The Dropship Model | What Is Dropshipping? Advantages and Disadvantages of Dropshipping – Complete Guide

Dropshipping is an inventory chain management method in which the seller accepts payment for an order, but the customer receives the product directly from the item warehouse delivered by the actual manufacturer while you just do the middlemen work. The process of dropshipping is easy: you as a retailer will take customer orders and pass the delivery details on to the dropshipper, who carries the stock of goods and who will be responsible for shipping them out to the customer. You will pay the dropshipper, and the customer will, in turn, pay you, at a markup. You earn the difference between the wholesale price you pay and the retail price you receive.

This is how the process of dropshipping works:

1.The customer places an order for a product on your online store.

2. You give the wholesale price and customer details to the dropship supplier.

3.The dropship provider packages and ships the request straightforwardly to the customer in the brand name of the retailer.

The above illustration of the dropship model helps us to understand the actual process of this smart way of doing business known as dropshipping. The biggest difference between dropshipping and the general retail business model is that the seller doesn’t stock or own inventory. Instead, the merchant purchases inventory as needed from a third party – usually a wholesaler or manufacturer – to fulfill orders.

Advantages of Dropshipping:

1.Absence of physical inventory: Since you offer utilizing the dropshipping business technique, all your products will be stored at your supplier warehouse, saving you lots of money on maintaining stock in a warehouse. You don’t have to manage or pay for a warehouse.

2.Less investment or nearly zero investment: With the dropshipping model, you don’t have to purchase a product unless you already made the sale and have been paid by the customer. You just have to pay for your website domain name and hosting.

NOTE: If you’re using services like Shopify, you’ve to pay for their monthly or yearly packages.

3.Increased items and variety of products in your online store: Since you don’t store the items you offer, you are not restricted by your warehouse measure in offering the same number of items as you need, on your online store. You may even offer items from numerous providers in your online store. There is no limit to the variety of items you can add to your stay. Websites like Aliexpress, Ebay,wholesale2b, etc. provides a variety of dropshipping products.

4. The business owner has more free time and is location independent: A dropshipping business can be run from just about anywhere with an internet connection. With dropshipping you should simply send more orders to your dropship provider and after that let them handle everything else while you gain the benefit and are left with more opportunity to build up your strategies for success and scale. The owner can focus more time on marketing and scale their business.

Disadvantages Of Dropshipping:

1.Shipping problems: Customers will be contacting you for delivery delays, shipping damages, and other complaints. In the event that you work with numerous providers – as most drop shippers do – the items on your site will be sourced through various diverse drop shippers. This complicates your shipping costs.

2. Low-profit margins: You have a lot of competition so you only have a smaller profit margin. Also, suppliers will charge you higher prices for dropshipping products. You also have to pay for shipping charges depending upon the customer location because you don’t want your customer to wait for too long.

3. Issues related to inventory – Products could become out of stock without you knowing it. This becomes a problem when customers start ordering those products from you thinking that they will be receiving them soon.

Leave a Reply

Your email address will not be published. Required fields are marked *