by John Larkin
John runs the blog here at eCommerceLift and is a verified Shopify Expert. Interested in an initial growth consultation? Click here
8 years ago
Drop Shipping: Is It The Right Move For Your eCommerce Store?
Whether you are an established eCommerce store or an entrepreneur trying to figure out how to accomplish your first business venture, there are so many daunting choices that have to be made. One such choice involves inventory. Numerous eCommerce stores are turning to the practice of drop shipping as a way to manage and simplify inventory and attempt to make it risk free. However, drop shipping isn't always the easy way out. We are presenting the pros and cons of drop shipping so you can decide whether it is the right choice for your eCommerce store.
What is Drop Shipping?
First and foremost let’s get to grips with what drop shipping actually is. Drop shipping is when an eCommerce store uses a supplier that is willing to ship individual orders. It differs from the traditional shipping methods as there is no bulk buying and stocking of inventory, rather just individual offerings usually shipped from wholesalers to customers directly leaving the eCommerce merchant acting as the middleman.
Rewards of Drop Shipping
Lower Inventory Investment
<br "page-break-before:auto;="" mso-break-type:section-break"="">Drop shipping means that your eCommerce store has no inventory therefore has none of the risks of having inventory. Risks such as buying too much stock, not buying enough stock, unwanted stock or damages all become obsolete. There is no need for excessive stock planning or maintenance as you only order when needed. Drop shipping significantly reduces the stress involved with inventory.
Open for Business Quickly
Many issues with developing a start-up or changing stock are trying to get capital to enable you to buy and build up your inventory. Drop shipping enables a company to almost immediately start-up and sell once they have found a wholesaler they are willing to work with. With a low amount of capital an eCommerce store could potentially start up or expand their offerings to help them build a customer base and expand with relative ease.
Cost Effective- no need for a warehouse, packaging and shipping
<br "page-break-before:auto;="" mso-break-type:section-break"="">Drop shipping doesn't just cut back on the cost of buying the inventory itself; it also can save you money in a number of unexpected ways. Without inventory, your eCommerce store has no need for warehouses to store large amounts of stock. Added to this the wholesaler often deals with post and packaging therefore negating that large cost leaving you with a more cost effective business.
Flexibly of Products
Without large amounts of inventory that has to be sold, drop shipping enables an eCommerce store to simply change what products they are offering with ease. If a product is not selling, receiving bad reviews or if your eCommerce store recognises a gap in what your customers wants and what you are selling, it can easily be altered. Drop shipping offers your store unbelievable flexibility in regards to what you are selling as there are no hindrances or obstacles preventing you from altering it.
First and foremost let’s get to grips with what drop shipping actually is. Drop shipping is when an eCommerce store uses a supplier that is willing to ship individual orders. It differs from the traditional shipping methods as there is no bulk buying and stocking of inventory, rather just individual offerings usually shipped from wholesalers to customers directly leaving the eCommerce merchant acting as the middleman.
Rewards of Drop Shipping
Lower Inventory Investment
<br "page-break-before:auto;="" mso-break-type:section-break"="">Drop shipping means that your eCommerce store has no inventory therefore has none of the risks of having inventory. Risks such as buying too much stock, not buying enough stock, unwanted stock or damages all become obsolete. There is no need for excessive stock planning or maintenance as you only order when needed. Drop shipping significantly reduces the stress involved with inventory.
Open for Business Quickly
Many issues with developing a start-up or changing stock are trying to get capital to enable you to buy and build up your inventory. Drop shipping enables a company to almost immediately start-up and sell once they have found a wholesaler they are willing to work with. With a low amount of capital an eCommerce store could potentially start up or expand their offerings to help them build a customer base and expand with relative ease.
Cost Effective- no need for a warehouse, packaging and shipping
<br "page-break-before:auto;="" mso-break-type:section-break"="">Drop shipping doesn't just cut back on the cost of buying the inventory itself; it also can save you money in a number of unexpected ways. Without inventory, your eCommerce store has no need for warehouses to store large amounts of stock. Added to this the wholesaler often deals with post and packaging therefore negating that large cost leaving you with a more cost effective business.
Flexibly of Products
Without large amounts of inventory that has to be sold, drop shipping enables an eCommerce store to simply change what products they are offering with ease. If a product is not selling, receiving bad reviews or if your eCommerce store recognises a gap in what your customers wants and what you are selling, it can easily be altered. Drop shipping offers your store unbelievable flexibility in regards to what you are selling as there are no hindrances or obstacles preventing you from altering it.
