Drop shipping is a business model which allows the company to not to stock any kind of products and even to maintain any warehouses or stores for the same. Moreover, the company even does not have to ship the products to the consumer themselves. In this procedure, the retailer ties up with a dropship supplier that produces or stores the products and ships them directly up to the consumer on the behalf of the retailer.
The working process:
- Order placement by the consumer through retailer’s online/offline store.
- Transfer of the order by the retailer to the dropship supplier.
- Packaging and delivery of the order by the dropship supplier directly to the consumer.
Benefits of Drop Shipping:
The two of the most important and upfront benefits of Drop Shipping is ensuring a positive cash flow and elimination of the need for inventories or warehouses at the retailer level. First of all the retailer does not have to pay to the wholesaler as soon as the order is placed, therefore the money paid by the consumer can be kept by the retailer for some time which increases his economic stature. This process also eliminates the need and the cost of middlemen which usually add up to the whole value of the product.
Advantages of Drop Shipping:
Drop Shipping can be advantageous in a number of ways which benefit both the buyer and the seller. Below-mentioned are some of the most basic advantages which are prevailed by the process of Drop Shipping:
- Elimination of Risk: Initially, acquiring a storage space or inventory might be really expensive and risky for a new business. The model of Drop Shipping eliminates the risk of losing a great amount of money by not investing in storage spaces.
- Time & Money: The retailer does not need to invest a great amount of money in acquiring stocks and spaces to store them. All the procedures of storage and supply and also carried out by the supplier which saves a lot of time and money in return.
- Diversity of Products: The retailer can expand to a huge number of products by acquiring a business with a number of different suppliers. The retailer does not even need to invest in securing different products; he just needs to invest in advertising and selling the products through his store.
- No investment: The retailer needs not invest a lot in acquiring and storing goods; moreover, he does not even need to employee people to sell out his products. Most of the work ranging from storage, packaging, and shipment is carried out by the Dropship supplier.
Disadvantages of Drop Shipping:
- There might be an ordering delay when the order has been placed by the consumer through the retailer but the wholesaler is out of stock which leads to a delay in the shipment of the product which reflects badly on the behalf of the retailer.
- Some middlemen might be involved in getting out profit from the retailer by taking the availability of the products, whereas, they might not be acquiring any of the products on their own but depending on some wholesaler for the same which might increase the value of the product. The retailer needs to be aware of such sellers. This might lead to the reduced profits for the retailer.
- There might even be some scams prevailing in this business. Some of the suppliers do offer the products at a cheaper rate but might deliver the fake or duplicate products. The low quality of the products directly impacts the reputation and the business of the retailer. These products might offer lucrative profits for the retailer but might end him up with business and legal issues.
Drop Shipping can actually turn out to be a boon for this online era, however, one needs to be extremely careful, as a retailer as well as a consumer to ensure the source of the product and its genuine price. However, it has expanded the limits for the retailer to take up the orders from any locality and diversify his business. If the retailer pays enough attention to the quality of the product as well as the reputation of the supplier, it is a win-win situation for one and all.