What is Drop Shipping?
If you’ve wanted to start an online business but have worries about making your own products, managing inventory, storage, and the process of shipping goods then drop shipping could be the answer you were looking for. Drop Shipping is an online retail method where you can sell recognized, branded products on your website without needing to worry about shipping the goods and fulfilling orders.
When you sell something on your website, your website (or store) will then automatically purchase the goods from a third party and then they will ship directly to the buyer themselves. It gives vendors the advantage of not needing to manage or stock the product. Essentially, they are the middleman.
Benefits of Drop Shipping
Less Capital Needed to Start
The main advantage of drop shipping is that you can start your online business without needing to pour in thousands of dollars into it.
The only time you’re purchasing goods is when a customer has already purchased it. And you’re not even doing it; it’s all processed automatically.
Ease To Start Up
With drop shipping, there is no need to rent out a warehouse and keep an inventory of stock available. You do not need to worry about processing orders, packing them and sending them out. This is all done by the third party. And because of this, you have near to no overheads.
In actual fact, the majority of successful drop ship businesses are managed from home by 1 person on a laptop, with total overheads of less than $100 a month. This also gives you the opportunity to scale the business quite easily with not much risk involved.
Work From Anywhere
As long as you have an internet connection, you can run your store from anywhere. Drop shipping is another very viable option for living the laptop lifestyle.
Choose What You Want To Sell
Because you do not need to purchase stock, you can choose to sell whatever you want and it will not cost you anything. Many companies offer drop shipping so the options available are very open and diverse.
Although there are a lot of great benefits to drop shipping, it does have its drawbacks.
Disadvantages
Margins are Low
There always had to be a price, with the main one being that the profits you make are small. In saying that, the investment is very low so you can afford to run on low margins.
Unfamiliar Inventory
When you have your own warehouse, and hold stock yourself, it’s easy to see how much you have of a particular item. With drop shipping, you do not get that advantage. There are ways you can synchronize your store to your third party store (who are supplying you the goods) but not all companies support that feature.
Shipping Woes
After setting up your online shop, you will likely be involved with multiple suppliers, which is what should happen anyway. But with this comes shipping problems. For example, a customer may purchase multiple goods, which end up coming from 3 different suppliers. So you will unfortunately need to charge them 3 separate shipping costs. On their end they only receive 1 total price, but it can seem that you are overcharging them. And on top of that they receive 3 separate packages which can seem odd at their end.
Supply Errors
Because you are not handling any of the stock, you have no idea what’s happening after the sale is made. A variety of problems can stem from this including: items being sent late, items getting lost, sent to the wrong address, the wrong item being sent, packaging was poor. All these issues can really tarnish an online vendor’s reputation, so be ready to expect a bit of damage control once in a while.
Is Drop Shipping worth it? Yes, most definitely it is! The system is in no way perfect, but what system ever is? If done correctly, it can bring in a decent amount of revenue without having to throw lots of money at it.
© OBM Resource
