15 Feb The benefits and disadvantages of drop shipping
An e-commerce business has many things to take into account when setting up – delivery arrangements, where the stock will be stored, the most cost-effective and least time-consuming way for the company to arrange its items. Read our article to see how drop shipping has become the preferred choice for e-commerce websites today.
Drop shipping is effectively taking out the process of having deliveries from suppliers to your company and simply getting them to deliver the item straight to the customer. It cuts out the unnecessary task of getting a delivery to simply send it out again. This saves money on postage, while also eliminating the need to worry about storage space for smaller e-commerce sites. But, while it has its advantages, drop shipping isn’t ideal for everyone…
Benefits of drop shipping
The start-up costs are smaller
In order to set up an online business, a good chunk of capital is usually required to buy your inventory of products. But this can be guesswork, as there’s no saying how much stock you’ll sell for that month or year. Drop shipping avoids this problem, eliminating the risk of spending your money on unsold stock.
You can offer items almost instantly
Usually, when a retailer wants to start selling a product, they’ll have to wait until all of their stock has been shipped in order to begin advertising them on their website. After all, what’s the point in offering an item for sale when you can’t actually sell it? Using drop shipping means that when you decide you want a product on your site, you can start advertising almost immediately.
You can offer a wider range of products
Having the ability to offer a wider range of products is always something a company can aspire to and with drop shipping it’s possible. You don’t have to worry about different colours or sizes and where they’re all going to be stored, you simply list them on your site and your supplier can deal with the rest.
Testing new products without a risk
When adding new products to your range, the risk of not selling is always in the background. Having to guess what your customers want to buy is tricky for any business, so being able to test the water without making any true investment is always an advantage.
Time-saving is key
Organising your stock and preparing it for delivery can often be a time-consuming nightmare. Using a third party to ship items saves handling, labeling, packing, shipping and so on. This leaves you with the time to focus on growing your business in different areas.
Disadvantages of drop shipping
Processing your orders can become difficult
Many companies that use drop shipping as a sales strategy work with multiple wholesalers, each of whom will come with different requirements for order processing, billing and shipping. This can make things very complicated. The gap between selling a product and then getting it shipped can also take longer, as there are many conversations and actions that will take place before it gets sent off.
Not having all of the product information is problematic
As you never actually handle the products that you are selling, you have no real idea of what they are like. Given the manufacturer doesn’t give enough product description that’s of adequate level, you can’t answer general customer enquiries about the products’ dimensions, weight, ease of use and so on, without constantly forwarding their questions to the supplier. Lack of information will leave noticeable gaps on your website and this isn’t good for any company – empty information may put a customer off.
You also never know about the availability of a product until a customer purchases it and you find out that it’s out of stock. This can be immensely frustrating for customers who are under the impression that they had purchased a product to find out that they actually didn’t. In order to eliminate this problem, an automated system which updates stock availability regularly throughout the day is preferable. You could also request an email or phone call from the supplier if the stock has run out.
Customer service issues
Drop shipping removes the responsibility of shipping but it also removes a large part of the customer experience from your control. There’s no way to ensure that a product has arrived on time or as described. When a customer calls to either complain or enquire, the process of resolution is slowed as you often don’t have the necessary information at hand and the query or complaint will have to go through a third party supplier before it can be solved.
A vast amount of competition is everywhere
Finding great drop shipping products mean they generally will come with competition from other retailers in your sector. The margins of drop shipping products can be quite low as many manufacturers charge for the fulfillment service so you have little amount of room to manoeuvre your prices in order to beat your competitors.
As you can see from the benefits and potential problems, choosing drop shipping is an option that shouldn’t be chosen without major consideration. The problems that arise can often be solved just by careful planning and implementation of contact between the seller and the supplier. With enough thought, the disadvantages can be avoided.
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