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The Pros And Cons Of Ecommerce Drop Shipping Logistics
DROP SHIPPING IS A RETAIL BUSINESS METHOD WHERE A PARTICULAR STORE DOESN'T STOCK THE PRODUCTS IT SELLS. INSTEAD, WHEN A CUSTOMER ORDERS A PRODUCT, THE E-COMMERCE STORE WILL PURCHASE THE ITEM FROM A THIRD PARTY AND OFFER IT TO THE CUSTOMER. THIS WAY, THE ECOMMERCE STORE DOESN'T SEE OR HANDLE THE PRODUCT. THE THIRD PARTY WOULD DIRECTLY SHIP THE PRODUCT TO THE FINAL CUSTOMER. THIS METHOD OF SELLING HAS BECOME EXTREMELY POPULAR NOWADAYS. THE PROCESS BEGAN WITH THE ADVANCEMENT OF INTERNET TECHNOLOGY. THE INTERNET HAS CHANGED THE WAY PEOPLE DO BUSINESS IN NUMEROUS WAYS. ECOMMERCE DROP SHIPPING LOGISTICS IS ONE SUCH WAY. THIS ARTICLE PROVIDES A COMPREHENSIVE OVERVIEW OF THE PROS AND CONS OF ECOMMERCE DROP SHIPPING LOGISTICS.
The biggest difference between drop shipping and the regular model of retail sales is the merchant doesn't own any stock or inventory when it comes to drop shipping. Instead, the merchant will purchase inventory as required from a third party to fulfill the orders. Usually, it would be a wholesaler or manufacturer. If you are planning to launch an online ecommerce store, one of the very first questions to answer is from where are you planning to get the products to offer your customers. This encompasses all aspects starting from sourcing, inventory management to storing the products. It could be challenging for a store owner, especially a person new to this business.
Once this hurdle is passed, there are other problems of dealing with order fulfillment and shipping the products. Adding to this is the customer service aspect which is one of the most important aspects of building a sound ecommerce business. All these hassles can be avoided with drop shipping. It will allow the ecommerce store to fulfill their orders directly from the wholesaler or manufacturer of the product. The ecommerce store owner will not have to worry about keeping inventory, storing products, shipping and other aspects of the business.
You simple transfer the orders to a drop shipper who handles all the inventory, shipping and other logistics. Just imagine how easy it would be to do business this way. This is why there are so many e-commerce business owners who are operating on the drop shipping business model. There are so many service providers offering such services to their customers today. This unique business model has its own advantages as well as disadvantages. Here are some of the important pros and cons of the ecommerce drop shipping business model.
Less Capital Requirement is the most important advantage of the drop shipping business model. You can probably launch an ecommerce store without spending thousands of dollars in the process. Traditional retailers have had to spend a large amount of money purchasing inventory. This is not the case when it comes to a drop shipping business. This is why there are so many business owners taking this route today. Most of them would tie up with Chinese wholesalers or manufacturers to provide the products to their customers for affordable prices. Running an ecommerce business becomes much easier when you don't have to deal with physical products. Drop shipping is the best business model that allow you to do this. You will not have to worry about managing and paying for a warehouse, packing the orders and shipping them, tracking inventory for accounting purposes, handling returns and inbound orders and managing the required stock levels when you start an ecommerce drop shipping business.
Drop shipping businesses don't have to manage a warehouse for storing products and conducting inventories on a regular basis. Hence, they will not have so many overheads similar to a traditional retail business. Their overhead expenses are extremely low due to this reason. Many of the successful drop shipping businesses run from a home office with only a laptop. The overheads are not even $100 a month. These expenses may increase as the business grows, but it will never reach dizzy height compared to a traditional brick and mortar retail business. Drop shipping businesses don't require a specific location to operate. They can run from anywhere in the world where there is an internet connection and a computer. As long as you are able to communicate with the supplier and customer easily, you can run the business quite efficiently. This is why there are so many people entering this business model on a daily basis.
Since you will not have to pre purchase the products you sell on your ecommerce site, you are able to offer a wide array of products to your potential clients. If your supplier has the specific item, you can list it on your website for sale. You will not have incur any additional costs in this regard. In a traditional business, if your sales increase three fold, your workload will increase in the same manner. But when it comes to a drop shipping business, most of the workload due to additional orders will be borne by your supplier. You will not have to struggle with an additional load of work due to it. You will only have to take care of your customers and let the wholesaler handle the logistics part of it. This is another important benefit of the drop shipping business model.
There are some disadvantages of this model, too. Low profit margins are one of the cons of a drop shipping business. Many merchants sell their products at rock bottom prices in order to grow their business. Since they have invested so little in getting their business off the ground, they are able to afford to operate on such low margins. The fierce competition among the drop shipping businesses has also made merchants lower their profit margins to attract more sales. But if you are able to improve your customer service better than your competitor's, you can definitely attract more sales and profits in the long run. The aforementioned article provides a comprehensive overview of the most important pros and cons of ecommerce drop shipping logistics.
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