Drop shipping has become a very popular method of selling online. It gives retailers the opportunity to focus on other important matters like developing their businesses and increasing sales. In a very short period, drop ship retailers can establish a good reputation in the e-commerce market.
Drop shipping is also referred as an automated system that reduces the effort required for managing inventory. Once an order is placed by a customer, the supplier contacts the manufacturer who then contacts the retailer. The manufacturer then sends its product according to the order by the customer to the retailer, who then adds the item to the retailer’s inventory. Since the retailer is responsible for inventory management, all the transactions between the supplier and the retailer are handled by him/her.
Drop shipping reduces the hassle of maintaining an inventory. It allows retailers to sell products easily since there is no need to maintain an actual inventory. This leads to more profit margin since there is not a need to manage the product inventory. With less work involved, the time to earn more profit is also shortened.
Another advantage of drop shipping business model is the ability to increase or decrease the volume of sales depending on the demand of the customers. Since there is no inventory, the retailer does not face difficulties in storing inventories. This will allow them to offer new products frequently to increase their sales. They can also provide more options to the customers. For instance, if there is a particular type of product that has very limited quantities in the market, the retailer can add this specific item to their inventory.
On the downside, there is also a reduction in the level of profitability. The amount earned from selling items can be reduced because the retailer has to handle the inventory and storage. If they fail to do so, the retailers will have to take out loans to pay for their inventory expenses. On the positive side, it is a good opportunity to enter the e-commerce industry since the margins are higher than usual. Also, the cost of goods purchased from the suppliers are less than those in the retail market, which leads to increased profits and bigger margins.
Although there are disadvantages to ecommerce dropshipping business model, it is a very practical choice for most retailers. In fact, many sellers have already started to use dropshipping to make money online. Some even make a full time living from it. In addition, SaleHoo makes it easier for newbies to find reliable suppliers and dropshippers. If you are considering this business model, just be sure to choose a reputable supplier and make sure to do the proper research on how to sell on eBay and on your own site.