What is dropshipping and is it right for your business?
By Jack Simpson
We live in a time when it’s easier than ever to set up a fully working shop, albeit a virtual ecommerce one.
One of the things that makes it so easy is the fact that, unlike in the past, you don’t actually need to own or store any stock in order to start selling to customers.
How is that possible? One of the most popular ways is through dropshipping.
What is dropshipping?
Here’s a picture of an actual ship being dropped. This is not what dropshipping is.
It’s really just a fancy word for outsourcing the inventory and shipping side of your ecommerce business.
Rather than going down the traditional route of ordering in stock, keeping it in your warehouse (or sitting room perhaps, if you’re a fresh startup) and then posting it out when orders come in, you can fulfil orders directly through the wholesaler or manufacturer.
So when orders come in you simply transfer them with the partner who then handles all of the fiddly delivery logistics.
Simple. No warehouse. No inventory woes. No logistical headaches when it comes to getting products out to your customers on time.
Example of a dropshipping partner
Perhaps the most high-profile example of a dropshipping partner is Amazon and its ‘Fulfilment’ service (FBA).
Amazon will store sellers’ inventory, pick it, pack it and ship it across the EU as and when orders are made via the Amazon site.
Edit: Amazon’s FBA qualifies as a third-party logistics (or order fulfilment) provider rather than a dropshipping partner because you still have to buy the stock up front, whereas with dropshipping you only purchase stock once the sale has gone through.
I can feel a dropshipping vs. order fulfilment post coming on…
More time for other tasks
The most obvious benefit in using this is, as with all forms of outsourcing, an increased ability to focus time and effort on other areas.
By letting somebody else take care of inventory and shipping issues, you can spend more time on areas such as sales, marketing, PR, recruitment – all the things that are so crucial to success in the early days of a startup and beyond.
Less startup capital required
When you’re thinking of starting your first business, unless you’re one of the lucky few it’s highly likely that a lack of capital is going to be one of the biggest barriers.
And the fact you’re new to the game means you’re unlikely to get much credit from manufacturers or wholesalers.
But because it removes the need to buy stock up-front, dropshipping enables people with relatively low startup funds to deck out an ecommerce site with products. [Read more….]