Dropshipping Advantages & Disadvantages – Part 1

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Dropshipping Advantages & Disadvantages

dropship-best-practices-pt1

Right, you’ve done your research into dropshipping – you finally know what it means - and you now want to know what the advantages and disadvantages are in the dropship industry.

Well, here they are...some of them anyway.

Advantages

You don’t need to be rich: The great thing about dropshipping is that merchants don’t need thousands of pounds to start up. It’s relatively easy to start an ecommerce store without needing that much money to purchase, and store your stock before selling and shipping.

What this means, is once you make a sale, it is only then you purchase your stock and have them shipped to your buying customers. This also saves you the space, time and money from having to rent a warehouse. On top this, you also don’t need to worry about packaging, handling returns and managing your stock level – to some degree.

Low Operating cost: As mentioned above, you don’t deal with purchasing inventory, renting a warehouse and you don’t even need a brick-and-mortar store. Which means starting off with a cheap laptop or desktop computer is all you need. Over time your expenses may grow, though compared to actual retailers these costs will still be much lower.

Location, location, location: What if you live in Spain, Germany or even South Korea? This has no effect on managing a dropshipping company. This can be ran from just about anywhere with an Internet connection.
A-Z: With dropshipping you can pretty much offer any items, products and stock you want to sell, as long as your supplier can supply them of course.

Ok, that’s great to know, but wait…what are the dropshipping disadvantages?

Disadvantages

Supplier errors: You’ve most likely had experiences where the stock reaches you and it’s the wrong item, or it most likely doesn’t reach you in time, or at all.

Whilst your suppliers or dropshippers are trying to fulfill your orders, they are also fulfilling orders for other merchants, which does mean human errors do occur at times.

Because the supplier (dropshipper) is never seen or known of by the customer, this means the responsibility of any errors such as no delivery or wrong item/s is down to the merchant.

In any such case it is best to do either of three things.

- Admit fault: by apologizing and let the customer know you’re going to fix the issue.
Never mention the dropshipper and or supplier. You’ll only confuse the customers.

- Make it up to them: you could offer a refund for the shipping fee, or a full refund instead. However you may even insist in sending a replacement free of shipping costs. Anything you can think of will be greatly appreciated.

- Speak to your supplier: Even though you will need to accept fault, under no circumstances should you have to pay for it (unless you are offering freebies). The supplier should by all means fix this error, if it them to blame of course.

Inventory issues: Because you’re not stocking your own items, there are times when keeping track of your inventory does become very difficult. Finding a solution to keep an eye on what is in and out of stock will require extra resources, time and technology.

Shipping costs: Many drop shippers source their stock from multiple suppliers. If your customer purchases items all of which are sourced from multiple suppliers, then you will need to factor in the separate shipping costs for all of these products. The other downside to this is if the shipping costs were somewhat quite high – added together – then your customers may go elsewhere because they think you’re overcharging them for shipping.

And there we have it, the dropshipping advantages and disadvantages.

Come back next week to find out about Dropshipping Terminology and The Order Process.
[UPDATE: Click here for Dropshipping Terminology & The Order Process]