The dropshipping process is different from the traditional fulfillment process in that the merchants don’t have to keep the inventory. Instead, the vendor represents the inventory from your side. You only make a purchase from them when any customer place the order for some items and you sell them through the dropshipping process.
Dropshipping allows you to sell items without actually involving in the handling of inventory and shipping the items to the customer by yourself. This becomes a very flexible and time-saving order fulfillment process for merchants.
The Advantages of Drop Shipping
There are numerous advantages to drop-shipping your products, which include:
1. Not keeping an inventory on-hand:
One of the main advantages of using drop shipping is that you don’t need to keep the inventory on-hand. You only buy the inventory from your vendor when you sell something to the customer, hence you do not need to worry about managing the inventory.
2. No storage space required:
With the dropshipping process, you don’t need storage space as you don’t keep the inventory on-hand. Hence, your business will have little to no overhead costs of managing and renting the storage space.
3. Grow more business:
When you store and sell your own inventory, there can be many limitations, such as limited stock of goods and limited shipping location. But, with drop shipping, you can sell a wide variety of goods which represents by various vendors as well as you can ship the items to many locations. Thus, in this way you can grow more business.
4. Unlimited Products:
Dropshipping gives you the flexibility to sell those items which are not present in-store or kept in local inventory. It appears to your customers that they have unlimited product options. This is very useful for great customer experience.
All of these benefits are great. But, before you get ahead of yourself and start to drop shipping, you need to know about the other side of this fulfillment process.
The Disadvantages of Drop Shipping
Dropshipping has some considerable issues that you need to take into account before choosing a dropshipping option.
1. Low product margins:
As the product directly ships by the vendor to the customer without the involvement of the merchant selling the products, the markup on the price keeps on increasing. It’s how vendors make their profit in this business strategy. Although, in a competitive market, you have to continually lower your price to compete. This might can results in loss sometimes as you have to sell at very low margins.
2. Finding the right vendor:
Finding and creating good business relationships with the right vendors with wide product variety and right prices can be difficult. As dropshipping becomes more feasible for more vendors, you’re going to have to scan through a lot of posing wholesalers offering “wholesale” prices.
3. Relying on vendors:
The best and worst part of dropshipping is that you rely on your vendors to always have products in stock and to make correct shipments. But, what if they don’t have an item in stock that you just sold to your customer? Or, their shipment doesn’t reach the customer on time? Who will be responsible for answering the customers? As the vendors are completely invisible to your customers, hence it is your responsibility to handle these situations and cover the costs when you need to.
4. Using multiple vendors:
Merchants will often make deals with multiple vendors to get a wide range of products, ensure the products are in stock and select the best prices for different products, and ship from the nearest location to customers. It is not as easy as it looks, managing multiple vendors can be very complex. If you don’t do it right, it can cost you your business.
5. Shipping costs:
Keep a check on shipping costs when you’re using multiple vendors to ship different parts of one order, or product. If not handled carefully, dropshipping isn’t cost-effective for you anymore.
Dropshipping if done correctly can make a big difference in your business and its bottom line. But, if not handled well, it can cost you your business.
The Bottom Line
The benefits of drop shipping make it an attractive and flexible order fulfillment solution. But, there’s also a bad side of drop shipping that you must take into account. Ultimately, the decision on whether or not dropshipping is the best choice for you depends overall on your business type and requirement.
Contact Tenaxx Logistics
Want to find out more about our order fulfillment services? Contact Tenaxx Logistics today by filling out our online form or call us at 519-260-2738 and let us know what your business requirement. We’ll talk to you about possible shipping requirements and give you an accurate estimate for the services you need.
Check out these articles for further reading:
What is Drop Shipping?
Common Order Fulfillment Issues and How To Fix Them