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All You Need To Know About Dropshipping

By Author: Roy Lau
Total Articles: 6

What is Dropshipping?
Dropshipping is one of the most common supply chain management technique in which the retailer or seller does not store goods, but transfer the orders taken from customers directly to the wholesaler or the manufacturer, who ships it to the customers. The retailer gets benefited by the difference in the wholesale or the retail price. Alternatively, the retailer can opt for a commission from the wholesaler on the sales percentage.

Instead of maintaining a stock, the dropshipping sellers puts just few items on display and keeps a catalogue consisting of the details of the products. In order to avoid direct connection between the wholesaler and customer, the dropshipping sellers often resort to “private label shipping” in which they label the products customized as per their needs.

The boom in the e-commence industry has further lead to the rise in the dropshipping companies. Dropshipping is even more popular in case of smaller retailers who sell the products in smaller quantities but to a large number of buyers. Also, this concept makes more business sense in big ticket items like steel and iron ore where the retailers just takes the deposit and have these materials shipped directly to the site from the manufacturing yard or facility.

Advantages of Dropshipping
- Blocking money in stock is not a very good idea especially if you are the sole trader. Dropshipping helps to overcome this problem as it helps you to sell a product before you actually buy it from the wholesaler. The positive cash flow cycle occurs in dropshipping as the seller is paid when the purchase is made and in turn he pays the wholesaler using credit terms.

- It is true that bulk buying gets you a good discount, however the cost per unit still rises due to increased costs on account of distributions, storage, warehouse, handling etc. Thus, drop shipping can help eliminate these costs and get you more profit per unit.
- Dropshipping allows the seller to focus on his core area of competency rather than paying too much attention to the storage and handling of the stock.

Disadvantages of Dropshipping
Like any supply management techniques there are some risks associated with dropshipping sellers and some of the major ones are highlighted below:-
- Sometimes dropshipping leads to back ordering in which the seller takes the purchase request from customer and forwards it to wholesaler, but the product is already sold out. This leads to a long delivery time and impact the credibility of the retailers.

- Dropshipping has also lead to a certain scams and frauds due to middlemen who illegally get involved in the supply chain and make money acting as middlemen between the retailers and wholesalers. Also, some scam artistes are involved illegally in this lucrative “work from home” opportunity.

Ideal for Beginners
Due to Dropshipping, it has become very easy for the beginners to open a business. Unlike earlier brick and mortar establishment, beginners can open their business in just a day by opening an e-commerce site and sell goods and deliver them at any location throughout the world.
For more information about Dropship Company and Dropship, please visit the website:-http://www.tgoal.com/

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