Best-practices for conducting retail business continue to evolve as new technology develops. Business owners have seen the benefits of establishing online stores together with their brick-and-mortar storefronts, and a growing number of new entrepreneurs start out with an online store and skip the brick-and-mortar thing altogether.
This is where dropshipping comes in. Dropshipping is an arrangement between a business and a distributor in which the distributor ships the product directly to the customer on behalf of the business. This process is one of the easiest ways to acquire and sell products without housing large and bulky stocks (i.e., without maintaining a physical store or warehouse).
Is dropshipping for you? Here are its pros and cons:
- It saves space
The basic benefit of dropshipping is practicality. Since most online sellers—most likely including you—are home-based and have limited space or do not have the budget to rent a warehouse for product storage, dropshipping allows your business to grow in capacity without the limits imposed by your lack of physical space. You don’t have to stock all the items inside your property because the dropshipping company takes care of the inventory.
- There is less capital involved
Dropshippers generally do not require minimum orders. You will only pay for items that get sold and the only investment required is for your business’ operations.
For businesses that get stock by bulk, it can be a problem if some customers fail to pay before the cut-off date or cannot be contacted on the day of payment. With dropshippers, however, you only need to place an order for a small amount of items that you already need, hence saving you money.
- Nothing is wasted
Sellers always encounter the problem of what to do with unsold items, especially if they are perishable goods. Seasonal items like swimsuits or jackets only sell for a particular period. Trends change often and customers like to be up-to-date with the products they use.
As an offshoot from the previous point, placing an order for only the volume that you need would not just save you money but also leave less room for excess and waste.
Food and cosmetics, for instance, are products suitable for dropshipping. They have a shorter shelf life than other goods, which means that if they are pre-ordered, the quality is ensured because they are delivered directly to the customer.
- Items are handled properly
You do not have to worry about proper handling and packing since it’s the dropshipper’s duty to take care of it. Dropshippers make sure that items are sealed and properly labeled before delivery. You just need to accept orders through your website, monitor the transactions, and let the dropshipping company do its job.
However, there are no perfect businesses, and dropshipping is one of them. Here are a few things to consider before looking for a dropshipper that will help your business.
- You are liable in case of damages
Since dropshippers take care of everything, their work is unsupervised. You will take full responsibility in case problems are encountered by the customer, since they are unaware that the item did not come directly from you.
Damages, losses, failed deliveries, and having the wrong item shipped are part of what you may have to deal with. However, these cases should be rare because dropshippers also have to protect their reputation as experts in handling and delivery.
- Some expectations are not met
As the owner of an e-commerce business, you will most likely only post virtual representations of your product. Variations in color and size are unavoidable, but some customers expect the actual product to look like the one displayed on the website. Dropshippers have their own return policy to give the customers the option to get their money’s worth. So before partnering with one, make sure to read the contract carefully and see if you are comfortable with every clause. Whatever the dropshipper’s policy is, the customer will associate it with you and your business.
- It involves a long process
Though partnering with an external shipping company is practical in most circumstances, it involves a long process. You will have to place an order to the dropshipping company and wait for the confirmation. Once the item is ready for shipping, the tracking number will be sent to you, and then to the customer. If the product is unavailable, you will have to inform the customer about it and repeat the whole process.
The entire process takes a long time as both you and the dropshipper would want to ensure that products are delivered on time and to the right customer.
- You or your customers could be scammed
All businesses are threatened by scammers. Fraudulent suppliers pose as legitimate dropshippers when, in fact, all they want is your money and nothing else. However, there are easy ways to spot a scammer. Intensive background checks and testimonials from former buyers should be reviewed before committing in order to minimize the risk of becoming a victim.
Dropshipping is an option for online business owners who wish to make their lives easier. There may be a few setbacks and minimal risks but with wise judgment and proper management, dropshipping can be a smooth-sailing transaction.
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