For quick understanding, dropshipping can be explained in this manner. The moment a customer needs a product and then goes ahead to make an order via an online store; it is left on the path of the store to take it from there.
What they simply do is to reach out to a supplier that offers the product services at usually a wholesale or a discounted price. And from there, the supplier ships the product that is packaged in the store’s brand to the customer that ordered it.
This implies that you do not need to have a physical store or inventory before you venture into dropshipping.
Furthermore, dropshipping is a distinct and interesting model within the realm of e-commerce that has both its advantages and challenges that can significantly impact businesses and entrepreneurs that are hoping to establish an online presence.
Read more: How Does It Work?
How it works is quite simple.
After making the necessary ad on your website and a customer places an order, the retailer serves as the intermediary between the supplier and customers. The retailer negotiates the price with the supplier.
When that is successfully done to the retailer’s satisfaction, such a retailer makes his or her earnings from the remaining which he sees as profit. The partnership between supplier and retail is through a structured process that includes negotiation as stated earlier, through an agreement and collaboration. The supplier knows the right action to take the moment the order of the customer comes in.
On the retailer’s path, while checking out for credible suppliers, he would research the quality, pricing, and terms attached to the product such a supplier provides.
Types of Dropshipping
This has to do with customizing design products based on the request from your customers. Some examples are accessories, apparel, and posters, amongst others.
In this case, two individuals partner with each other; that is a retailer and a wholesaler. The goal is to source bulk products at a discounted price and eliminate the need to manage inventory and logistic fulfilment.
In this line of business, a retailer that has no inventory partners with a supplier who manages, packages and shipping in customers’ orders. All that is required on the path of the retailer is to set up an online store and establish pricing for the products they hope to sell.
Advantages of Dropshipping
Some of the benefits can encourage you to take up this business. Some of it are:
Unlike the normal circumstances where you are at risk whenever some markets aren’t sold at your inventory, the risk is minimal here.
No Inventory Management
In dropshipping, you have nothing to worry about when it comes to the aspect of managing an inventory since the supplier will be responsible for the delivery, packaging and logistics.
With the use of an active internet-enabled device, you can effectively manage dropshipping business anywhere around the world where you may be.
Wide Product Range
You can offer different product services from numerous suppliers without having to own a physical business stock.
Disadvantages of Dropshipping
This is one of the major challenges encountered in the dropshipping business. The logistics service is slow especially when you’re dealing with an international supplier. The effect of this is that the customer gets dissatisfied with the shortcoming as a result of this.
Lower profits Margin
This occurs as a result of the products ordered from the supplier at wholesale price and then sold to customers at retail price – the more reason why the percentage earned by the retailer is low.
Total Dependence on Supplier
The productivity and success of this dropshipping business solely lie in the quality and credibility of the supplier you are working with. Let’s say you happen to strike deals with a slow and unreliable supplier, it will take a tow on your customers. Remember once this happens and continues further, it can affect your business growth.
Customer’s service challenge
Except for the fact that the retailer accepts a customer’s order and forwards it to the supplier, there’s a need on the path of the retailer to calm the customer down assuring them that all will go well. But unfortunately, it is beyond their will control since they aren’t responsible for making the product delivery.
Dropshipping is one of the businesses you can manage with the use of the internet. However, if venturing into the business interests you, you can try it out having considered the positive impact it will have on your life and the likely challenges that are inevitable.