What is dropshipping?

Dropshipping has become one of the biggest trends recently in the UK. With a lot of people turning towards it either to start making money or to procure supply at a discounted cost. So before we take a look at why it has become so popular. Let’s examine what dropshipping is. In summary, dropshipping is where you are selling items without having to hold the physical inventory. The benefits to this are that you save on overheads such as storage and acquiring the storage. Essentially cutting a whole part of the supply chain out.

So, why are so many people jumping on the dropshipping bandwagon? Well firstly. For those wanting to start their own business or begin their entrepreneurial journey, it’s perfect due to its low start-up costs. Eliminating any need to purchase warehousing, logistics and inventory. Making the barrier to entry almost non-existent. It also means that you can test the market with new products and strategy without carrying the burden of more risk. As opposed to having to pay for inventory and running the risk of having it not sell. You can test and try as many different strategies as possible without any significant immediate financial burden.

Other costs you save when dropshipping include saving on fulfilment. Typically you would not only have to pay for warehousing. But also for other supply-chain associated costs including packaging, labelling, posting and tracking. All of this is alleviated as this is all left to the third party. However, there are some cons to dropshipping that some of those who delve into it do forget. One of the biggest being that you are reliant on someone else’s stock. Leaving you with the danger of potentially not being able to fulfil orders dependent upon your chosen drop shippers supply chain. This not only means that you lose out on sales but it can also hurt your reputation as a drop shipper.

Your profit margins when drop shipping are also squeezed as you lose out on being able to bulk buy therefore you are going to be paying individual prices rather than saving on unit costs when purchasing in bulk. And finally, any damage in transit or poor customer service from the suppliers end falls onto your shoulders and is out of your control from the start.
There are ways to boost your way of succeeding when dropshipping though. Quick tips include ensuring that you have a reliable and trustworthy relationship with your supplier. You may also want to make use of cloud-based inventory management systems so that you aren’t caught short and end up not being able to fulfil orders therefore losing out on money.

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