Advantages of Dropshipping
What is dropshipping?
Dropshipping is a fulfillment method that bypasses traditional distribution channels and ships the products directly from the wholesaler or manufacturer. Dropshippers do not buy products ahead of time to sell, and they do not keep inventory on hand. As a result, the retailer processes customer orders by forwarding them directly to the manufacturer. Afterward, the supplier picks, packs, and ships the product directly to the customer. The retailer handles payment for the order, selling products at a markup and keeping the difference after paying the supplier.
Dropshipping suppliers can be the manufacturer of the product, the wholesale distributor, or any other part of the supply chain. Dropshipping is distinguished by the fact that the retailer who processes the sale does not hold inventory, but sends the order to the supplier for fulfillment. Dropshipping can even be conducted by retailers directly serving clients. In general, the earlier a supplier is in the supply chain, the cheaper it will be for a dropshipper to source a product because each step in the supply chain tends to add a markup.
1. Low Capital Requirements
A challenge faced by many retailers when starting a business is determining how to manage inventory. Merchants spend thousands of dollars on inventory investment, which can significantly reduce the startup capital of a company. However, dropshipping eliminates the need to purchase products or worry about low stocks.
You will have less upfront costs, less stress, and fewer responsibilities when you start a dropshipping business, leaving you with more time and money to devote to other aspects of your business.
2. Flexible Location
Today’s customers demand unparalleled shipping and are quick to break relationships with businesses that don’t meet those expectations. Your business can gain a geographic advantage by using a dropshipping company. Suppliers based on the West Coast can benefit businesses based on the Central U.S., and vice versa. Your brand will be able to deliver exceptional service all the way from the point of order to delivery when you are close to your customers.
3. Save time and money
You won’t have to worry about managing and paying for a warehouse when you run a dropshipping business. You won’t need to track inventory, manage returns, or restrict your office to a specific location. You can take your business anywhere in the world as long as you have an internet connection to stay in touch with your suppliers and customers.
4. Product Selection Wider
It is often easier and less expensive for merchants to purchase a select few items in larger quantities rather than offer a diverse selection because they are required to pre-purchase their products. Nevertheless, dropshipping allows you to sell as many products as you want on your online store without having to worry about inventory or costs.
5. Reduced Risk
A new business comes with many risks, not the least of which is the thousands of dollars you’ll invest in inventory. Dropshipping allows you to make a relatively clean break if things don’t work out as planned, without having to worry about being stuck with thousands of dollars worth of inventory.