Drop shipping pros and cons can help decide if this business model is right for your online business. It can be an excellent way to earn extra income or even replace your day job. The online shopping industry increased 28% over the last year due to increrased security and reliability. More and more people are trusting online merchants and enjoying the convenience of shopping from home.
That means this is one of the fastest growing areas of online business. Entrepreneurs the world over are starting drop shipping businesses in the hopes of creating a successful business. Those that understand the way the business is done are the most likely to succeed.
I found this article that I think you might find informative. It lists some of the drop shipping pros and cons that you should be aware of. And here it is:
The Pros and Cons of Drop shipping
What are drop shipping pros and cons
Drop shipping is when the product supplier takes care of all the shipping for you. Rather than ordering stock in bulk, the stock remains with the supplier. Then, when you make a sale, you send an email to the distributor and they pack up the item and send it straight to the customer with your company label on the box.
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Drop shipping is a very popular option with sellers because it takes a lot of the grunt work out of selling on eBay. However, there are some major downsides to drop shipping - especially for new sellers. Here's a list of the drop shipping pros and cons so that you can make the right decision for your business.
Drop Shipping Pros
- No storage room required. You don't have to fill up your living room with stock and packing materials! This is particularly useful if you are selling large items such as kit-sets, furniture, sporting goods, and so on.
- No warehousing costs or paying to have stock delivered to you from the supplier. Drop shipping means you don't have to pay for your own storage area. Which can mean big savings in the long term.
- Spend more time on other important areas of your online business. You won't have to organize the packing and drop shipping method. You won't have to drive to the post office to ship out your packages. This gives you a significant amount of time to spend on more important tasks like marketing and communicating with your customers.
- No packaging required. You save money by not having to order and store packaging materials. You will not have to hire labor to run a shipping and receiving department.
Drop Shipping Cons
Drop shipping is a very appealing prospect for many sellers; however it is not always a realistic one. Despite the hassle, 'doing it yourself' can often be a more sensible option financially, especially for new businesses.
- Drop shipping can be costly. You have to pay for the cost of the labor and materials involved in drop shipping. Generally this is between $2 and $5 per item. Many new sellers find that the additional costs of drop shipping greatly reduce their profit margins and sometimes nullify the whole operation. This is the main reason why drop shipping is not a viable option for some sellers.
- You are still responsible for any shipping problems. So what if the item arrived damaged? Was there a shipping delay? You'll get the flak for anything that goes wrong with the shipping even though it is technically out of your control.
Sometines it is hard to find a supplier who will do it all, and do it well. Many distributors will not drop ship because of the extra paperwork involved. Then there is the matter of checking up on quality standards to make sure your items are being packed correctly.
- Low stock levels may cause unhappy customers. Your supplier won't necessarily tell you when they are running low on stock. If they run out and have to do a back order, you may end up spending a great deal of time placating a bunch of unhappy and impatient customers.
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As a drop shipping pros myself I can tell you that it all boils down to picking the right supplier and applying your business model correctly. I use a drop shipping supplier that has been in business for 30 years, has global reach and isn't going away any time soon. Their computer based database can tell me immediately if a product is in stock, back ordered or no longer in production. This helps me head off any confusion as to whether or not I can ship the order.
Yes, you will have to pay for shipping costs from your supplier, but you can use that to your advantage. You can offer free shipping as an incentive to sell the product provided you still make a profit. Sometimes you have no choice but to pay for shipping costs. When that happens you should pass the shipping costs along to the customer. All you need to do is make your shipping schedule match what the supplier charges.
Many of the drop shipping pros and cons can be overcome by careful planning and execution. Three things you will need to do to make your drop shipping online business a success are.
If you are just starting out or even a seasoned drop shipper the most important thing you need is a reliable supplier. I use the Drop Shipping Pros at Salehoo.com
- Select reliable drop shipping suppliers
- Obtain an online shopping cart (free or paid) to collect orders and calculate shipping costs and taxes.
- Create a merchant or PayPal accout to process online transactions.