The word dropshipping is kind of trendy right now, although most people have no idea what it actually means and think it is when someone accidentally drops your goods somewhere while shipping. That’s not dropshipping, that’s a bad DHL service.
In a way, dropshipping is the latest major evolution in e-commerce and therefore I would love to guide you through the main pros and cons of the industry.
Dropshipping is a method to carry out order fulfillment where the online seller does not need to keep products in stock hidden somewhere in the basement among spider webs and lost documents. Au contraire my friend! The buyer sells the goods and asks for shipment from a third-party supplier.
Dropshipping offers plenty of benefits you might already heard of, such as:
- You don’t need to invest a huge capital to start your business as inventory is guard by someone else and this someone else also takes care of shipping and cooking you breakfast… if you pay him/her enough. You simply start your online store! I would suggest you go with the platform Shopify, which is always a great choice. Then pick your products and find the right whole-seller.
- When you don’t need to operate your stock on your own, you become more flexible and mobile in terms of location. You enjoy freedom to choose where you work from. Your office may be either at the Caribbean or in your home cellar if you don’t like the sunlight and that’s all good. And if you want to become more flexible and mobile in terms of body movement, I recommend Yoga.
- Dropshipping allows you to focus 100% on actual selling and marketing without worries about stock and inventory. When you are newbie in online business, one less task might be a big advantage and a drive for you to become a pro!
- You can offer a longer list of products, as overhead costs are much lower than they would be in case of you kept your own inventory and stock-premises.
- Products could be sold directly in E-bay or Amazon. Thus, in some cases there’s no need to keep your own online store up and running at all. Take advantage of Jeff Bezos! He can handle it.
Some Downsides You Should Know
As you can see, there are quite a few strong-stated benefits about dropshipping, but nothing in life is perfect (ok, maybe chocolate), so in order to maintain I must tell you about the main downsides as well:
- Finding a reliable and 100% cooperative supplier is hard! Very, very hard! Yes you sell the goods and ask the supplier to conduct the delivery, but when it comes to delays, quality issues and returns… you’re the one who will have to deal with some unsatisfied customers. You rely on the mercy and professionalism of the supplier since you control nothing Jon Snow; nothing of the supply-chain and all the information comes from the supplier. Plus, you should take into account that there is always a delay in communication as dropshipping involves three parties – seller, buyer and suppliers. Be cautious with this communication delay issue. If it goes public you may lose your customers as quickly you Usain Bolt runs 100m. That’s about 10 seconds.
- If you love to have control… this might not be for you. There’s no way you can have 101% control over inventory and this can lead to the situation where you sell out-of-stock items. In such case is useful to have more than one supplier in order to duplicate (or triplicate) the inventories.
- Low margin is the middle name of dropshipping and it’s not a beautiful one, since every sale you make leaves more profit to the supplier. This is especially painful with a start-up business where your profit depends heavily on the traffic and building up the customer-base may take time. Be patient though, you’ll get there!
- Last but not the least, a big con of the dropshipping is the high competition. Low start-up costs encourage many entrepreneurs to try this business model, which leads to immense competition and, in return, brings some, particularly smaller businesses, to the point where they must cut profits to stay in business. Unfortunately this could be unsustainable in middle-to-long term. Bigger companies have a better position when it comes to mark-up reductions.
So what is the “Booooh! That’s ugly!” stuff then? Keeping it short, I would say it’s all about legal liability issue. You wouldn’t know always where the goods come from and some suppliers may not be 100% honest about this. If you don’t feel like you trust completely your supplier, please get another one or get a lawyer! Just in case.
Sadly, as a partner you could always involved in such cases and it is something to be kept in mind when choosing the supplier and conducting the agreement with him/her #Feminism.
Couple of Suggestions to Follow
To sum things up, though it is absolutely not a way to overrate e-commerce success, dropshipping eases a path to begin with an online business. As a completely objective and unquestionable conclusion, I offer you three steps to follow when preparing for dropshipping:
Search extensively for the right whole-sellers and/or dropshippers. And I mean exteeeeeeeensively. With several “e”s. You may not find the best ones in the first page of Google search since they tend to be quite old-fashioned in terms of SEO and marketing and they might not even know what those words mean. So, do not decide over the first impressions, since a webpage may be out-of-date and not lately renewed. Do your homework, get a tutor, agree on trial periods, test the deliveries, draw binding and proper agreement which also includes returns, delays, damaged goods etc.
Pick the right e-commerce platform. Once again, I would personally recommend Shopify as both installation and usage are simple enough and it works pretty damn fine! You may find useful A Quick Guide to Install Shopify, which I wrote especially for you.
Do not underestimate product. An outstanding product is the easier way to success, profits and that house by the beach you wanted to buy since you were 15 years old. If you are doing only dropshipping it may be difficult to get off the ground, but if you use dropshipping as an additional tool to improve your business and complement already existing services, it may be a mighty optimization to power your online business.
When you want to know more about dropshipping opportunities then I do recommend to take a look at Yakkyofy website also. There you can find some more ideas about tooling and how to start your own online journey.
I would be more than happy if you would share your experiences with dropshipping in comments section.
I wish you the best of luck!