What is Dropshipping? What are the advantages and disadvantages of Dropshipping?

You are wanting to start a business but have no capital, limited financial resources are the reason why you hesitate. But don't worry, there are many entrepreneurs starting out with the capital "0". One solution to this problem is to rely on online sales by Dropshipping method. So what is Dropshipping?

1. Concepts

Dropshipping is a retail fulfillment method where a store does not keep the products sold in its inventory. Instead, when a store sells a specific product, there's no inventory, it buys the product from a 3rd party and ships it directly to the customer. As a result, those salespeople never see the product or handle it.

The biggest difference between Dropshipping and other retail models is that merchants sell without a warehouse or without inventory. Instead, these merchants buy inventory as needed from a 3rd party – usually wholesalers or manufacturers – to fulfill their orders.

This model is very famous in the world. For example, the famous computer company Dell also has a line to expand its business network around the world through Drop Ship. Agents who register to do Drop Ship just need to do online marketing to find customers, when they order products, you transfer the order to Dell for the company to deliver and extract a commission for you.

2. Pros and cons of Dropshipping

Drop shipping has the following outstanding advantages:

Drop shipping can help you get started with zero capital. With the dropshipping model, you won't have to buy any products unless you've made a sale and the customer has paid. Without the cost of inventory, you can start a successful dropshipping business with very little capital.

Items are delivered much faster, bypassing unnecessary middlemen.

You can downsize your warehouse or even eliminate it altogether and, of course, eliminating this cost saves you a lot of money. Since you don't have to deal with inventory purchasing and inventory management, your management costs will be quite low.

When selling online, inventory is your biggest headache. Coming to Dropshipping, you will no longer have to worry about this problem.

Flexible business location because: A dropshipping business can go anywhere with an Internet-connected device. As long as you can communicate with your suppliers and customers easily, you can start and manage your business.

You can work anywhere, anytime you want.

Besides the above advantages, Dropshipping also has certain limitations:

It is difficult to find a good distributor, providing you with a stable source of goods at a reasonable price.

Shipping problem will be very difficult when you have too many suppliers.

Defective products from suppliers: You will not be able to control product quality. Think about it if customers are not satisfied with the product, surely your website's reputation will be significantly affected.

Low Profits: Low margins are the biggest downside to a highly competitive dropshipping business environment. Because it is so easy to get started and the investment and operating costs are low, many merchants will set up a store and sell bargain items in an effort to increase sales. They invested very little to start the business so they could afford to operate with low turnover.

Some rules to keep in mind to get a drop-shipping service right for your company:

Drop-shipping will work optimally if applied to the right products. Chances are the product is in high demand being offered by suppliers where the freight rate should be a fraction of the cost, so use a more expensive shipping method. will not be financially profitable. To protect your customers from shipping mishaps, you must check your srop-shipping companies first and list the most reliable ones.

Make sure you have a reasonable amount of time. Drop-shipping will take a certain amount of time and certainly not more than the time it takes you to process the order yourself. And it can also help your customers to track the shipping process.

Items must be supplied from your supplier. This helps you to know the product you are selling is available in the supplier's inventory. If you do not have that information, inform your customer that you do not have stock in stock and that the goods are not available but depend on a third party.