You’ve probably heard or read about drop shipping and how it can be a great online business due to the fact that you don’t need much business capital to set up one.
With drop shipping, you don’t need to keep a stock of the products that you are selling. When you make a sale, you purchase the merchandise from one supplier who in turn directly ships the item to the customer.
As the seller, you don’t need to spend money upfront for the merchandise. You only pay the supplier from the payment that you received from your customer. This somewhat win-win situation is what makes drop shipping business appealing to people.
If you are interested in starting a drop shipping business, here are the pros and cons to help you make that important decision.
Pros
Little to No Capital Involved
Since the merchandise is directly shipped to the supplier, there is no need for you to find a space to stock your inventory as well as shelling out money upfront for the merchandise. The supplier gets paid once you receive payment from your customer.
Work from Any Place
You are in charge of the digital or technological aspects while your drop shipping supplier is in charge of the physical aspects. This allows you the freedom to work or run your business from any place that has an internet connection.
Scalable
You simply need to transfer the information about the placed order to your supplier, which means that the amount of work you need to do remains the same. This means that the business is very scalable and can only be limited by the amount of stock available with the supplier.
Having more than one supplier for your offered merchandise would be the wisest route to take so you would rarely encounter an “out-of-stock” situation.
Limitless Product Selection
Remember that you don’t need to purchase and keep an inventory, which gives you more freedom in the number of products you sell. You only need to concentrate on your sales data to see if you can offer more products to sell particularly if you wish to expand your business.
Cons
Low Profit Margin
Over the years, drop shipping has become quite popular which makes it a highly competitive market. To ensure that you get a fair share of the drop shipping consumer market, you need to provide products that are priced based on the current prices offered by other drop shipping business owners.
High Risk
All businesses involve some risk, but this is probably higher when it comes to drop shipping since you don’t have any control on the physical aspects.
Imagine yourself guaranteeing your customer that they are purchasing a high-quality merchandise that would be delivered to them with no issues only to end up with shipping delays, low quality merchandise, and in some cases an “out-of-stock” situation.
This can be a very frustrating experience for you and your customer. The last thing you would want on your plate would be to deal with a very upset customer.
No Fast Shipping
Expert studies have always shown that the shipping time is one of the most important influential factors for an online buyer. If your product is shipping from an international location, chances are you won’t be able to offer rush shipping options unless you keep an inventory of your most sellable merchandise.
Please don’t think that I am trying to discourage you from starting a drop shipping business. My aim here is that by presenting the pros and cons of drop shipping, you would be in a better position to decide if you should proceed with your plan.