It seems that dropshipping has become a booming business in recent years. But what does dropshipping really mean, and why has it become so popular? We’re here to provide you with all the information you need to know about this trendy business model, including its benefits, drawbacks, and potential pitfalls.
What is dropshipping?
Dropshipping is a retail fulfilment method that doesn’t require the store to hold its stock. Instead, when a store sells a product using the dropshipping model, it buys the item from a third party and has it shipped directly to the customer. Since the seller doesn’t handle the goods, they are not responsible for the storing, picking, and packing processes.
The dropshipping process looks a little something like this:
⇒ An eCommerce order is placed
⇒ You pass the necessary info along to your dropshipper
⇒ The dropshipper charges you for the item sold, plus a dropship fee
⇒ The dropshipper picks and packs the item and posts it to the customer
⇒ The customer receives the item
The good: advantages of dropshipping
⇒ The process of drop shipping is less expensive and more accessible than other fulfilment methods.
⇒ The seller only pays the supplier or manufacturer when a customer buys a product. The upfront costs are almost zero, an attractive price for entrepreneurs that are starting their eCommerce business from scratch.
⇒ Choosing this method frees time to focus on other aspects of the business, as well as saving on the costs involved in manufacturing and storing inventory yourself.
⇒ Wide scope of products available to the merchant to sell on since the seller don’t have to keep a physical stock.
The bad: disadvantages of dropshipping
However, it’s not all as great as it sounds.
Although no logistics journey is completely smooth sailing, there is an increasing number of obstacles that merchants selling via dropshipping face:
⇒ Lack of control over the quality of the items being sold. As inventory rarely passes the hands of the seller, it’s impossible to accurately assess the quality of the products that you’re taking ownership of.
⇒ How and when the items reach their buyers. In dropshipping often lack of shipping policy for eCommerce businesses leads to insufficient communication, and delivery times, and prevents customers from getting the constant tracking updates that fulfilment services provide.
⇒ Dropshippers can sell items that are out of stock or even discontinued.
The ugly
When it comes to dropshipping, communication with the supplier can be a major issue. If a customer needs to make a complaint or track an order, it can be a time-consuming and confusing process as the supplier holds all the information for customer service. Moreover, if the supplier disappears or sends a low-quality item, it can be a nightmare for both the customer and the seller. In addition, due to the increasing competition, the profit margins in dropshipping are very low.
Considering all these factors, it’s important to weigh the risks before deciding if dropshipping is worth it.
Looking for a dropshipping alternative?
Alternatives to Dropshipping
If you want to follow a model similar to dropshipping, you have some options:
⇒ Consignment stock: an agreement with the supplier to guarantee a minimum stock level will be available.
⇒ Sell digital goods: this way you can avoid the “out of stock” issue: games, software, music, education.
⇒ Make your own products and sell them – jewels, fashion, accessories, personalised products and more.
Outsourced fulfilment: our recommendation
If you’re looking to take your eCommerce business to the next level, consider outsourced fulfilment as a viable alternative to dropshipping.
With outsourced fulfilment, your supplier can directly send stock to a fulfilment centre where it is stored until a customer places an order. This means that you have full control over your stock and can ensure that any issues with customer orders are resolved quickly and efficiently. One of the most significant differences between dropshipping and outsourced fulfilment is stock ownership.
The transparency that comes with outsourced fulfilment is another major advantage. You’ll have access to real-time dashboards that show every step of the process, which can be helpful if you encounter any problems. Additionally, fulfilment providers like Huboo offer transparent pricing, allowing you to accurately calculate your profit margins.
Conclusion
Starting an eCommerce business with dropshipping is a low-cost option, but it can lead to disappointment for customers if there are any issues with their orders.
To avoid this, consider outsourced fulfilment for your business. Not only can it prevent problems, but it can also help maintain your customers’ confidence in your brand.
Speak to a fulfilment expert to learn more about how to take your eCommerce business to the next level.
