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When you are in online business, you need to understand drop shipping. Whether you’re selling through established platforms or have your own online store, drop shipping is an essential aspect of running an online business that you must be familiar with.
Often the reputation of an online business depends a lot on dropshipping facilities. Customers order things online because they want the ordered material to be dropped at their doorstep. If that does not happen properly, then the reputation might falter.
What is Dropshipping?
Drop shipping is an order fulfillment process that allows e-commerce businesses to outsource the procurement, storage, and shipping of products to a third party, typically a supplier. This model is effective and has been adopted by entrepreneurs worldwide, as many businesses today operate on a global scale. The main advantage of drop shipping is its low overhead cost. However, it must be monitored and re-evaluated regularly to prevent any issues with customers. Providing the best customer experience is the business owner’s top responsibility and should never be compromised.
Drop shippers store and deliver the product after a customer has submitted an order online. Typically, they have a warehouse where all the goods are kept before delivery. Your agreement with the drop shipper will cover their duties and responsibilities towards your organization. In some situations, customer service is handled by the organizations. The sequence of dropshipping goes like this:
- The seller enters into an agreement with the drop shipper
- Customers place orders online
- The seller receives the order
- The customer gets an order confirmation
- The seller sends the order to the drop shipper
- Dropshipper ships the order
- The customer receives the delivery
Pros and Cons of Dropshipping
This fulfillment approach or dropshipping has several pros and cons for a business house. They are:
The Pros
- Overhead Costs- Dropshipping can lower your overhead costs as you do not have to maintain a storage facility. Also, you do not have to deliver the products cutting costs of delivery persons.
- Starting Costs- Entrepreneurs who are just starting their business may enroll with drop shippers, as it helps them reduce costs.
- Risk Mitigation- The risk of losing money due to over-ordering products or losing merchandise is not your concern, as you are not processing the orders.
- Multi-channel Selling- Drop shipping offers the flexibility of multi-level selling. You can sell through your own domain, platforms like Amazon or Etsy, or via social media channels.
- Flexibility- It offers flexibility because drop shippers can be at any location and fulfill your order.
The Cons
- Competition- This is a highly competitive field because of low cost.
- Monitor- Monitoring product quality becomes difficult because your involvement becomes less.
- Branding- It is difficult to build your brand because the products may be generic.
- Profit Margins- Selling at low prices can lessen your profit margin as you wish to win the competition.
- Supplier Error- Low-quality drop shippers can cause numerous issues in order delivery, leading to losses in money, products, and reputation.
Whether you choose to enroll a drop shipper depends on the business you want to develop; its scope, brand, and the kind of customer service you intend to offer must be considered.