Risks of Drop Shipping
Potential for Scams for Business & Customers
Unfortunately, drop shipping has become synonymous with scams for both business and customers. With many ecommerce stores accepting information and promises that eventually put them at risk. It is important if you are considering the practice, to fully investigate and know about the companies you are dealing with so you and your customers avoid being burned.
Long Process
Drop shipping has numerous channel members which all have to be coordinated and organised. With all of these players it could potentially be a long, drawn out process from customers placing an order to actually receiving their order. This could affect how customers view your eCommerce store as waiting days or weeks for their order won’t encourage them to buy more or spread positive word-of-mouth about you as a merchant.
Little Control Over Quality- packaging, merchandise, etc.
<br "page-break-before:auto;="" mso-break-type:section-break"="">An obstacle that can be frustrating for many merchants is the lack of control they have over the quality of the shipments. Issues such as poor quality merchandise and generic packaging all can be involved when dealing with drop shipping. eCommerce merchants must be meticulous with their research and communication with the manufacture to ensure quality that they expect or you could risk turning customers off your eCommerce store.
Complicated Returns Process & Customer Service
<br "page-break-before:auto;="" mso-break-type:section-break"="">As the chain in drop shipping is more complicated, issues can arise with customer service and returns but it is important to remember customers hold you solely accountable. eCommerce stores must deal with customer services issues that they may have no control over and in addition dealing with returns becomes more complex. As eCommerce managers must deal with being middleman between customers and manufacturers, it requires extra coordination and communication that has the potential to become a headache for all those involved.
Potential Higher Cost- buying in bulk vs. buying one, drop shipping fees
<br "page-break-before:auto;="" mso-break-type:section-break"="">Although drop shipping saves on expenses such as warehouses, packaging, shipping, etc. it can potentially become less cost effective way of doing business in the long run. Buying in bulk saves large amounts of money versus buying stock when needed, leading to smaller profit margins. These costs need to be analysed as buying bulk at wholesale price might seem like a large expense at first but could save your eCommerce store money in the future.
Drop shipping isn't for every eCommerce store. It involves planning and coordination as well as knowledge about the benefits and risks. However, if an eCommerce store carefully assesses every aspect of drop shipping it could become the perfect method to help build a successful, profitable eCommerce store.
Potential for Scams for Business & Customers
Unfortunately, drop shipping has become synonymous with scams for both business and customers. With many ecommerce stores accepting information and promises that eventually put them at risk. It is important if you are considering the practice, to fully investigate and know about the companies you are dealing with so you and your customers avoid being burned.
Long Process
Drop shipping has numerous channel members which all have to be coordinated and organised. With all of these players it could potentially be a long, drawn out process from customers placing an order to actually receiving their order. This could affect how customers view your eCommerce store as waiting days or weeks for their order won’t encourage them to buy more or spread positive word-of-mouth about you as a merchant.
Little Control Over Quality- packaging, merchandise, etc.
<br "page-break-before:auto;="" mso-break-type:section-break"="">An obstacle that can be frustrating for many merchants is the lack of control they have over the quality of the shipments. Issues such as poor quality merchandise and generic packaging all can be involved when dealing with drop shipping. eCommerce merchants must be meticulous with their research and communication with the manufacture to ensure quality that they expect or you could risk turning customers off your eCommerce store.
Complicated Returns Process & Customer Service
<br "page-break-before:auto;="" mso-break-type:section-break"="">As the chain in drop shipping is more complicated, issues can arise with customer service and returns but it is important to remember customers hold you solely accountable. eCommerce stores must deal with customer services issues that they may have no control over and in addition dealing with returns becomes more complex. As eCommerce managers must deal with being middleman between customers and manufacturers, it requires extra coordination and communication that has the potential to become a headache for all those involved.
Potential Higher Cost- buying in bulk vs. buying one, drop shipping fees
<br "page-break-before:auto;="" mso-break-type:section-break"="">Although drop shipping saves on expenses such as warehouses, packaging, shipping, etc. it can potentially become less cost effective way of doing business in the long run. Buying in bulk saves large amounts of money versus buying stock when needed, leading to smaller profit margins. These costs need to be analysed as buying bulk at wholesale price might seem like a large expense at first but could save your eCommerce store money in the future.
Drop shipping isn't for every eCommerce store. It involves planning and coordination as well as knowledge about the benefits and risks. However, if an eCommerce store carefully assesses every aspect of drop shipping it could become the perfect method to help build a successful, profitable eCommerce store.
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