The most important thing you need to think about as a business owner is how you want to manage your inventory, and how you want to do product deliveries. when a customer buys something online he expects to get the product in good shape and at the right time, he doesn’t care how you do it what packaging you use, etc., and dropshipping cuts all these headgears.
All he cares about is the end result which is getting the best product with great packaging at the fastest possible time. a lot of online sellers like keeping inventory and shipping the product themselves. a lot of other sellers don’t like the whole hassle of keeping an inventory,
The reason they don’t like the inventory model is they need to get a warehouse, they need to get office space, and they need to stock up a lot of inventory, a simple and best solution for this is to use a drop shipping business model.
What exactly is dropshipping?
Dropshipping is a retail fulfillment model where the business owner does not ever keep inventory, of the products in a drop shipping business model I get an order, I buy it from a third party, and that third party directly sells it to the customer.
The benefit of having a drop shipping business is I’m never going to see the product, I’m never going to touch the product, and the product is directly going from the supplier to the end customer. how does a drop shipping business model actually work?
let’s say as a business owner I want to focus on starting a drop shipping e-commerce business. but it just focused on innovative electronic gadgets. I find suppliers online, let’s say I find a guy called john who deals only in power banks. found another guy called Simon who deals in led products. get an agreement with both john and Simon.
I tell them guys I’m going to market your products online on my website. and I’m going to be taking a 15 % commission on every sale, now I also tell john and Simon saying guys I’m never ever going to buy inventory from you.
guys let me explain this to you in a really simple. manner let’s say I have got my e-commerce website I’ve started to do my ads and now I’m receiving orders. so let’s say I got an order for a 20000 mah power bank remember john is the guy who’s supplying these power banks to me.
and I have an agreement with him now what happens is me and my team will send the order details and the address to john, he is then going to pack the product from his office wherever on this planet he is and he’s going to directly send it to the customer.
it is also john’s responsibility to send the tracking details to the customer now what happens is the customer gets the product within a few days as the customer gets the product I ask the customer everything is fine what’s your feedback did you have any issues with the order. if everything is smooth and there are no issues I will eventually reduce my 15 margins which I had agreed with john on and I’ll page on the balance amount.
Advantages of dropshipping.
That is a simple example of our drop shipping business model works one of the biggest and best examples of a successful drop shipping e-commerce business model is a website called amazon, which is one of the advantages of running a drop shipping business.
Dropshipping is Easy to understand.
well if you’re new to the digital world and if you’re new to e-commerce drop shipping is something very simple to understand and implement.
Dropshipping Eliminates lots of fixed costs
well in a traditional business model where you purchase inventory, you require a lot of other costs along with it you have your costs like fixed costs and the variable costs you need to buy a warehouse, need to get an office, and you’re paying your stationery your rent electricity with drop shipping all these costs are eliminated.
All you have to pay for is to market and run your online website in a drop shipping business you can run it from anywhere and the best part is you can sell globally probably you can even sell to other planets now there are suppliers.
Every product available online
Almost for every product available online and in your dropshipping business model, you got to decide which product you want to focus on do you want to focus on a particular product do you want to focus on a particular category or do you want to mix it all up it’s up to you to decide what do you want to mark your niche as in dropshipping.
Simple to set up.
All you have to do is market your website send as many orders to your drop shipper and let them take care of everything else while drop shipping has a lot of advantages it has a lot of drawbacks as well let’s discuss a few of them first and most important drawback of a drop shipping business model.
Disadvantages of drop shipping.
let’s say you’re marketing your product and you’re getting a lot of orders for it maybe a drop shipper has the stock maybe it does not have the stock now what happens is that you’ve received orders for a particular product but your drop shipper does not have any stock what do you do now you got to either cancel the order or tell the customer you delay the order.
let’s say on my e-commerce drop shipping website I’m selling my drop shippers portable drones now I’m getting a lot of orders for them I’ve shipped out a lot of orders, and now my customers have queries regarding this portable drone well I do have some knowledge about it but I don’t have as much knowledge as what my drop shipper does so I asked my drop shipper all the queries I get from my customers he’ll reply back to me that’s when I reply back to my customer there’s already a delay in customer service out there which is really bad for e-commerce business.
Drop Shippers steal your Customers.
One of the biggest drawbacks is when your drop shippers steal your customers what I mean by this is you as a business owner are never going to touch or see the product right now imagine that your drop shipper puts a small post-it on the parcel.
it says hey why don’t you buy the same product from our website for the next purchase at a 20% discount now he has already stolen your customer next time that customer is not going to buy from you but they directly buy from your drop shipper.
Quality control in dropshipping.
the business you’re never gonna see the products right so you don’t know what quality of the product is your drop shipper actually sending out to the customer this can be really bad for your business.
Delay in dispatching
the orders so let’s say I get an order for a particular
product today and I send the details to my drop shipper today my drop shipper does not dispatch it for four to five days eventually after four to five days he dispatches the product.
what happens in this scenario is the customer is also going to get the delivery five days later than what you’re supposed to get it he might need this product as a gift for someone on their birthday for an anniversary or a special event unfortunately delivery is going to be delayed and this is really bad as a band presence for your website.
you as a business owner don’t know what packaging your drop shipper is using if your drop shipper uses bad packaging on the product it might lead to a lot of damage in transit.
The last point we’re gonna discuss here is the price which leads to a very low margin now you need to make sure that your product on your website needs to be at par or lower than other competitors to make sure you’re at par or lower than other competitors you might have to slack down on your margin you might not be able to survive in a drop shipping business model, For a very long time.
Conclusion of Dropshipping
so to conclude all of this drop shipping can be a really easy business for someone to set up it’s great for first timers it’s a low-risk low investment business model where you have nothing to lose right so whether you choose to sell on your own e-commerce business or if you choose to sell on an e-commerce marketplace drop shipping can get really beneficial for you.