The Advantages and Disadvantages of Dropshipping
- 3 Mins
What Is Dropshipping?
Dropshipping refers to the retail method where a store sells products through a third party and has them shipped directly to the customer, as opposed to keeping their own products in stock. When companies use dropshipping, the third party handles the product while the online store never comes into contact with it, and said third parties are usually suppliers or manufacturers. Unsure if dropshipping is right for you? Read on to explore the benefits and disadvantages.
Benefits of Dropshipping
Manufacturing is easier than ever with dropshipping. It has made the retail industry more accessible, lowering overhead costs for mom-and-pop shops and large-scale commerce alike.
Finding a manufacturer that is the right match may come with a few struggles, but generally speaking, setting up dropshipping is simple. By paying a third party a small percentage of the profits, retailers can remove themselves from the inventory process in order to focus on solely retail aspects.
Dropshipping, as previously mentioned, completely diminishes the overhead costs typically associated with home-based businesses. There’s no need to worry about financial hurdles like paying for warehouse space, obtaining manual labour for order fulfilment, or handling shipments.
Dropshipping’s process doesn’t require shipping from the retailer to the consumer, which means only the location of the manufacturer matters. A single retailer may reach out to international manufacturers or separate manufacturers in different countries to expand the reach of their products. This flexibility gives merchants the ability to ship worldwide on a moment’s notice – an ability not always granted by in-house stocked products.
Disadvantages of Dropshipping
Dropshipping does come with drawbacks, and there’s a level of consistent management necessary to ensure your orders are perfectly fulfilled.
Smaller Profit Margins
This disadvantage to dropshipping makes sense: your profit margins are smaller because there’s a middle man. For someone using dropshipping as a hobby, this isn’t as much an issue, but if your company relies solely on dropshipping, a pre-established and steady consumer base is necessary to offset lower profits.
Less Customer Service
Companies that use dropshipping take on a customer service role, but it can be hard to deliver the expected quality of customer satisfaction without control over the supply chain. For issues customers may have, your only resource is communicating with your supplier – not directly changing supply chain factors like fulfilment speed or returns at your own will. E-Commerce relies super heavily on top-tier customer service, so working with the right manufacturer can be vital in situations like these.
Fewer Branding Opportunities
When dropshipping packages arrive, they come in either standard packaging or packaging branded with the manufacturer’s label. It’s not a huge deal to have unbranded packaging, but it adds to the customer experience when you do. Keep in mind that as you grow, it’s these little details that will matter more.
Dropshipping in the Realm of E-Commerce
Dropshipping is a popular E-Commerce option, and all it takes is obtaining an E-Commerce platform for your online store, like Shopify. Getting started with sites like these is a quick process, and you’ll be dropshipping away in no time. At Radiant, we take standard Shopify stores and elevate them via custom website builds, allowing you to stand out amongst other retailers. Contact us today for Shopify expertise customised to any retail platform!