Warehouse Management, Inventory & Order Management, Brands, Multi-brand Retailers, 3PLs, Sellers, eCommerce Fulfillment, B2B & B2C Order Fulfillment

Dropshipping: Everything you need to know in 2018

  • February 9, 2018
  • |
  • 4 MIN READ

If you are willing to start an eCommerce business and not sure about dropshipping as an order fulfillment method, continue reading the blog. Here, we’ll focus on what dropshipping is, its pros and cons and how good it is for your business.

What is Dropshipping?

Dropshipping is a supply chain retail fulfillment method where the product is directly supplied to the customer from the manufacturer or the wholesaler. Instead of purchasing and storing a whole lot of inventory, a dropshipper just need to tie up with a manufacturer or a wholesaler and enlist the complete merchandise in the eCommerce store. This particular fulfillment method reduces the initial investment as the eCommerce store can eliminate the inventory maintenance cost. However, profit margins will likely be reduced and competition will become higher.

Is dropshipping really a good fulfillment option?

Deciding this is not as simple as it might appear to some of the eCommerce business owners. For a business owner who is willing to go with low investments, dropshipping is the option for them. While for some it might seem that the business is actually out of their hands.

Let us now discuss the pros and cons of Dropshipping:

Pros of Dropshipping:

  • Low startup Cost: As explained in the definition, business owner opting for dropshipping need not store inventory for order fulfillment. Also, there is no upfront cost involved in the agreement with the manufacturer/wholesaler which includes overhead expenses of managing inventory, warehouse, shipping & billing.
  • Go to market real quick: Dropshipping eliminates the wait time when products are shipped from manufacturer to the business owner, in some cases it can be a few weeks. In dropshipping, eCommerce owners can quickly go to market with their products as soon as they are manufactured and checked for quality.
  • Broad variety of product offering: You can offer the huge product range to customers and co-work with multiple manufacturers/wholesalers who are ready to work with dropship.
  • More time to market products and offer best customer service: With dropshipping one can manage inventory, fulfill orders, shipping, and labeling with ease. An eCommerce business owner can spend more time on marketing and promoting the complete product range. Additionally, the focus can be shifted to providing the best and seamless customer experience.

Cons of Dropshipping:

  • More Competition: Low startup and overhead costs can make more businesses to opt for the eCommerce dropshipping as an order fulfillment model, increasing the competition subsequently.
  • Inventory Reliance on Manufacturer/Wholesaler: In dropshipping, the eCommerce business owner can not control inventory hence the quality and quantity of the products are always under question.
  • More complicated logistics operations: Working with multiple suppliers might become way too complicated for a business owner as one has to deal with different shipping methods and policies. Errors are more likely to occur, be prepared to communicate with them as well as your customers to avoid discrepancies.

In order to integrate the dropshipping model with the eCommerce business, it is necessary to understand businesses’ profit margins and ensure it makes sense for the business. Working closely with suppliers and integrating them with the order fulfillment software can really solve those challenges that a business may encounter while opting for the dropshipping model. To ensure a hassle-free fulfillment process, Vinculum – A global SaaS-based eCommerce ecosystem enabler offers Vin eRetail which can help business owners to enable multi-channel retailing with ready integrations to leading marketplaces, 3PLs and webstores.

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