Dropshipping is a fulfillment method where a store does not keep the products it sells in stock.
Instead, it purchases the item from a third party and has it shipped directly to the customer. As a result, the seller doesn’t have to directly handle the product, and there are far fewer chances for error.
The biggest difference between dropshipping and the standard retail model is that the selling merchant doesn’t stock or own inventory.
Instead, the seller purchases inventory as needed from a third party to fulfill orders. Usually, a wholesaler will sell the products, and they can be found at a lesser price.
Dropshipping is a type of business model that enables a company to operate without maintaining inventory, owning a warehouse to store their products, or even shipping their products to their customers themselves.
How it works is that the retailer partners up with a dropship supplier that manufactures and/or warehouses products packages the products, and ships them directly to the retailer’s customer on the retailer’s behalf.
In simpler terms, this is how dropshipping works:
- A customer places an order for a product in an online store.
- The seller will then forward the order and customer details to the dropship supplier.
- The dropship supplier packages and ships the order directly to the customer in the retailer’s name.
As a business model, dropshipping has several different aspects that prove to be beneficial, such as:
It’s Easy to Set Up
It doesn’t take an entire village to set up since it essentially involves just 3 steps—find the supplier, set up your website, and start selling the goods!
This business model is relatively easy to understand and implement for someone new to the eCommerce industry.
Cost is Minute
In traditional business models, most of the costs are related to setting up and running the retail operations, such as purchasing inventory, packaging, and employing people for operation.
Since dropshipping eliminates that step, and thus the cost of it, all you have to pay for is the associated costs of running your online platform.
You can quit worrying about overhead costs and focus your attention on marketing and sales—the places where the business is making money.
Risk is Far Lower
If the business doesn’t sell products it still doesn’t lose anything, so there is little to no pressure about having to sell your inventory.
Of course, there are cons to all great things.
Lower Profit Margin
Depending on your niche, location, or requirements, suppliers and vendors will charge you higher prices for dropshipping products, which does eat into your profit margins.
Since the customer is purchasing the product from the retailer’s website, if the supplier messes something up, it’s still the retailer’s fault as the brand is the retail process’s face. This is one of the reasons why it is essential to choose the right supplier.
Customer satisfaction is often linked to the details—personalized packaging and branding of the shipped products, freebies, and notes accompanying the order—it’s almost always the smaller things that count. Unfortunately, the dropshipping model seldom allows retailers to control how their brand is presented during the delivery and fulfillment process as the supplier is the one who ships the products.
Contact Us Today
If you’re on the lookout for a third-party that can complete all of your needs for the dropshipping method, Pendleton Management can provide every service you require.