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What is Dropshipping? Is It A Strong Business Model?

If you are the one looking for an opportunity to start an online business then you must have come across a term – dropshipping. Dropshipping is an online business model which requires a small investment.

Let’s  first understand what is Dropshipping and how it works?

What is DropShipping & How It Works?

Dropshipping is a type of retail fulfillment method where a business doesn’t store stock products,  instead, it purchases the product directly from a third party and gets it to deliver directly to the customer. Hence, the seller doesn’t hold the burden of handling the products.

The main difference between the traditional retail method and drop shipping is that in the latter one doesn’t need to open a store, pay rents, and stock products. Instead, you just have to start an online storefront, buy products wholesale from suppliers, and just play the role of the middleman. Dropshipping is a simple business model which can be very rewarding.

Many entrepreneurs opt for dropshipping as it requires little money and effort to get started. But there are always two sides to the coin, so the drop shipping business has many advantages as well as disadvantages which one needs to see before starting your own dropshipping business.

Drop shipping  is an amazing business model for aspiring entrepreneurs as it allows them to test different  business ideas. Here are few reasons why drop shipping is a popular business model.

1. Requires Less Startup Cost

Unlike traditional retailing business which requires a huge amount of capital to be invested, dropshipping allows you to start an online e-commerce store without having to invest a big sum of money.

Instead of buying huge inventory and hoping it to sell, dropshipping allows you to purchase a product only when you’ve made a sale and have been paid by the customer. Thus drop shipping eliminates the risk of going into debt.

2.Order Fulfillment Cost is Small

Order fulfillment cost includes arranging and managing a warehouse to store the products, packaging cost, labeling,  organizing and tracking the order, shipment cost, handling returns.

But with dropshipping all of this is taken care of by 3rd party. Your job is just to make sure that they get customers’ orders. Dropshipping business becomes easier as one need not deal with physical products.

3. Low Overhead

With drop shipping business your overhead cost is quite low as in the first place neither you are buying and storing any product nor involved in shipping.

Dropshipping business can be started just from anywhere,  requiring a laptop,  an internet connection, and few recurring costs.  You just need to communicate with your supplier and customers that’s it.

Even as your business grows, this cost will increase but still, it is less as compared to other traditional businesses.

4. Wide Range of Products to Sell with Less Risk

Since you need not pre-purchase the products in drop shipping, you can test new items and trending products to potential customers. You can see what product other retailers are gaining from and can add it to your list. Dropshipping allows you to update your inventory quickly and cheaply.

5. Drop Shipping is Flexible

Flexibility is one of the best things about the dropshipping business. It allows you to manage everything with little hassle and commitment. There is no one controlling and bossing up you,  you be your own boss. It allows you to set your own pace and work at a time that is comfortable for you. It gives you room to set your own strategies and make decisions.

Below are few disadvantages  of drop shipping and the solutions to overcome them:-

1. Less Profit

It requires less investment to start, the overhead is low so can be the returns, because with every sale most of the money goes to the supplier. This can be a big disadvantage in the highly competitive market. Whole sellers rely on bulk selling for making decent profits but when dropshipping suppliers sell you a single unit they are left with nothing but to add the additional cost of shipping and storing.

You can mitigate this problem by making huge sales and selecting products which are well suited for a dropshipping business.

2. Less Control

In other e-commerce businesses, if customers have a complaint about the delivery speed, packaging, return policies, or product quality, you can address them yourself but in dropshipping business, you cannot address and fix them. Sometimes even the best of the drops shipping suppliers can make mistakes for which you’ll have to apologize. The only thing that you can control in this business is the kind of product you sell and its price.

You can take care of this problem once you start making good profits,  then you can order products in bulk and take care of the rest of things by yourself.

3. High Competition

It is easy to invest in a dropshipping business and low barrier entry means huge competition. But it is sad to know that most of the investors do not put in efforts into their dropshipping store. They just open e-commerce stores and start advertising and selling without changing anything. This means that many sellers would be selling the same product with the same images and even the same description.

So in order to overcome this problem of competition, it would be great that you put in some efforts. You can do this by having unique images for your product, have own description for the product, put in efforts to design your site, you can also add a video of your product.

4. Quality Issues

In the drop shipping business, you as a middleman never get to see the product.  Many times quality issues can arise. So it is always better that you ask for a sample from the supplier.

This way you can check the delivery time, packaging,  product quality and can also use the test product for creating your own product images and videos.

5. Shortage Of Stock

As you don’t have control over a lot of things,  the same is with the stock of the product. There may be chances that your supplier may suddenly run out of stock due to huge demand.

It is important that you keep yourself updated with this information so that you can switch suppliers that got the same product to meet the demand.

Some Drop Shipping  Product Ideas :-

If you’re someone who is interested in dropshipping business but have no idea where to start from. Here is the list of few amazing products which  can fit the range of any industry

With good planning and proper execution and by following the above-mentioned tips one can thrive to build a profitable dropshipping business. It will take time and effort to see the results but your dropshipping business would surely taste the soup of success.

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