Pros and Cons of Dropshipping

Some of you might have heard of the term dropshipping. Dropshipping means that your supplier will ship directly to your customer when receiving an order from you. In short words: you handle the orders and they will handle the shipment. They offer dropship products and keep the stock (and not you!). Dropshipping is highly popular for online businesses and dropship companies are definitely on the rise. Some buyers would only buy from dropship companies and wholesalers. Most people would prefer to join a dropshipping program as they have more to gain than lose. I will be outlining some of the pros and cons of dropshipping here:

Pros of Dropshipping

1. No need for stock inventory

Dropshipping allows you the freedom of not keeping stock at all. This can save up a lot of storage space as your wholesale dropshipper will be doing the warehousing for you. You don’t have to worry about cramping all your stock goods into your tiny one room apartment (if that’s where you are living). You can be selling over 10,000 different items in over 100 categories in your online auction or website and not have even one single item within your vicinity. This would be extremely beneficial if the items you are selling are big in nature (i.e. electrical products or furniture) or if you are planning to sell a large amount of goods.

2. Small investment = small risk

The biggest advantage of participating in a dropshipping program is the lack of investment required. There are some companies who require an initial investment on your part regardless of whether you buy from them or not. My advice to you: don’t buy from them! A genuine supplier would not ask any money from you unless its for buying their products. Most companies do charge a small amount of dropship fee when you place an order from them. Usually the amount is pretty minimal (i.e. less than $5) and is usually (but not always) on a per order charge and not a per item charge. So even if you were to order 5 items and if they are to be shipped to one address then you are charged that one fee.

Of course, you must always check the company’s dropshipping terms. Different companies obviously have different set of rules. Before deciding on a dropship supplier calculate all the extra charges especially the dropship fee. Some suppliers offer good stock inventory and lots of products but have killer fees. I would usually stay away from those companies .

3. Avoid handling returns

Avoid the hassle of handling returns from your customers. Good suppliers would normally have returns and exchange policy which you can use for your customers. If any of your customer would like to return an item because of a defect they can do so by sending them directly to your manufacturer. They will handle the returns and not you. Sounds great right?

4. Time and money well spent

Spend time only doing the necessary. Ask manufactures if they offer a csv file contaning their product information datafeed which you can import directly to your shopping cart system and integrate it into your website. Spend time handling orders, payment and inquiries. Leave the shipping and returns to the supplier! Fork out cash only when there is an order.

Cons of Dropshipping

1. No control of inventory

No manufacturer, wholesale dropshipper and supplier can ever guarantee you a 100% stock availability. Its just not possible. If you are keeping the stock at your house you would know which items are available and which are not. I had a few instances where I list a particular item on ebay and that item turned out to be out of stock. Bear in mind, when I listed the item I was told that the item is in stock but an auction listing usually last 7 days and within that period of item the item just might be sold out. So when this happens, I not only lost a sale but a repeat customer. Who ever wants to buy from you again after this incident right?

In the past one year I have participated in a dropship program with two different companies. One company was a manufacturer while the other is a wholesaler. There was no start up cost and the dropship fee was only $5. Lucky me? The only problem is of course related to the stock availability. However, if you could handle your customer’s complaints well and reply to their emails courteously then this should be a minor problem for you.

2. Unreliable dropshipper

There are many illegitimate companies claiming to be genuine dropshippers. Check out their credibility and unless you are 100% sure of their legitimacy purchase a dropship product from them that cost only a few dollars and asked it to be shipped to your address. You can also check how they package their goods and if they have included any promotional material in your package.

Conclusion

One does not discover new lands without consenting to lose sight of the shore for a very long time. -Andre Gide

Buying from a wholesale dropshipper is a good way to cut on many costs including inventory and returns. Look for reliable dropshippers and experiment with the whole dropshipping process if you are not familiar. If you have exprience with dropshipping what are your feedbacks? Do you think the good outweigh the bad? Drop a comment and let us all know…

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