What is dropshipping and what are its advantages and disadvantages?

If you want to set up your own online store, but you do not have the means or the necessary logistics, you should know that there are multiple options that will allow you to dedicate yourself to eCommerce without having a warehouse or having the products you offer with you: dropshipping.

What is dropshipping and what are the advantages and disadvantages of this business model? Read on! We tell you everything you need to know.

 

Logistics alternatives for eCommerce

Surely, before even starting to design your business plan, you will have noticed the big companies that are already succeeding in the world of eCommerce. If they have reached this point, it is because they are doing something very well. So, do not hesitate to try to decipher how they manage their business, how they are organized, what marketing strategies they implement… in short, how they manage to be market leaders and continue to increase their figures as time goes by and try to apply the story to your business.

It is clear: if they have been able to achieve it, so have you, because not everyone started from the top: Amazon, for example, has gone from being a small online bookstore to become the giant of the marketplaces. Of course, it is very likely that you do not have the great logistics that the company has today.

Is this a hindrance to your online store enjoying the success you desire? Not at all. There are many possibilities of online business models for which you do not even need to have your own warehouse and one of those that may interest you most is, precisely, dropshipping.

 

What is dropshipping

Imagine that you are given the opportunity to sell one or more products, taking a commission for each sale you make and taking care of all the part of the shipments the same supplier of those products. Sounds interesting?

Well, this is precisely what dropshipping is all about: a business model based on distribution, formulated for online stores, in which your role is to act as a commercial intermediary and your eCommerce serves as a showcase for the sale of products that the supplier will then send to customers who have purchased them on your platform.

With this business model you do not need to have stock available, so you do not need to have a warehouse to store the merchandise. The supplier takes care of the shipments and you just have to set up an effective online store, receive orders, payments, ask the supplier to take care of the shipment and, of course, design the best strategies to get as many sales as possible to enjoy the commission you get for each one of them. Isn’t it great? See if it is that, due to its many advantages, there are many people who opt for dropshipping for their online store.

 

Advantages of dropshipping

The fact that so many people are betting on this business model is no coincidence. Dropshipping has advantages as succulent as these:

  • Significant cost savings: setting up your online store without having to worry about stock, warehouse, maintenance, inventory, transport or the loss of value of the products themselves is much cheaper than doing it in a big way with all these added extras.
  • Logistics are handled by the supplier: when you have your own warehouse and the stock is on your own, in addition to having to find space for the merchandise, you also run the risk of losing the investment if the products are not sold. When you opt for dropshipping, all this is no longer a problem, because it is the supplier who is responsible for deliveries.
  • More strategic and organized sales: taking care of all the processes involved in running an ecommerce in which you have to take care of the shipments of the goods, in addition to an economic cost, also involves a significant cost of time.

 

Disadvantages of Dropshipping

Now that you know the advantages of dropshipping, it is time to find the other side of the coin: the disadvantages, which also exist:

The commercial margins: of course, you will try at all times that the commission for each sale you make from your ecommerce is as high as possible, but there will be many times when the profit margin is lower than you would like.

Competition at home: you may be the only one with whom your supplier has established agreements but, frequently, their merchandise is divided among several online stores and, as you can imagine, many of them will be your direct competitors.

Problems with deliveries: imagine that in your Ecommerce you promise that shipments will arrive, at most, in 48 hours and the supplier for some reason is late with the delivery. Who do you think users are going to blame? Exactly: you. At a logistical level, when you choose this distribution system, the supplier takes care of everything, but you are the only one in charge of facing your customers. Hence the importance of not leaving orders aside and keeping track of the different deliveries.

Crossborderit has a simple solution. We help with all aspects of Classification, Calculation, and we will even collect the duties and pay them on entry so there are no delays. The customer knows what they are going to pay when they buy the product. Customs is paid accurately allowing the package to be delivered just like a domestic shipment.

If you want to know more about Crossborderit (CBIT) and its platform visit www.crossborderit.com

 

Damon Baca

Co-Founder

Crossborderit (CBIT)

www.crossborderit.com/IOSS

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