Is Dropshipping Right for You?

Dropshipping has become one of the most talked about new ventures in today’s market. For today’s professionals who don’t know what dropshipping is or if it is right for them, it is important to understand the basic concepts of this retail fulfillment method as well as the advantages and disadvantages of using this type of solution.

What is Dropshipping?

In basic terms, dropshipping is a fulfillment method that allows you to buy products individually from a wholesaler and then ship them directly to a customer, without going through the typical distribution channels. This means you do not have to buy larger amounts of inventory. Instead, you are partnering with a supplier and essentially listing their merchandise items for sale through your company. As the merchant, you never see or handle the product.

Advantages of Dropshipping

There are a number of advantages to dropshipping, which is why it has become such a popular model in today’s market.

It doesn’t require nearly as much capital as wholesaling.

For companies who don’t want to put up as much capital, dropshipping is a great solution. Many companies have found it is a powerful way to get their business off the ground without having to invest as much money initially into their venture.

You can run the business from anywhere.

With dropshipping you can run your business anywhere. Most of your work can be done entirely online, wherever you need it to be done, giving you a great deal of flexibility and allowing you to save money on overhead.

You can offer more products due to not needing to hold physical inventory.

With dropshipping you actually never touch or handle the products that you are selling. This means you do not need to worry about all of the logistics of handling and holding physical inventory. This gives you a lot more freedom with your company and with your overall costs.

Disadvantages of Dropshipping

Just because there are several advantages of dropshipping, it doesn’t mean there aren’t also some cons to this business model as well. Make sure that you are fully aware of the disadvantages of dropshipping before you consider this business model.

You’ll likely have low margins.

Be prepared to have low margins on the cost of your products. You will need to be willing to sell a lot more inventory wise in order to make money as there is not as much opportunity for markup with dropshipping.

It’s hard to keep track of inventory.

There are a lot of benefits that come with not having to physically handle your own inventory, but you still need to be able to keep track of that inventory. This can be difficult without your own warehouse, so you need to be ready to handle certain challenges with inventory management and be able to set up a system that works for you and the warehouse.

You still have to handle returns and customer service inquiries.

Even though you are not handling the products you are selling, you still need to be able to handle returns and customer service inquiries. This means you have to be able to handle complaints from customers, even if you weren’t directly responsible for the issue. This can be a challenge for many companies initially, as some customers won’t understand that you don’t directly handle their products before they are sent out.