What is drop shipping?
Drop shipping is an eCommerce fulfilment method in which you don’t need to stock the products you are going to sell, instead of purchasing them from third parties and shipping them directly to customers. Hence in the drop-shipping model, the seller is not responsible to store the product. As opposed to the standard retail model in this fulfilment method, there is no need to hold inventory.
With the surge in the eCommerce business, niche products are becoming prominent in the marketplace. However, their demand often fluctuates hence the sellers don’t need to store them in bulk in the inventory. This is where the drop shipping business model plays a crucial role.
But starting drop shipping in India is easier said than done. Just, like all other businesses, it has its share of advantages and disadvantages. Therefore, let’s comprehensively look at the same.
The advantages of drop shipping business
- No inventory related problems
In regular retail, you order your products from your suppliers, have them manufactured/prepared in bulk then start selling them immediately when they’re ready. The problem with this approach is that you have to maintain a huge inventory of whatever product you are selling at all times, which costs a lot of money. If for example you ordered 1,000 units of a certain product to sell them immediately and the next day there’s none left, then what do you do? You lose loads of money because that’s already paid for those 1,000 units and you didn’t sell them at all. With drop shipping, you don’t have to worry about such a headache
- Low operating costs
If you compare domino’s franchise cost India or the cost of any other franchise with a drop shipping business operation cost you will the latter is considerably cheaper. See more. You don’t need to invest in inventory, storage, or staff. You can outsource all work and rely on third-party suppliers and manufacturers to fulfil orders.
Instead of having your warehouse and employees, you can employ these services from third-party providers – they will do all the work for you while you just have to deal with customers and process payments.
- Low risk
Unlike other business models, drop shipping lets you avoid large upfront investments in physical products. This means that you can change your product range and prices as needed without any extra costs or delays because it doesn’t involve a physical product.
- Location independent
As long as you have access to the internet you can start your own drop shipping business from anywhere in the world.
- No control over the suppliers
Trouble in drop shipping is that because they act as intermediaries between the sellers and buyers, they can just take money from a seller without delivering the ordered goods to the consumer. And after taking money from the seller and not giving any reason for non-delivery, they can’t be reached for any conversation. Moreover, your designated supplier may not always have products in stock. The responsibility of this will lie on you as the seller. One workaround could be doing business with multiple suppliers. However, trying to control an increasing number of suppliers is tiresome and exhausting.
- Low margins
Setting up a drop shipping eCommerce store is a very low-cost operation. The seller must be aware that the supplier company will make the most money for the work it does.