now offers Dropshipping. But what makes Dropshipping such a lucrative and viable option of startups?
Dropshipping is a retail fulfillment method where a store doesn’t keep the products it sells in stock. Instead, when a store sells a product, it purchases the item from a third party and has it shipped directly to the customer. As a result, the merchant never sees or handles the product.
The biggest difference between dropshipping and the standard retail model is that the selling merchant doesn’t stock or own inventory. Instead, the merchant purchases inventory as needed from a third party – usually a wholesaler or manufacturer – to fulfill orders.
Below are the key benefits of Dropshipping:
Less Capital Is Required – Probably the biggest advantage to dropshipping is that it’s possible to launch an e-commerce store without having to invest thousands of rands in inventory up front. Traditionally, retailers have had to tie up huge amounts of capital purchasing inventory.
With the dropshipping model, you don’t have to purchase a product unless you already made the sale and have been paid by the customer. Without major up-front inventory investments, it’s possible to start a successful dropshipping business with very little money.
Easy to Get Started – Running an e-commerce business is much easier when you don’t have to deal with physical products. With Dropshipping, you don’t have to worry about:
Low Overhead – Because you don’t have to deal with purchasing inventory or managing a warehouse, your overhead expenses are quite low. In fact, many successful dropshipping businesses are run from a home office with a laptop for less than R10 000 per month. As you grow, these expenses will likely increase but will still be low compared to those of traditional brick-and-mortar businesses.
Flexible Location – A Dropshipping business can be run from just about anywhere with an internet connection. As long as you can communicate with suppliers and customers easily, you can run and manage your business.
Wide Selection of Products – Because you don’t have to pre-purchase the items you sell, you can offer an array of products to your potential customers. If suppliers stock an item, you can list if for sale on your website at no additional cost.
Easy to Scale – With a traditional business, if you receive three times as much business you’ll usually need to do three times as much work. By leveraging Dropshipping suppliers, most of the work to process additional orders will be borne by the suppliers, allowing you to expand with fewer growing pains and less incremental work. Sales growth will always bring additional work – especially related to customer service – but a business that utilize Dropshipping scale particularly well relative to traditional e-commerce businesses.
All these benefits make Dropshipping a very attractive model to both beginning and established merchants. Unfortunately, dropshipping isn’t all roses and rainbows. All this convenience and flexibility comes at a price.