Benefits & Disadvantages of Drop Shipping | Strategy Plus
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.
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WHAT ARE THE ADVANTAGES 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. Drop shipping is effectively taking out the process of having deliveries from suppliers to your company first and instead, simply getting them to deliver the item straight to the customer. It cuts out the unnecessary task of receiving orders, storing and sorting the products and then sending them. This saves money on postage, storage space, stock and the workforce needed to process the orders. But, while it has its advantages, drop shipping isn’t ideal for everyone…

 

ADVANTAGES OF DROP SHIPPING

  • The startup 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. Don’t have enough money to start your online store? 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. If you want to get started with your online store and test new products, you can look up dropshipping marketplaces like AliExpress or Dropship Direct.

  • 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, labelling, 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 time between selling a product and then getting it shipped can also take longer, as this part is out of your hands and you depend on the supplier to process the order quickly.

  • 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 and real experience of the product may mean you can provide less useful and unique content on the website which will also harm your SEO.

If you don’t choose the supplier correctly, you might discover that the product you purchased is out of stock. This can typically happen if you use Drop Shipping on Ebay and it’s 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. For more information, see how to optimise your e-commerce customer support.

  • A vast amount of competition is everywhere

Finding great drop shipping products will often mean you will face competition from fellow retailers in your sector. The margins of drop shipping products can be quite low as many manufacturers charge for the fulfilment service so you have a 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.

 

If you’re in the early stages of planning your e-commerce business, we can help you with designing your website as well as promoting your business through social media

Get in touch to find out how we can support your business…