Dropshipping: the good, the bad, the ugly (and alternatives)
In recent years, the number of orders being fulfilled via dropshipping has surged. So, what exactly do we mean by dropshipping, and why has it increased in popularity? We’re here to give you the good, the bad, and the ugly on this newly popular model.
What is dropshipping?
Dropshipping is a retail fulfilment method that doesn’t require the store to hold its stock. Instead, when a store sells a product using the drop-shipping model, it buys the item from a third party and has it shipped directly to the customer. The seller never handles the product directly, and therefore doesn’t have to engage in the storing, picking, and packing process. To fulfil orders, the seller will purchase only the necessary stock from a third party when it’s needed.
If you’re a business owner, the process looks a little something like this:
An order is placed to your business
You pass the necessary info along to your drop shipper
The dropshipper charges you for the item sold, plus a drop-ship fee
The dropshipper picks and packs the item and posts it to the customer
The customer receives the item
The good: advantages of dropshipping
The process of drop shipping is less expensive and more accessible than other fulfilment methods.
The seller only pays the supplier or manufacturer when a customer buys a product. The up-front costs are almost zero, an attractive price for entrepreneurs that are starting their eCommerce business from scratch.
Choosing this method frees time to focus on other aspects of the business, as well as saving on the costs involved in manufacturing and storing inventory yourself.
Wide scope of products available to the merchant to sell on since the seller don’t have to keep a physical stock.
The view from your new dropshipping eCommerce office? Keep reading the article
The bad: disadvantages of dropshipping
However, it’s not all as great as it sounds.
Although no logistics journey is completely smooth sailing, there is an increasing number of obstacles that merchants selling via dropshopping face:
Lack of control over the quality of the items being sold. As inventory rarely passes the hands of the seller, it’s impossible to accurately assess the quality of the products that you’re taking ownership of.
How and when the items reach their buyers. In dropshipping often lack of shipping policy for eCommerce businesses leads to insufficient communication, delivery times, and prevents customers from getting the constant tracking updates that fulfilment services provide.
Dropshippers can sell items that are out of stock or even discontinued.
And lastly, your store could effectively be in a race to the bottom. With so much competition, retailers set lower and lower prices to compete with their rival until the profit drops to an obsolete amount, losing you money and a livelihood.
The ugly
Dropshipping ultimately takes away the responsibility from the seller to their consumer. Overall, the disadvantages to drop shipping includes errors in the product shipment, shipping problems, inventory issues, miscommunication, and low margins. If a customer calls the merchant to make a complaint or locate an order, the process is lengthy and often lacks the desired clarity – all the information for customer service is in the hands of the supplier.
Will the gifts arrive before Christmas with dropshipping?
Alternatives to Dropshipping
If you want to follow a model similar to dropshipping, you have some options:
Consignment stock: an agreement with the supplier to guarantee a minimum stock level will be available.
Sell digital goods: this way you can avoid the “out of stock” issue: games, software, music, education.
Import: import goods instead of letting the supplier fulfil them. You can even add your label to these goods and create a private label to increase your profit margins.
Make your own products and sell them – jewels, fashion, accessories, personalised products and more.
From these options, half of them involve having stock. And actually having stock might solve at least half of your dropshipping issues.
Reducing stock costs
For dropshippers, having no stock saves money but is also a source of headaches. If you want to avoid the dropshipping disadvantages, you’ll probably need some stock.
If you don’t like the idea of keeping a stock in-house, you can save time and money outsourcing your fulfilment. See how Huboo fulfilment works:
Add your products and your details to the Huboo Dashboard
Ship your products to us – you can do this yourself or have your manufacturer send to us directly
Huboo integrates with your eCommerce: customers order your products, and we take care of the picking, packing and posting. Sorted!
You can see inbound goods, sales and fees in real-time on your dashboard
If you don’t like the idea of keeping a stock in-house, you can save time and money outsourcing your fulfilment.
Which categories can a fulfilment center like Huboo fulfil?
A fulfillment company can usually fulfil orders from many categories. Some examples are:
