Dropshipping is a relatively new craze that is spreading around the world, giving more and more people the chance to make money online. It is allowing people the chance to start an online business without the capital outlay that is usually required to start a more traditional business.
With stock held by a dropshipping business a website owner simply lists the items that the dropshipper can supply and when the owner sells an item he or she contacts the dropshipper, purchases it for a reduced amount, keeping the profit, and gets the dropshipper to deliver the item to the customer.
The pro's of Dropshipping
As you can imagine this can lead to a lot of advantages to the website owner. The most major pro's being.
- Little capital needed. Only the website needs to be developed, and if a ready made solution like Ebay is used then that is not even needed. Unlike traditional businesses it is actually possible to set a company up by using dropshippers with absolutely no outlay at the start.
- No minimum order quantities. Because you can order stock singly you don't need to order large numbers of items to benefit from drop in price to wholesale levels.
- No storage fees. Because the stock is all stored by the dropshipping company you won't have to be paying for warehouse space.
- Delivery. Delivery of the item is all arranged by the dropshipper, so you don;t need to worry about delivery prices, times, movement of stock etc.
- Wide range of stock. Because you are not tied to having certain stock by prices and quantities you are free to search for a large selection of items that you can put on a website or auction site.
- No risk. By using items that you are yet to pay for you are not actually risking having items that you can't sell, you make a profit on EVERY item that you sell.
As you can see there are a lot of benefits to using dropshipping as a business model, but what surely there are cons? Yes, obviously every business model has some drawbacks and dropshipping is no exception.
Con's of dropshipping
- No control of customer service. Returns policy etc are set by a company other than you, and you have to use what they offer.
- Stock levels. If the dropshipper you are using runs out of stock after you have sold an item but before they deliver it you could be left having to refund the sale or find another supplier.
- Competition. There are a number of people searching for dropshippers and it is possible you will be using much the same stock as someone else, meaning you will have to find a way of pitching the item in a better way than your competitors.
- A lot of scams. Because so many people new to the idea of making money online start by looking at dropshipping as a business model there are a large number of people looking to take advantage, so many scams are in operation throughout the Internet.
Thankfully although there are cons, when you find a good dropship supplier there is definite money to be made. The trick is of course to find that good supplier in the first place.