3 Reasons to Start a Dropshipping Ecommerce Business
You’ve always wanted to open your own ecommerce store, but your worries over the time, money, and effort required put a damper on your enthusiasm. You aren’t sure you have the necessary skills and resources to maintain a large inventory. You don’t know anything about the logistics of order fulfillment or shipping. Above all, you’re worried about ending up in debt if your products don’t sell.
While these issues are valid concerns, they don’t have to be insurmountable hurdles. One solution is to adopt a dropshipping model of supply chain management. Rather than ordering your inventory from a wholesale supplier and shipping it to customers yourself, you simply transfer customer orders and shipping information from your online store to your wholesaler, who then handles the entire fulfillment. Here are three reasons why dropshipping might be the right approach for you.
1. Lower Startup Costs and Minimal Risk
The biggest danger with any retail venture is purchasing wholesale goods you can’t sell. If the hot new item you thought would sell out in days turns out not to sell at all, not only will you not make a profit but you’ll also lose your initial investment. Eventually, you’ll have to mark down the product and practically give it away, so it won’t take up valuable space.
Square explains how dropshipping reduces the cost of starting your online store because you don’t have to purchase your inventory upfront. The inventory remains with your supplier. While suppliers do take their cut for maintaining that inventory and shipping it to customers, it’s a cut of the profit you make on actual sales. If your products aren’t big sellers, you might not make the profit you’d hoped for, but you won’t be in the red.
Because you don’t have to purchase your inventory, you don’t have to invest in the space to store it and the resources and personnel to manage it. As Profulfilment points out, you won’t need warehouses, shelving, forklifts, barcode scanners, or inventory management software. You won’t need to handle the logistics of building codes, safety inspections, or employee benefits. You also won’t need to lay off employees if your business tanks.
2. Better Product Selection and Value
By saving on overhead, you can pass those savings on to your customers. Dynamic Business indicates dropshippers can offer more competitive pricing because they don’t have to recoup dual shipping costs; customers pay only for their own shipping expenses.
Wholesale suppliers who qualify for bulk rates are often able to ship products more cheaply or even offer free shipping, which is particularly enticing to customers. Salehoo.com reveals that 90 percent of buyers are more likely to buy an item with free shipping even if the price is higher, which means you can cover the shipping without explicitly charging for it.
Business notes dropshippers aren’t tied down to a physical warehouse in a fixed location. With an Internet connection, you can run your business anywhere, taking advantage of areas with the cheapest cost of living, and work with suppliers worldwide, taking advantage of areas with the cheapest production costs.
If you’ve ever gone to a brick and mortar store looking for a specific product, you know the frustration of discovering they only keep one model in stock or they carry every flavor except the one you want. Dsco reports “retailers who hold physical inventory carry on average only 13 percent of a supplier’s product line.” Without that burden, however, you can offer thousands of products at no additional risk, which benefits your supplier as well. With a few simple clicks, you can expand popular product lines, remove poorly selling items, add seasonal favorites, and try out several new products to see which one customers like best.
Another danger small businesses face is the failure to keep up with demand if their products sell more quickly than expected. Suddenly, so many orders are pouring in that it’s impossible to fulfill them in a timely manner. As they scramble to hire additional employees and keep products in stock, quality control and customer service often suffer.
By leaving order fulfillment to the supplier, you’re free to grow at your own pace. Printful describes how dropshipping is a good option for businesses that are likely to remain small as well as those likely to expand.
If, for example, you have a blog, you might add a store to sell dropshipped items related to your content. Your content is your main source of income; your store is just a side hustle that won’t take much of your time. If you’re an artist, you might use a specialized dropshipper like Printful to print your designs on t-shirts or tote bags.
On the hand, you might intend to make your online store your day job. Stores like Zappos used dropshipping so they could offer a large product selection from the start and eventually expanded to the point where they could handle fulfillment in-house. Some retailers use dropshipping only during the holiday season when demand exceeds their fulfillment capacity.
How does your online business use dropshipping to get the drop on the competition? Share your thoughts in the comments.