To Dropship or Not to Dropship
What is Dropshipping and is it Right for Your E-Commerce Business?
If you’ve recently started an e-commerce business, you might have heard the term “dropshipping” come up in conversation.
But you may still be asking yourself “What does dropshipping mean and could it work for my company?”
Don’t worry if you’ve still got questions about dropshipping because we’re here to provide the answers.
Read on to find out what dropshipping is, how it works and if it’s a viable option for your business.
What is Dropshipping?
Dropshipping is a service offered by an ever increasing number of wholesale sellers to their customers.
It allows the buyer – you – to receive orders from customers without having to stock product inventory on your own premises.
Instead, upon receiving an order from a customer, you contact your supplier who then takes care of packaging and shipping the product on your behalf.
It’s an appealing option to entrepreneurs running e-commerce stores from their own homes as it means not having to rent additional space for storage – which can prove costly.
How Does Dropshipping Work
So we’ve answered the question “what is dropshipping”. Now onto the next query: “how does dropshipping work?”
There are three links to the chain of dropshipping: the customer, the e-commerce retailer and the product supplier.
Your job as a retailer is to display the products you are selling on the platform you have chosen, along with a concise description and straightforward payment options.
Once the customer makes a purchase from your e-commerce platform, the second stage of the process begins.
It’s then your job to get in touch with the wholesaler and pass on the order. The supplier will then package and ship the product to your client in your company’s name.
Wondering about profit margins when using a dropshipping service?
Think of it like this:
-The customer places an order for a product which costs £50 on your ecommerce platform.
-You pay the supplier wholesale price for the product and dropshipping service, let’s say £25.
-Your overall profit from the transaction is £25
Of course, in order to use dropshipping as a sourcing strategy, you first need to find a wholesaler (link to previous blog post) who provides a dropshipping service – and not all of them do!
In order to identify the right dropshipping supplier for you, we’d recommend using a directory such as ours at the Wholesaler UK.
All our wholesalers are vetted and verified by us, so you know you’ll be working with suppliers you can trust.
Check out our UK dropshipping wholesalers here.
Benefits of Dropshipping
So you’ve identified dropshipping as something you may be potentially interested in as a retailer. But are you still wondering whether dropshipping is right for your business?
There’s no denying that dropshipping continues to increase in popularity as a sourcing option, and this can be attributed to a number of factors.
The benefits of dropshipping include:
- Cost effective – One of the main reasons retailers are drawn to dropshipping as a business model is because of low overheads – you don’t need to rent extra warehouse space to store products or buy bulk stock, and it prevents you from having to hire a lot of extra staff to manage this side of operations.
- Flexible– In theory, if you’re using dropshipping, all you need is a laptop and an internet connection to run your e-commerce store. Because you’re not tied to a physical location and managing warehouse space, you can run your business from anywhere in the world.
- No shipping – Shipping and packaging can be a hassle – there’s no doubt about it. If your wholesaler is taking care of all this for you through a dropshipping service, it prevents you from having to purchase packaging such as boxes, bubble wrap and tape yourself. Plus it means you’re saved the effort of setting up your own shipping account!
- No inventory- Not only are you spared the expense of a warehouse and all the extra costs incurred in storing inventory – such as insurance and manpower – you also avoid bulk ordering from suppliers and being saddled with stock you can’t shift. After all, if it doesn’t sell, you won’t order it!
Cons of Dropshipping
Unfortunately, like everything, dropshipping has its downsides, too.
- Reduced control: One of the disadvantages of dropshipping is that it reduces the amount of control you have as a retailer when it comes to order fulfillment and shipping. You instead rely entirely on your wholesale supplier to deliver products to your customer in a timely fashion.
Fortunately, most suppliers provide a tracking number so you can monitor the process, but ultimately if the customer is left dissatisfied with shipping times – the buck stops with you.
- Inventory: If you’re in control of your own inventory, you know exactly how much stock you have left and when it’s running low. Unfortunately, this can be another unknown quantity when using a dropshipping service. If your wholesaler runs out of the product, you do too – which means you might have to process more customer refunds than you would if you were managing inventory yourself.
- Order processing problems: Although dropshipping seems fairly straightforward as a concept, if you’re working with more than one supplier things can get complicated. Suppliers may use different shipping and billing options, which can prove difficult to keep on top of if you’re working with multiple wholesalers.
Conclusion: Is Dropshipping right for my business?
So now you know what dropshipping is and how it works, it’s time to decide whether it’s a feasible strategy for you.
Perhaps you are just starting out with your e-commerce business and have limited time and space.
Or maybe you have chosen online retail as a career choice as you enjoy the flexibility it provides. Armed with your laptop and an internet connection, you can feasibly work from any corner of the globe.
If this is the case then dropshipping could work for you. Having your wholesale supplier deal with shipping and product storage means you are saved the commitment and added expense that both of these entail.
However – if you prefer to have control of the order process from start to finish and want to be personally responsible for delivering excellent customer service to your clients, then you could feel out of the loop when using a dropshipping service.
Although most dropshipping wholesalers operate a highly professional service – after all, it’s their reputation at stake, too! – if any problems occur then it’s on you as a retailer, in the customer’s eyes at least.
Last but not least, whether or not you choose to go with dropshipping in your business – remember to ensure you are always working with verified UK wholesalers to source your products.
You can choose between hundreds of trusted UK wholesalers in the Wholesaler UK Directory – divided into easy-to navigate categories to ensure you find exactly what you are looking for!
Good luck and happy retailing!