Dropshipping is an eCommerce buzzword. Everyone is talking about it, and many entrepreneurs have found great success using this business model.
So, what exactly is dropshipping? This business model requires you as the company owner to sell and deliver items without having to buy and stock them. Let’s break that statement down. You don’t have an inventory of stock that you’ve purchased. Nevertheless, you sell these products, and they are shipped to the customer.
It might sound too good to be true the first time around. But the reality is that dropshipping is ideal for small companies. Here’s why:
- Low startup costs
When you want to start a business that sells products, you need to have deep pockets. The first thing you need to do is acquire an inventory. This is a massive layout of starting capital.
However, this is exactly what you DON’T need to do if you’re starting a dropshipping business. You won’t need to take out a loan from the bank to get your dropshipping venture off the ground. Instead, you make the sales, inform the manufacturer, and have the product shipped to the customer.
- No inventory, no problem
The fact that you, as a business owner, have no inventory to worry about has a lot of advantages. You don’t need to spend a lot of money on warehousing space. There’s also no risk of buying an inventory of products that wind up not selling well. This eliminates the problem of deadstock.
However, you need to work with fulfillment providers that make sure the products are shipped to the customer on time. You need to be sure of your choice as the provider’s service is a reflection of your brand. If you enter into a contract with a company that offers poor service, your business is at risk of failing.
- Variety is the spice of life
Because you don’t run the risk of sitting with a warehouse of products you can’t sell, you can afford to experiment with your product range. This allows you to take a few risks with your offerings.
You also don’t have to wait for new products to arrive at your business before you can start selling them. This makes it possible for you to change your product range as often as you’d like. When you see an item selling well online, you can add it to your online store once you’ve entered into an agreement with the manufacturer.
- Reduced shipping times and costs
Compare the prices your fulfillment provider charger offers for shipping with what it would cost you to do it yourself. These companies have established transportation networks. Since they work with bulk deliveries, their costs are reduced.
Shipping companies have a considerable staff complement. These are employees sort, select, and pack the items before they are dispatched for shipping. Think about what it would cost you to hire people to do the same for you. It’s highly unlikely that you’ll be able to match the delivery times and prices a fulfillment provider does.
- More time on your hands
As a business owner that uses the dropshipping model, you’ll have more time to focus on your company. You won’t be spending hours on the phone with suppliers, waiting for orders, and worrying about shipped orders arriving on time.
Instead, you’ll be able to spend more time on growing your business. This could include marketing your company to increase your customer base. You can also expand into other markets by selling more products. The more time you spend on expanding your business, the more transactions you’ll do, and the more your profits will grow.