume.
Less price and risk
In the ordinary business model, starting up a new business as well as managing the whole retail operations can be turn out to be costly. It’s not an easy job to supervise inventory management, warehouse management, shipping, billing, refunds, and much more. Thus, through the dropshipping model, it cut down the expenses to a much cheaper price, as you don’t need any particular office or warehouse.
The dropshipping reduces the time as the vendor can put their products online as soon as the product is ready and goes for quality check. Whereas, in the traditional method the seller has to wait until the product gets shipped from the manufacturers to the business owner. The whole process sometimes takes a week’s time.
Challenges of Dropshipping
Competition is huge and the profit margin is less
During the peak of the competition, the small vendors get ready to sell their products in low- profit margins to grow their income. It isn’t surprising as they can afford to do so, as they invested less in it. This tough competition completely destroys the profit margins which made it hard for the vendors to support sustainable growth. Further, the vendors or suppliers might charge more money depending on the requirements of the customer which will eat up the profit margins.
Managing the inventory is tough
While shipping the products from the innumerable warehouses or suppliers, to multiple merchants and on the other hand, keeping track of the stock or inventory is tough. Managing the inventory is a big issue in the dropshipping. The customers remain clueless about the quality and quantity of the products.
Shipping products complications
It isn’t an easy job for any small vendors as they have to work with the various suppliers as well as with the different logistics methods and policies. Every supplier has some specific return policies like which all items can be returned, which can’t be returned, under what conditions, and much more. You just need to be aware of all this for the smooth functioning of your business.
When to use Dropshipping for e-commerce business?
If you are a beginner- Those have newly started the online business, dropshipping might prove fruitful to them.
If you want to test a new product/market – It is the best option to test the new products or starting a new business.
Sell products without any inventory – It is regarded as the best way to sell thousands of products without maintaining an inventory.
It is best for those business holders who wish to invest less in the market then the dropshipping method is the best option for them. To merge the dropshipping method into your e-commerce business, you need to start with the research on the business profit margins. So, opting for order fulfillment software which might help you in working closely with the suppliers as well as integrating them into it might help you solve the challenges.