As many of you would know, online shopping often leads you down a rabbit hole of price comparisons, pop-up ‘specials’ and an overwhelming amount of options.
What does this mean than, to the aspiring home business owner focused on building an online presence in retail?
Is the rate of consumerism up to par with the growing rate of Entrepreneurs?
Will dropshipping become a wash of dodgy suppliers, fewer buyers and ultimately become a broken market?
Well, pretty much the entire e-commerce industry of Pakistan is drop shipped. No one actually stocks the products. They are simply catalogued for online display, but are drop shipped by the vendor to you.
So far, it all works well, but this is for domestic sales only.
Pros of Dropshipping
Low Startup Costs
It requires a lot of capital to stock a warehouse. You can eliminate the risk of going into debt to start your business by using dropshipping.
Instead of purchasing an extensive inventory and hoping that it sells, you can start a dropshipping business with zero inventory and immediately start making money.
Low Cost of inventory
The cost of inventory is one of the highest costs you’ll have if you own and warehouse stock.
You may end up with obsolete inventory – forcing you to find ways to reduce your stock – or you’ll end up with too little inventory – leading to stockouts and lost revenue.
Dropshipping allows you to avoid these issues and focus on growing your customer base and building your brand.
Low Order Fulfillment Costs
Order fulfillment usually requires you to warehouse, organize, track, label, pick and pack, and ship your stock.
Dropshipping lets a 3rd party take care of all of that.
Your only job in this arrangement is to make sure they get your customer orders. Everything else will be handled by them.
Sell and Test More Products with Less Risk
Without the constraints of a physical inventory and the costs associated with it, dropshipping allows you to update your inventory quickly, easily, and cheaply.
If you know a product is doing well for another retailer or reseller, you can immediately offer it to your customers without waiting for it to arrive in your warehouse.
Dropshipping allows you to test new items without the risk of carrying obsolete inventory. You only pay for what you sell.
Cons of Dropshipping
Less Control Over Order Fulfillment and Lead Times
Even though you don’t carry the cost of warehousing stock, you will pay for dissatisfied customers.
The manufacturers and wholesalers you do business with are responsible for managing and shipping your stock. If they screw up, the customer complains to you or buys from your competitor.
If you start a dropshipping business, make sure you work with high-quality partners.
Reliance on Other People’s Stock
Being able to offer new products immediately or stop selling slow-moving products is a major benefit of dropshipping.
The drawback to this perk is that you don’t control your supplier’s inventory. If they run out of stock, YOU run out of stock.
This will result in longer lead times and lost customers.
The hidden “cost” of dropshipping is the lack of bulk pricing.
You will likely pay more for each item you sell as compared to paying less for a large inventory of items – leading to less profit.
If you want to earn a lot of money using dropshipping, then you’ll have to sell more products than you otherwise would have if you owned and warehoused them yourself.
Poorer Customer Service
If your supplier delivers products late, damages them, delivers the wrong items, or otherwise screws up your customer’s order, the customer will take it out on you.
We already mentioned this problem when it comes to order fulfillment and lead times. But it extends farther than that.
You won’t be able to maintain the personal touch that retailers who manage their own inventory can provide customers. You won’t be able to quickly solve customer issues without overseeing the inventory yourself – you’ll have to deal with your suppliers to solve problems for your customers.
This “man-in-the-middle” way of helping your customers can lead to issues with your suppliers who may take a long time to do what you ask them to do, and with your customers – who will quickly get tired of waiting a long time for their problems to be solved.
Here’s What You Need to Make Dropshipping Easier
Now that you know the pros and cons of dropshipping, it’s important for you to know about a tool that you can use to make dropshipping work better for you.
We mentioned that one of the cons of dropshipping is not being in control of the inventory you’re selling – leading to potential stockouts.
But, you can use a cloud-based inventory management software that integrates with your supplier’s software so that both of you know how much inventory is in stock at any time.
This helps you as a dropshipper synchronize your marketing and sales campaigns with your supplier’s stock.
So, when any of your supplier’s customers make a sale (including you), it will update the amount of inventory in your supplier’s warehouse automatically
I don’t believe the market it in jeopardy.
It is just a matter of time when other wholesale systems, other then Amazon, eBay and Aliexpress are going to relize that dropshipping is the business of the future, and change their traditional business model with middlemanship and phisical stores onto the modern ones where they will find droppshiping stores who are positioned well in their branche/niche and give them agreement (something like the traditional distributor contract).