What is Dropshipping?
Why Dropshipping Works?
The Disadvantages of Dropshipping
Over-reliance on suppliers
You always have to rely on your suppliers to keep stock and hope everything goes smoothly. Any supplier errors translate into your business and this can damage the reputation of your business.
Impaired customer service
If a customer comes to you with the issue of a damaged, incorrect or missing order, it will be hard to track and sort out this issue with your supplier
If you work with different suppliers, you’ll experience separate shipping costs for sending each product. This will open discrepancies between the cost you offer to customers and the true shipment cost.
Lower profit margins
There’s high competition in the space. You will be struggling to win customers. If you’re a startup, you’ll have to think of how you can differentiate your brand and offer value.
The product shipped is often designed and branded by the supplier. Some suppliers can agree to your product changes but additional branding requires a minimum order quantity to be affordable for the manufacturer.
Dropshipping Vs Third-Party Fulfillment
Even though both dropshipping and third-party fulfillment provides an order fulfillment process that is outsourced, they are different eCommerce business models.
Third-party fulfillment is where you use a specific fulfillment center and send your inventory in bulk. They will handle the packaging and shipping logistics to customers.
Now let’s look at the key differences between dropshipping and third-party fulfillment.
- No need to pay for inventory or warehousing fee
- Dropshipping service takes care of the picking, packing, and shipping. You don’t have control of the processes
- Shipping gets complex when you have more than one supplier
- No after-sale when suppliers screw up packing or shipping
- Offers limited branding
- You have to buy some stock and incur warehousing charges
- Fully controllable, online merchants can monitor the processes in real-time
- Third party fulfillment offers flexible shipping solutions
- Provides easy return processing and better customer satisfaction
- You can brand limitless inventory volume
Simple Dropshipping is Becoming a Bad Idea
Dropshipping is usually lauded as an easy way to get into the eCommerce business. Even though there’s less up-front financial risk, complex shipping, low profit margins, and little quality control are hazards you just can’t ignore.
If you’re thinking about starting a dropshipping business through Shopify or a similar platform, you need to rethink it.