Defination Dropshipping :
Dropshipping is a method of execution where retail store does not keep the products it sells in stock. Instead, when a store sells a product using the dropshipping model, it buys the product of a third party and delivered directly to customer. Consequently, the seller does not have to handle the product directly.
The biggest difference between the dropshipping and model of sale is the selling dealer stock or inventory itself. Instead, the seller inventory purchases as needed a third party, usually a wholesaler or manufacturer to fulfill orders.
Dropshipping Model Block Daigram :
Dropshipping is a business model for budding entrepreneurs to start because it is accessible. With dropshipping, you can quickly try different business ideas with limited downside, which allows you to learn a lot about how to select and market products on demand. Here are some other reasons why dropshipping is a popular model.
- Less capital is required
Probably the biggest advantage of dropshipping is that it is possible to launch an ecommerce store without investing thousands of dollars in stock before. Traditionally, retailers have had to attach huge amounts of capital to purchase stocks.
With dropshipping model, you need not buy a product unless you have already made sales and have been paid by the customer. No large upfront inventory investment, you can start sourcing products and launch a successful dropshipping business with very little money. And because you are not committed to selling through inventory purchased before, as in a traditional retail, there is less risk in starting a dropshipping store.
- Easy to start
Running an e-commerce business is much easier when you do not have to deal with physical products. With dropshipping, you do not have to worry about:
- Management or pay for a warehouse
- Packing and shipping your orders
- the inventory tracking for accounting reasons
- Returns management and inbound deliveries
- control and management of inventory levels Continually products
- Low overhead
Because you do not have to deal with buying stocks or managing a warehouse, your overhead costs are quite low. In fact, many successful dropshipping stores are managed as home businesses, which requires little more than a laptop and some recurrent expenses to run. As you progress, these costs are likely to increase, but are still low compared to traditional brick and mortar businesses.
- Flexible Location
A dropshipping business can be run from almost anywhere with an Internet connection. While you can easily communicate with suppliers and customers, you can run and manage your business.
- Wide selection of products for sale
Since you do not have to pre-purchase the items that you sell, you can offer a range of products tend to your potential customers. If providers store an item, you can list your sale on free of charge online store.
- Easier to test
Dropshipping is a method of execution useful for both the launch of a new shop and business owners looking to test customers have the appetite for other product categories such as accessories or completely new product lines. The main advantage of dropshipping is, again, the ability to list and sell products potentially before you commit to buying a large amount of inventory.
- Easier to scale
With traditional retail, if you get three times the number of orders, which usually does three times more work. By leveraging dropshipping suppliers, most of the work to process additional orders will be supported by suppliers, which allows to develop with fewer growing pains and less overtime.
Sales growth will always bring more work, especially related to the support, but corporate customers who use dropshipping scale particularly well compared to the traditional e-commerce
The disadvantages of dropshipping
All benefits mentioned do dropshipping for a very attractive model for anyone to start an online store, or for those looking to expand their existing product offering. But like all the approaches, dropshipping has its drawbacks, too. Generally speaking, convenience and flexibility are priced. Here are some drawbacks to consider.
- low margins
lower margins are the major drawback of operating in a vertical highly competitive dropshipping. Because it is very easy to start, and overheads are so minimal, many stores competing set up shop items and sell at rock-bottom prices in an attempt to increase revenue. so since they have invested little in start up business that can afford to operate on razor-thin margins.
Usually, these vendors have websites low quality and poor (if any) of service to the client, which can be used to differentiate your business. But that will not stop customers from comparing prices to yours. This increase rapidly fierce competition hurt profit margins potential in a niche. Fortunately, you can do much to mitigate this problem by selecting a niche / vertical is well suited for dropshipping. Let’s discuss how to do exactly that in chapter 4.
- The inventory problems
If you store all your own products it is relatively simple to keep track of the items that are in and out of stock. But when you are sourcing from multiple warehouses, which are fulfilling orders from other traders, inventory can change on a daily basis. Fortunately, these days, there are a handful of applications that let you synchronize with suppliers. Dropshippers and can “pass along” orders to a vendor with a click or two and you should be able to see in real time the amount of inventory the vendor has.
Oberlo also enables traders to take automatic actions when a provider accesses zero values. For example, when a product is no longer available, it can unpublish automatically released product or service, but automatically adjusts the amount to zero.
- complexities Shipping
If you work with multiple vendors-as most dropshippers do-products in its online store are obtained through a number of different dropshippers. This complicates handling.
Say a customer places an order of three elements, all of which are only available from third parties. You will incur shipping charges three separate for sending each item to the customer, but it’s probably not wise to go along this charge to the customer. And even when it does make sense to include these expenses, automating these calculations it can be difficult.
- Errors Provider
Have you ever been accused of something that was not their fault, but had to accept responsibility for the error anyway?
Even the best make mistakes dropshipping suppliers that fulfilled orders for error you have to take responsibility and apologize. mediocre and poor-quality suppliers and cause endless frustration with missing items, failed shipments, and packaging of low quality, which can damage the reputation of your business.