Dropshipping is a method of retail compliance in which a store does not maintain the products in their own stock. Instead, they keep the products in the stock of a third party. When somebody reserve product, the seller will send the item from the third party directly to the customer. The retailers never see or administer the product.
There is a big difference between dropshipping and the traditional retail model: the retailers have no stock or inventory. Instead, the merchant purchases the inventory from a third party only when his clients want to buy something.
The dropshipping model has many benefits and drawbacks:
Less Capital – In this case, retailers needn’t invest thousands of dollars in advance to launch his own store, probably it’s the biggest advantage of dropshipping. Traditionally, retailers have had to prepare large amounts of inventory of capital purchases. Without large initial investments of inventory, it is possible to start a successful dropshipping business with very little cost.
Easy Start– It’s so easy to run an e-commerce business when you do not have concentrate on physical products. Dropshipping will help you:
• Managing or paying for a warehouse
• Packing and shipping of your orders
• Inventory tracking for the accounting reasons
• Handling returns sales and shipments
• Continual managing of product and improving storage conditions
Low Overhead - Your overhead cost will be very low because you do not have to buy inventory or manage a warehouse. In general, the cost is less than $ 100 per month, you only need to work with your laptop in your home office. Even these costs are likely to increase as it grows, but will still remain low compared to the traditional model.
Flexible Location - A dropshipping business can run anywhere only with an internet connection. As long as you can communicate with suppliers and customers, you can run and manage your business easily.
Wide Selection of Products - Because you do not have to buy the items which you want to sell, you can offer a variety of products to your potential customers. If suppliers store an item, you can list it for sale on your own website.
Easy Scale - With a traditional business, if you get three transactions you will normally have to work three times. By leveraging dropshipping providers, most of the work to process additional orders will be supported by suppliers, allowing you to expand with less pain in growth and less incremental work. Sales growth will always bring additional work - especially in relation to customer service - but companies that use dropshipping scale particularly well relation to traditional e-commerce businesses.
All these benefits make dropshipping very attractive for beginners and the established merchants. But at the same time, dropshipping also has many disadvantages.
Low Margins – we can’t avoid this point, low margins are the biggest disadvantage of operating in a highly competitive dropshipping niche. Because the start is so easy and the overhead is so minimal, many traders will establish and sell items at a very low price. Little has been invested in getting the business started, so they can afford to operate on minuscule margins.It is true that these merchants often have poor (if any) customer service and low-quality websites. But that will not stop customers from comparing their prices with yours. This increase in drastic competition will quickly undermine the profit margins. Fortunately, you can alleviate this problem by choosing a niche that is very suitable for dropshipping.
Inventory Problems - It is relatively easy to keep track of items that are in and out of stock if you stock all of your items. But when you are buying from many different warehouses, which are also fulfilling orders for other merchants, inventory changes on a daily basis. While there are ways to better synchronize your store inventory with your suppliers' inventory, these solutions do not always work perfectly and vendors do not always support the required technology.
Shipping Complexities - If you work with multiple suppliers, the products on your website will be passed through a number of different drop shippers. This makes your shipping costs complicated.
If a customer wants to buy three goods, all of which can only be provided by three different suppliers. You will send three separate shipping charges, but it may not be wise to deliver this charge along to the customer, as they will think that you are overcharging the transport! Even if you want to pass these costs along, automating these calculations can be difficult.
Provider Error - Have you ever been accused of something that wasn’t your fault, but you must be responsible for the error?
Even the best shipping agent will also make mistakes fulfilling the order - which you must take responsibility and apologize for errors. The mediocre and low-quality factories will cause endless setbacks to the lack of items, poor transport, and poor quality packaging, thus damaging the reputation of your business.
What Socialshops can help
However, Socialshops can help you overcome all the four obstacles and achieve your success.Get started for free Socialshops
Low Margins - The beauty of Socialshops is that Socialshops have access to the data of DHgate, which is one of the biggest B2B platforms in China. Socialshops will provide you a list of the most popular products sold in your country with the most competitive price.
Inventory Problems - You will feel really frustrated if there is an order in your dropshiping, but when you make the purchase you find the inventory is zero. However, Socialshops will make sure this won’t happen. Whenever the inventory changes, the current number will be synchronized to your own store. If the inventory is zero, the product will be unavailable in your own store unless you change it manually.
Shipping Complexities - Don’t worry about it. Almost 80% of the products that Socialshops has recommended to you are FREE SHIPPING and the minimum order is 1. It means no matter how many suppliers your customers buy from, the products will be shipped one by one without any cost.
Provider Error - You will be really upset to take care of the error shipping or botched packaging which is not your fault. Now Soicalshops will provide you the support from the moment you upload your product to the moment that final customers receive them.