The Pros and Cons of Drop shipping
0December 1, 2010 at 4:47 am Filed in:Drop Shipping
First lest have a quick look at what is drop shipping? Drop shipping is the term used when a distributer or your supplier takes care of the shipping to your customers for you. So rather than ordering and storing stock in bulk all the stock remains with the supplier until you place an order for the item and that item is shipped directly to your customer on your behalf and with your company details on the box.
Drop shipping is quite popular with many online sellers as it takes lots of work away from you so you can concentrate on selling instead of spending time on packaging and shipping. But there are some downsides to drop shipping; these downsides mainly affect new sellers.
Here I am going to list pros and cons about drop shipping so if you considering selling online for profit you can make the correct decision if drop shipping is right for you.
Drop shipping Pros
1 You do not have extra shipping costs for the stock delivered from supplier
With drop shipping you don’t have to pay shipping charges for the stock to be delivered from supplier to you. Which means you can offer better deals to your customers or to have better margins, which in turn means better profits for you.
2 No Storage required
As with drop shipping the product is directly delivered from your supplier to your customers you do not have a need for storage this means more savings and better profits for you in a long run.
3 No packaging needed
This will save you a bit of money as you do not have to spend money on your own packaging and labels.
4 You have more time to concentrate on your business
As with drop shipping you do not have to deal with packaging and shipping it will save you lots of time, which you can spend on improving your business and generating more sales meaning you will be more successful and have higher profits.
Drop shipping Cons
1. Drop shipping sometimes can be costly
In some cases you have to pay suppliers for the cost of labor and materials which is involved in drop shipping. Normally if you do have to pay the cost is somewhere between and for each item. In some cases depending on your margins and quantity some sellers especially new once can find that these additional costs may not be sustainable because of the reduced margins. This is one of the main reasons why drop shipping may not be a good option for some new sellers.
2. Even with drop shipping are still responsible for any shipping problems
In case of any problems with shipping like item arriving damaged, shipping delays etc you are the one customer will go to as you are the customer facing party even some of this things are outside your control. So make sure you have a good communication channel with your suppliers so any shipping issues can be quickly fixed.
3. Sometimes it can be hard to find a supplier who will do it and do it well
Many suppliers do not provide drop shipping service as it requires lots of extra paperwork and tracking. Also it means supplier has to provide a higher level of quality control and generally there are also higher labour costs for supplier.
4. Stock levels may cause unhappy customers
Your supplier may not advise you in time on stock levels. So if you were to sell something without knowing that supplier is out of stock and needs to place that item on backorder you potentially may run into unhappy customers and in some case order cancelation from customers.
Drop shipping is generally quite an appealing way of doing business for many sellers but it is not always the right one. Despite the inconvenience of doing things yourself it can often be more viable option then drop shipping especially for new sellers.
