What is dropshipping?
Dropshipping is the type of retail fulfillment method where a store does not possess the products it intends to sell from the stock. Alternatively, when a store sells a product to a consumer, it initially purchases the item from a third party and then has it directly sent to the required customer. Due to this method, the merchant never handles or sees the product. For more details on dropshipping visit salehoo reviews.
How does it function?
Unlike a typical standard retail model, drop shipping does not require the merchant to maintain an inventory or stock of items intended to sell. Instead, the merchant makes a deal and purchases the items needed by the customer from a third party which is usually a wholesaler or manufacturer to complete orders.
- Less capital is required– This is probably the most significant advantage of drop shipping as it makes possible to establish an e-commerce store without having to traditionally invest thousands of dollars in inventory upfront as compared to typical retailers.
- Easy to start– Dropshipping has a lot of perks as you don’t need to deal with troubles like payment and management of warehouses, packing the orders, tracking inventory for accounting purposes, handling returns and managing stock, etc.
- Low overhead– Since you don’t need to deal with warehousing and purchasing inventory, the overhead expenses are very minimal, often operating at a home office for below $100.
- Flexible Location– Dropshipping can be operated anywhere with a stable internet connection and communication line between suppliers and customers.
- Wide selection– Since pre-purchase of items intended to sell is not necessary, a vast variety of products can be offered to potential customers.
- Easy to scale– in typical business operations, if you wish to gain excessive profit, you will need to work twice as much to earn it. On the other hand, by leveraging drop shipping suppliers, the majority of the work of handling additional orders will be borne by the suppliers allowing you to focus on increasing and expanding work with fewer hassles to handle.
- Low margins– This is the most significant disadvantage it suffers due to the tight competition owing to very minimal overhead costs and attempt to sell items at rock bottom prices to grow revenue.
- Inventory issues– When sourcing from multiple warehouses, it makes it increasingly inconvenient to fulfill orders of other merchants since the inventory changes on a daily basis.
- Shipping complexities– Since dropshipping involves working with multiple suppliers; the majority of the products posted on your website will be sourced from many different drop shippers complicating shipping costs involved.
- Supplier errors– Even the best drop shipping companies are liable for mistakes on their part when fulfilling orders for which you will have to take responsibility and apologize for the inconvenience.