What is Dropshipping?
Dropshipping is a business model and order fulfillment method in which the seller only fulfills the order without keeping the stock and the retailer sends the order details to the wholesaler. providence of products for shipping is the responsibility of a third party. Dropshipper ships the product to its customer from a third party. Third-party could be Wholesaler, producer, and an additional retailer. The third-party ensures the delivery of products directly to its customer.
When you want to start a business, you get worried about where to keep the stock, drop shipping is useful in this situation allowing entrepreneurs to start their online business without bearing the heavy cost of storing the stock at warehouses.
Dropshipping Market Stats
Dropshipping market size faces an excellent growth in ecommerce trade. The dropshipping market is marked at global level and was valued at USD 102.2 billion in the year 2018 the CAGR is expected to increase up to 28.8% from 2019 to 2025.
The Indian online market was valued at USD 38.5 billion in 2017 which will be expected to reach USD 200 billion & CAGR 51.0% in 2026 As per the ministry of commerce & industry.
Different mobile phone applications have also improved the experiences of customers. Many companies are dealing in providing solutions to drop shipping problems which makes your experience better.
How Dropshipping Works?
Drop shipping is the order fulfillment process; let’s take a look at how it works.
1. Customer places the order
Customers will select a product as per their wish and then place an order on your online shopping site. The customer pays the retail amount of his selected product.
After this customer will get the email confirmation on his mobile which is automated by shopping sites software. The customer will pay for the order by his bank account which will be deposited into the seller’s bank account.
2. Seller will place the order to drop shipper wholesaler
The seller will place the order to the dropshipper supplier at wholesale price. A wholesaler will charge the shipping charges with manufacturing charges. Seller forwards the email confirmation of order to its wholesaler.
3. The wholesaler will ship the order
Dropship wholesalers will ship the order to the customer after the packaging of the product. Name, address, mobile numbers, email id, logo are labeled on the invoice while doing Shipment. Customers will receive the tracking number of shipments with the invoice on email.
4. Dropshippers deliver the product
The customer will receive the tracking shipment number for tracking the product. The product gets to deliver to customers by drop shipper and he receives the payment; this is exactly how the order fulfillment process is completed.
Pros of Dropshipping
There are many advantages of having drop shipping in your online business let’s take a look at the pros of drop shipping.
1. Availability of a wide range of products
The seller has the option to select from a wide number of products as there are different varieties available. One can easily list the product of a wholesaler on online shopping sites and provide to its customer by drop shipping method.
2. Investment is low
The seller doesn’t need to invest much capital in dropshipping as it saves sellers from the purchase of bulk inventory for storage. In the dropshipping method, the seller doesn’t need to purchase the product until a sale is made.
3. Uncomplicated to set up
The setup is easy to install in business e, it’s not very difficult to understand the mechanism of drop shipping and managing and handling its operations without getting more worried. As different parties are handling their assigned tasks without having a burden on a single person.
4. No workload tensions
In many businesses a situation comes where the workload is increased by the number of order placements. In this scenario dropshipping drops the situation of hypertension in handling work. Each party is responsible for their work.
5. Online medium
Medium of dropshipping works very effectively only by having an internet connection as it is very flexible and efficient to use.
It is also beneficial for earning profit from margins without investing and purchasing inventory.
7. No Overhead
Storage fees and purchase inventory expenses are not a big deal as these activities are handled by manufacturers.
8. Flawless Service
Due to its flawless services it has become popular in many big companies. big companies have the capability of selling a wide range of products to customers as per their need and preference
Cons of Dropshipping
Dropshipping is an effective way of checking scales and also investing in different variety of product, on the other hand, it also has some drawback
1. Fraudulent drop shippers
In recent times the fraudulent activities have also increased in the drop shipping method. Parties entering in the dropshipping method should sign the drop shipping agreement contract for protection and prevention from fraudulent activities.
2. Less benefit for the seller
The profit margin for the seller is somehow less compared to retailers, wholesalers, producers they also charge very high prices for delivering the product.
3. Less transparency in the product
Without even checking the product physically, the seller fulfills the order requirement which leads to less transparency of the product. The seller doesn’t know whether the product is defective.
4. Brand growth is hard
While completing the demands of different customers, it becomes very difficult for one brand to achieve growth in dropshipping.
5. Competition Level
Competition is very hard to manage in dropshipping as less capital requirement for its setup attracts different online shopping sites leading to a very high competition level.
6. Lack of Customers brand loyalty
It is very difficult for customers to have trust and be loyal to one brand as the seller is also indulged in different brands and is less interactive with their customers.
7. Finding a good supplier
More than 84% of ecommerce retailers have faced the biggest obstacle as finding a good supplier for their business.
Also Read: How to start dropshippping on Shopify?
Understanding dropshipping requires time, effort, research. One should introduce drop shipping for boosting their business and achieving growth while competing. The testing of new products in the market is also very effective with drop shipping. It also eliminates the heavy cost of storage and buying inventory and its capital investment requirement is also very low leading to its advantages.
Numbers of apps are available to provide the services to make your drop shipping experience better while eliminating the complications. Always remember to get the information about third parties whether they are honest or fraud doing scams. So, overall dropshipping is an increasing trend in the ecommerce industry and you can also give it a try after weighing the pros and cons. However, having the assistance of a good ecommerce scpecialist can ease up your implementation process.