If you’re working towards being a successful small business owner in online commerce but are wary of dealing with physical inventory, eCommerce dropshipping might be the best option for you. The world of eCommerce is an exciting one and even after starting off by engaging in dropshipping, you can still go on to own your own stock, either by wholesale purchases, creating your own branded products or manufacturing.
What is Dropshipping?
Dropshipping is a method of supply chain management in which a retailer doesn’t keep a physical product inventory but rather transfers a customer’s orders directly to a wholesaler, manufacturer or other retailer who then ships the products to the customer.
This essentially means that the products you sell to customers come from a third-party who ships directly to them. Online retailers neither see nor handle products when using dropshipping.
So how does dropshipping work compared to owning your own stock? In comparison to standard retail store owners, you as the selling merchant don’t stock or even own an inventory. In order to fulfill orders, you liaise with a manufacturer, wholesaler or even another retailer to have the ordered items shipped to your waiting customers, contrasting with the model of owning your own stock in warehouses and fulfilling and shipping orders directly.
What Are the Pros and Cons of Dropshipping?
Just like every other business model, dropshipping comes with its own fair share of advantages and disadvantages. Let’s start by looking at the advantages of dropshipping in eCommerce:
- Low Risk: It’s a great to play safe, making it a solid choice for businesses just starting off in online retail and those taking a more cautious, conservative approach to eCommerce. With dropshipping, the risks of running an online business are minimal as you can avoid challenges like personally picking, packing and shipping products and the high overhead costs that come from owning your own stock.
- Minimal Startup Capital Required: Considering the fact that dropshipping products does not require investing in inventory before you start selling, it requires minimal capital to engage in this business model.
- Easy to Manage: With dropshipping, you have no business with physical products and as such, there is no need for you to rent and manage a warehouse, pack and ship orders or deal with staffing issues, as all these are left to a third-party.
- Remotely Operated: You can operate your dropshipping business from anywhere as long as you have strong Internet connection for effective communication with your customers and the third-party suppliers, retailers or manufacturers.
Other advantages of using a dropshipping service include having a wider selection of products to choose from, less stress from having to directly manage an inventory and a seamless customer fulfillment process.
Dropshipping also comes with its own downside and some of the disadvantages include, but are not limited to, the following:
- Third-Party Errors: Occasionally, errors may occur on the part of the suppliers, manufacturers or other retailers you’ve utilized for dropshipping. When this happens, you have no choice but to take responsibility and apologize to your customers. From missing items to low quality packing, delayed deliveries and botched shipments, you should be ready to sort any errors out as quickly as possible.
- Lower Profit Margins: Whether it’s Amazon dropshipping, Shopify dropshipping, eBay dropshipping or another service, merchants’ profit margins are generally lower since you are selling products from a third-party. In order to make significant profit, you need to maintain recurring sales in the highly-competitive world of eCommerce.
- Minimal Assurance on Inventory Flow: The control of inventory lies with the third-party and as such, certain products might not be available when they’re requested by your customers. This often leads to retailers accepting orders for items that are not currently available.
- Lower Barriers To Entry: A lot of people are catching up on this eCommerce retail model, especially because it requires minimal capital to start. Based on this, the competition is very high as a lot of online retailers find themselves selling similar items.
How to Transition from Dropshipping to Owning Your Own Stock
After carefully considering the pros and cons of dropshipping, you may now feel ready to transition from dropshipping to owning your own stock. Whether you want to create your own branded products or aim to buy products from a manufacturer, here are some steps to help make an easier transition:
- Develop the initial design of your product
- Conduct thorough market research
- Find a source for manufacturing if you opt against creating the products on your own
- Develop a business plan and create a budget
- Develop your unique product line
- Develop effective product packaging
- Adopt distribution channels and a logistical plan
- Differentiate your brand from competitors
- Develop and utilize a solid marketing strategy to introduce your new products
- Keep your website and social media accounts up to date with fresh content
- Maintain superior customer fulfillment compared to competitors
How Easyship Can Help
In order to make your transition from dropshipping to owning your own stock as seamless as possible, Easyship offers a wide variety of reliable and affordable shipping options to help you to fulfil customers’ orders all year round.
With access to many countries around the world, Easyship offers access to a global marketplace and highly competitive shipping rates. This, in turn, maximizes your profit margins and can give your business a significant boost while also breaking down barriers to global eCommerce, making it easier to own your own inventory and ship around the entire world.
Our shipping rates calculator can also be very useful in determining the full cost of your shipping and fulfillment operations while our useful guides to international shipping and duties and taxes are a great way to arm yourself with critical information as you prepare to take control of your own stock and potentially begin shipping cross-border.
Dropshipping is a great business model and an amazing opportunity for those who are trying to break into the eCommerce world. However, moving in the direction of owning your own stock can potentially significantly increase your profit margins and allow for better control your inventory flow.
Easyship stands at the ready to help your eCommerce business transition from dropshipping to owning inventory as your company scales and grows to exciting new levels.
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