Dropshipping is a hands-off retail fulfillment method that is easy to start up. Instead of holding stock in a warehouse, the store will order and ship products directly from the third-party supplier.
Dropshipping is great for new company startups because you don’t need a lot of capital, and there is a low liability on you. You also do not need much know-how, since 90% of the process is fulfilled by an already-established company. The main issue with dropshipping is that your profit margins are usually quite low.
If you are looking at trying dropshipping, here are some pros and cons that could guide you when deciding whether or not to use this method:
Easy to start and manage
Dropshipping requires very little from you to get started. You don’t need a warehouse to store products, and you hardly even need any money. All you need is a computer and an internet connection, and perhaps a little knowledge on how to build an online store.
Additionally, because most of the actual product movement is the responsibility of the third-party supplier, you don’t need to do much in terms of management. Therefore, managing your online store and shipments is a simple task that requires very little from you.
Easy to grow
Wanting to expand your business is a lot simpler when you use dropshipping than if you had your own stock. You mostly have to improve your marketing strategy, but the daily running of the business will not change. So, you don’t need to put a lot of money into expanding your business.
When you scale up your dropshipping business, your costs don’t skyrocket as they would if you scaled up a regular business. When scaling up a regular business, you need to invest in more inventories and more storage space, but this is not the case with a dropshipping business. You don’t store any products, so you don’t need to field this cost.
Flexible
Dropshipping allows for flexibility in the workplace. You can work from anywhere and at any time since you do not need to adhere to any schedules. A 3PL warehousing and fulfillment company will do almost everything for you. All you need to do is monitor and maintain your online store.
Because of this setup, you don’t need to be very involved in the physical trading of the business. Rather, you are confined to the online space and don’t even need to worry about shipping issues, since that is the responsibility of the shipping company. Hiring a good shipping company like Red Stag takes even more responsibility off your shoulders.
Difficult to process orders
In dropshipping, the customer orders, you process the order, and the shipping company fulfills the order. This seems straightforward but can actually become quite complicated. If you use a single supplier, this is easy and lacks any problem. However, your services may be sourcing products from various suppliers.
Different suppliers have different shipping and payment processes, which means you need to field all of these issues. You are offering a streamlined service for your customers, so you are taking the responsibility of uniting different suppliers to provide this service. In these cases, it can become extremely challenging to coordinate the process.
Challenges with customer service
When orders fail in a regular company, the customer knows exactly who is at fault. However, in dropshipping, you will receive the blame for all the problems even when they are beyond your control. Unfortunately, the customer will not understand your position, and you are expected to address the issues.
When a shipment fails to deliver or delivers incorrectly, you are the customer’s contact point. It becomes your responsibility to address these issues with the supplier and shipping company on the customer’s behalf. Providing customer service may be a slow process because of this.
