In the constantly changing environment of modern trade, eCommerce (short for electronic commerce) remains persistent with the growth of interest in online purchasing.

In eCommerce, the model called drop shipping has gained a share ofpopularity among other models as one of the most accessible and suitable for starting a business with relatively low levels of investment.

Therefore, this article sought to explain what drop shipping eCommerce is and the pros and cons of this business model to help anyone interested in it.

What is Drop Shipping eCommerce?

Conventional eCommerce mainly entails buying products in large quantities and stocking them before shipping them to the final consumer from the firm’s own depot. The main disadvantage of this model is that there is a very high initial capital expenditure in the form of stock accumulation and storage facilities, as well as continuous shipping and handling.

On the other hand, in drop shipping, there is no necessity in managing the inventory of products. Rather, when a customer places an order, the retailer relays the customer details, and the product that needs to be delivered, and the supplier is responsible for delivering the order to the customer. This particular process saves much on overhead expenses and makes it easier for the retailer to manage their business.

Below are some of the key steps that characterize the drop shipping process:

• Setting up an online store: You set up an online store where customers can find products procured from different manufacturers.
• Customer orders: A customer orders a product from your online store.
• Order Forwarding: You forwarded the necessary information to the supplier.
• Supplier fulfillment: The supplier sources, packs, and delivers the product to the customer instead of you.
• Customer receives product: The customer gets their order, and they may even be unaware that they dealt with the supplier rather than you.

In a nutshell, you are the manager of an online shop and the primary communicator with the clients, while the supplier deals with the goods and the delivery. The foundation of this model relies upon three major components:

• Your online store: This is where you present your products, take orders, and manage your customers.
• Dropshipping suppliers: These are wholesalers or manufacturers who have the stock and get to deliver the products directly to the customers. The selection of suppliers is very important for the further development of your company’s endeavors.
• Marketing and customer service: Even though you do not interact with tangible goods, you have to find customers, process orders, and offer quality customer assistance.

Advantages of Drop Shipping eCommerce

There are so many benefits associated with drop shipping, especially for somebody who is just starting an eCommerce business.

Low Startup Costs

One of the major benefits of drop shipping is that it is relatively easy to start. There is no necessity to purchase large stocks or rent a large warehouse to undertake this kind of model, which makes it ideal for anyone who wants to venture into business with little capital.

Minimal Inventory Management

Because suppliers are involved in the storing and transportation of products, you are relieved of this responsibility and can instead concentrate on promotional aspects and customer relations. This cuts down the challenges and expenses that come with conventional eCommerce undertakings.

Wide Product Selection

This way of product delivery enables you to extend the range of goods that are available in your stores while avoiding the risks of overstocking or, the opposite, lacking goods. Therefore, you can explore new products and increase the product range that is offered to consumers.

Location Independence

Establishing and running a dropship eCommerce business requires no specific location; it can be done from any location with an internet connection. This flexibility appeals to entrepreneurs looking for a location-independent business that allows them to take active control of their lives and business styles.

Scalability

It should be noted that drop shipping is highly scalable. As the orders accumulate, your store‘s main function is sales and client support since the suppliers take up most of the fulfillment responsibilities. This scalability helps grow the business without the huge investment in infrastructure, as seen in older and traditional models of eCommerce.

Challenges of Drop Shipping eCommerce

Like any other business model, drop shipping comes with some disadvantages that you need to know before committing to the model.

Supplier Reliability

Reliability is very important in drop shipping since you rely on the supplier to ship products to your clients. Lingering problems such as delayed shipment, poor quality products, or even wrong orders can result in customer complaints and potential loss of customer base for the retailer.

Therefore, supplier selection plays a crucial role; it is recommended to work with proven drop shipping eCommerce platforms like AliExpress and Oberlo to avoid issues in the future.

Inventory and Order Management

While operating a dropship eCommerce business means that you do not need to keep the products on hand, it also means that you has to know the inventory status of diverse suppliers. Proper order management systems (OMSs) like Inventory Source are required to reflect the correct inventory status in your online store as well as on the retailer’s platform to prevent stock out or overstocking.

Profit Margins

The profit margins can also be on the low side in drop shipping as compared to other conventional business types of selling online, as the suppliers may sell their products at higher per unit cost and sometimes may also impose additional charges such as handling and shipping. This situation puts pressure on retailers to adopt balanced decisions on pricing and cost so as to be able to achieve their desired level of profit.

Customer Service and Communication

The final disadvantage of this setup is that you do not come in direct contact with the product, and this means that managing customer complaints that stem from issues such as shipping or dispatch or quality defects could be a bit more challenging. Therefore, some of the crucial pragmatic actions are proper communication with the suppliers and timely and accurate handling of customer complaints.

Conclusion

After learning what drop shipping eCommerce is, it is clear that it is a good model for aspiring entrepreneurs as it requires little investment and business experience. Drop shipping helps reduce the costs of inventories and opens the doors to possessing a wider array of products. However, you still need to manage the suppliers well, manage orders efficiently, and attend to the customers’ needs.

If we analyze the situation with online retail, the future of drop shipping seems rather bright. Companies in the drop shipping business could further enhance their techniques for inventory control and order processing. Therefore, it is clear that success will depend mainly on market selection, relationships with suppliers, and marketing strategies.