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An insight into dropshipping

An insight into dropshipping

The major challenges that come while starting online store include everything from product sourcing to inventory management.  That’s where dropshipping business comes in.

Product Sourcing

Product sourcing is a concept of finding the source of the products which you can resell through your business. If you are going to start the online store, then it’s the very critical part of your business.

Inventory Management

Inventory Management

Inventory management is a part of supply chain management which defines the process of maintaining the stock items in the warehouse which consist of ordering the product, storage of product and controlling the product for sale.

What is dropshipping?

Dropshipping is a business model where you don’t have to maintain inventory at the store end. Instead, you buy products individually from wholesaler and ship directly to customer. AliExpress is the most common platform you can use to start the dropshipping business.

How dropshipping works?

Dropshipping

The e-commerce merchant post about the product he sells on his website from where the customer places the order. The merchant then places the order of the same product to the supplier who then ships it to the customer. The merchant generally hides the name of wholesaler shipping the product.

Advantages of dropshipping

Dropshipping model has many benefits associated with it and is the best way to test the market before going to sell something.

Low Operational Cost: 

Since most of the tedious works like inventory management, packaging and shipping are taken care by the suppliers, you keep your focus directed towards only marketing and customer service.

Product Collection: 

Since you don’t have to pre-purchase the product and maintain the inventory of that, you can offer the wide collection of products in your store.

Controlled business risk: 

When you are not spending a single penny to manage inventory and purchasing product from the supplier before the customer has paid you, the risk involved in starting your store is significantly reduced.

Location Independence: 

As long as you can properly communicate with customer and supplier, you can run your business from anywhere.

Disadvantages of dropshipping:

With the risk involved in the dropshipping, there is a reason to consider the below points before adopting this business model.

Depreciated profit margins: 

In this business model, basically what the customer pays you and what is then left after you pay to the supplier is the profit. Because of low overhead cost, there is a cutthroat competition in the market which makes it harder to grow early on.

Restriction on product quality: 

In dropshipping, you are putting faith on third party suppliers to deliver the quality product to customers. Even the best quality dropshipping suppliers can make mistakes, for which you have to take responsibility and apologize the customers.

Logistics complexities: 

If you are dealing with multiple suppliers, shipping complexities are bound to happen. Since products will be sourced from different suppliers, errors are bound to happen and it can happen that customer might receive the defective product.

Over the last 5 years, there has been significant growth in the usage of dropship model around the world.

Like every aspect of e-commerce, dropshipping business has its own advantages and complexities. Before choosing this business model, make sure to properly list out the problems and methods to address them.

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