If you feel attracted by the idea of starting an eCommerce business, there are a few models to look at. For example, if you are interested in low overhead, no warehouse, and still a good profit, you should learn more about dropshipping. Dropshipping is a business model in which you sell items that you dont own and dont stock. Your suppliers, who are manufacturers or wholesalers, are the ones who produce the goods, warehouse them, and also ship the products to your customers. The process is a simple one:
- The first step is an order that you receive
- The second step is to forward the order to your supplier
- Last but not least, the supplier fulfills the order.
If you want to learn more about dropshipping, check out this guide. It is important to have a clear overview of its pros and cons because people mistakenly think that dropshipping is easy. Indeed, you dont have an inventory to keep, but dropshipping comes with its own set of problems. Check out its pros and cons below and decide whether or not dropshipping is the eCommerce business model that you are looking.
- Low startup costs. If you are looking for financial independence without the stress of a 9 to 5 schedule, but you dont have a big amount of money to invest, dropshipping businesses are a good choice. Dropshipping helps you reduce the risk of going into debt because any normal business requires you to invest in an extensive inventory. Dropshipping, instead, allows you to immediately start making money with the investment in an extensive inventory.
- Low cost of inventory. The cost of the inventory is, without any doubt, one of the highest costs of warehouse stock. You may also end up with obsolete inventory. Dropshipping allows you to eliminate these costs and the risk of obsolete inventory.
- Low order fulfillment costs. Order fulfillment is complex, with costs that include warehouse, tracking, labeling, pick and pack, and shipping. Dropshipping means that a 3rd party will take care of all these.
- Less control over order fulfillment. It is one of the biggest cons of dropshipping. You also have less control over lead time.
- Reliance on other peoples stock. It is a downside of dropshipping businesses. People choose to use dropshipping businesses because these are businesses able to offer new products immediately. However, when your suppliers run out of stock, you run out of stock, and it is something that you cant control. It results in longer lead times and numerous lost customers.
- Less profit. When you opt for a dropshipping business, you need to accept that you cant bulk price. You will pay more for each item you sell, instead of paying less if you buy a large inventory of products. Of course, this is something that leads to less profit. If you want to increase the profit, then you need to invest in marketing and sell more products. It is how you will be able to increase the dropshipping business profit.