What is dropshipping?
You would have heard of
How it works?
So how is the actual sale made? In this business
Dropshipping requires you to keep the list of the products that you are going to sell. The other operational parts would be handled by the wholesalers. Basically, you are the intermediary handling the customer and the seller together.
With this basic knowledge, you might be fully inclined to opt it as your online business. But like every other business, there are some advantages and disadvantages associated with it. So, in this article, I have discussed these advantages and disadvantages so you can know more about it.
Benefits of dropshipping business:
1. No investment needed:
You don’t have to worry about the investment required for this type of business because you don’t need to keep the stock or maintain any kind of store for your business, so it won’t require you capital investment of any kind.
2. Supply chain management expertise not required:
You don’t need to be an expert in supply chain management to manage your online store and business because the handling of the production of goods and shipping is the requirement of the wholesaler, not you. So, this gives you an advantage over the traditional form of business.
That being said, dropshipping business owners save a great amount of cost on maintaining a physical location for stocking products and human resource to run the whole supply chain system, compared to conventional e-Commerce businesses.
3. Low risks:
The risks associated with obsolete inventory or the excessive maintenance of goods won’t be there. So, you can actually consider this business less risky as compared to the other business.
4. Wide variety of product offerings
You can choose a wide variety of products to be sold through your store. There is no limitation of selling a limited amount of good. Similarly, you can choose to sell even a limited number of products that are trending and bought by the customers.
You can increase the scope of your business depending upon the traffic that you can generate for your store, so the size of the business is totally in your control.
Cons of Dropshipping:
Analyzing the benefits would have made you believe that dropshipping is without any problems. However, this is not the case. Here are some of the drawbacks of
1. Extreme Rivalry:
The low barrier to entry results in
2. Low Profit Margin:
The high competition in the market also results in lower profit margin. Both the customers and suppliers can exert pressure on your business, leading to a little room, which you can earn money.
3. Logistic challenges:
Although, you don’t have to go for the logistic directly but it is you who is going to generate the tracking number for delivery to the customer and supplier. So, as your business would expand this process will get difficult. Moreover, you’ll have to rely on the wholesaler completely, it can have an impact on the reputation of your stage, but you can’t manage it.
Key factors for dropshipping business’s success:
If you want to succeed in the
a. Chooses the right wholesaler:
You’ll have to find the productive wholesaler for your dropshipping
b. Traffic generation:
In any online business, you need to generate traffic and take steps to optimize the conversion rates, as well. In order to achieve this, you can use different techniques like
c. Add value
In order to compete in the industry, you must add value in one way to the other. So, in your
Now, when you know what dropshipping is in its true sense, you can analyze the odds for your success and invest your time and effort in the right kind of business.