As online sales continue to skyrocket and now account for nearly a fifth (19%) of all retail sales with a forecasted growth rate of 34.5% by 2023, now is the perfect time to start looking at building your ecomm site.
One of the main ways many businesses are able to sustain such rapid growth is through dropshipping.
What is dropshipping?
Unlike traditional sales methods where a retailer needs to purchase and store products before selling and delivering them to consumers, dropshipping ships products directly to the customer for the manufacturer, distributor, or supplier.
The seller then collects the difference between the product’s sale price and its wholesale, minus any additional fees incurred.
The pros of dropshipping
The ease of dropshipping is undeniable. Because dropshipping is great for start-ups and small retailers it’s fast becoming one of the most popular business models for online sales.
- Reduced overheads: Dropshipping enables retailers to avoid costly overheads that comes with storing inventory. Dropshipping outsources this component and frees up valuable time, money and space for many online retailers.
- Low start-up costs: Dropshipping requires minimal cash injection because retailers don’t have to pre-purchase inventory. This reduces the risk of over-purchasing and winding up with excess stock.
- Great for product testing: Because start-up costs are low, dropshipping allows retailers to test different products and different markets easily at a cheaper rate.
The cons of dropshipping
While dropshipping has many advantages, there are some drawbacks that need to be considered. With over 5 million marketplace sellers on Amazon alone, dropshipping and ecomm is highly competitive and fortunes can turn on a dime.
- Low margins: Margins are incredibly low making it a buyers’ market.
- Inventory and supplier errors: Because you’re relying on a third party to fulfil your orders there is a greater margin for error that will reflect negatively on your brand and could deter customers in the future.
- Limited customisation: In such a competitive market carving your own niche is imperative, however, dropshipping doesn’t give you that level of control over the products you’re selling.
How to make the most of out of dropshippingDropshipping is an excellent tool to help build your ecomm business. If you’re unsure how you can incorporate dropshipping into you ecomm strategy, or if you would like to find out more about the right ecommerce platform for your business, seeking professional advice is a great place to start.