The idea of running a booming e-commerce business is one that many of us entrepreneurs have pictured. Unfortunately, that picture can quickly become blurred by the daunting thought of the sheer amount of time and money it takes to achieve such a dream. From purchasing inventory to stocking it, distributing it, dealing with customers and keeping books, it’s a time consuming and costly business to maintain.
Thankfully, there is an easier way for the average Joe to build an e-commerce business, without breaking the bank. It’s all thanks to the power of drop shipping, a sales distribution technique which can be highly profitable and extremely lucrative. In this article, I’ll be breaking down the benefits of drop shipping, while also highlighting some of it’s common problems. Hopefully the information you’re about to uncover will aid your decision in getting involved with product sourcing.
No Buying Stock Upfront
One of the biggest benefits with drop shipping is not having to buy stock upfront. Instead, items are sourced directly from suppliers, typically manufacturers or wholesalers. Therefore, you only ever purchase an item, after you’ve sold it to a consumer, eliminating the risk entirely.
Very Little Start-Up Costs
A traditional e-commerce business requires a big upfront investment. Stock, storage space, couriers, packaging, it all adds up. With drop shipping on the other hand, you can quickly launch a product packed store, without having to invest thousands of pounds in advance.
No Holding Any Stock
Naturally, not having to purchase stock also comes with the benefit of not having to store it. You don’t need your own warehouse and you don’t need to deal with the day to day operations of it.
Postage & Packaging is Done for You
Picking, packing and posting items is both costly and time consuming. With drop shipping, you won’t personally have to ship a single item ever. The time you save from not having to fulfill orders can be better assigned to other areas such as managing customer service.
Returns are Easier to Deal With & Won’t Cost You Anything
One of the most inconvenient yet necessary parts of business is returns. Luckily, they’re much easier to deal with when drop shipping and they won’t cost you a single cent. An item can be returned directly to the supplier in exchange for a refund or replacement. You simply act as the bridge between the 2 parties.
Expand the Business at a Rapid Rate
By cutting out the costly aspects of running an e-commerce business, you can grow your empire at a much faster rate. You don’t need to keep reinvesting in stock and growing your range gradually. You can instantly and constantly expand your product line, without worrying about cash flow.
Run the Business from Anywhere in the World
You can run a drop ship business from anywhere in the world. Your physical location is irrelevant. All that’s required is a PC and internet connection. You could literally be sitting on the beach in Hawaii and your business will still tick over like clockwork.
The Disadvantages of Drop Shipping
We’ve established that drop shipping has many benefits attached to it. However, that doesn’t mean it’s a flawless business model. It has it’s fair share of challenges. Some of which include:
No control over dispatch times or product quality
You’re relying solely on your supplier to dispatch items quickly. You also have no control over product quality or damage control checks.
No control over picking & packaging
Another downside with drop shipping is having no control over the picking and packaging. This renders you unable to include any promotional materials such notes, flyers or coupon codes in the order.
Items running out of stock or changing in price
One of the biggest issues many people face with drop shipping is items running out of stock or changing in price. Stock levels beyond your control. Without a good stock management system in place, you could end up selling something that’s no longer available for dispatch.
Thankfully, both of these issues can be eliminated, or at least minimised by having a close relationship with a reputable supplier. That’s why it’s so important to choose your supplier wisely.
The benefits of drop shipping are vast. It’s a perfect business model for someone who has limited cash flow and or time. It’s also idea for existing businesses that want to expand quicker without the risk.
It does have a small but significant list of disadvantages. However, these disadvantages can be overcome by finding a good supplier and putting an action plan in place.