If you are an online seller, you are probably familiar with the term Dropshipping. For the unversed, dropshipping is the term given to the process where the retailer does not keep stock but instead transfers the goods to the customer directly from the manufacturer, supplier, or another retailer. One of the questions that most often rises is, “Is dropshipping really worth it?”
Below, we hope to break down the process of dropshipping into advantages and disadvantages, and then you can decide for yourself if it really is worth it.
Advantages:
- No warehouse/ stock value needed. This means that you don’t need to keep an inventory. This is a big relief, for inventory management comes with its own sets of troubles like systematic inventory management or forecasting issues.
- Sure shot profit. A good thing about dropshipping is that it requires low investment and capital. Because you are the mediator selling goods at a higher price, a profit amount is guaranteed to you.
- No packing and shipping costs. Continuing from the above point, further costs are reduced because you don’t need to spend on packing and shipping the products, the supplier will do it for you.
- Location flexibility. Because you are dealing with multiple retailers all across the globe, you are not restricted by any boundaries. You can target a larger audience.
Disadvantages:
- Shipping complexities. This includes supplier errors, inventory issues and unforeseen circumstances that can leave you stuck between the customer and the retailer.
- Low-profit ratio. Granted that this requires low investment, it is quite possible that for the first few months, you do not see expected results. This is because channels for dropshipping, like eBay, Amazon, and Shopify charge commission fees for each transaction.
- No long term relations with the customers.
It is imperative that you choose the right kind of product. For many new sellers, the stress of not being in control can cause anxiety and that more than anything is what affects the business. But with careful planning and consideration, dropping models are becoming a successful venture.
What do you think about it? Let us know in the comments below!
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