Ecommerce Enthusiasts have taken up the plunge to penetrate into the ecommerce market and skyrocket their business potential by operating into the most suitable industry amongst many. Multiple ecommerce business models are available which entrepreneurs can use to expand the business considering and analyzing its advantages and drawbacks. It is one of the great ideas to jump-start your own ecommerce business with ease also without heavy investment.
A low Investment Business Model
Dropshipping is a retail fulfillment method in which the business doesn’t keep the inventory of the products it sells. When the customer places the order, the Dropshipping retailer further places the order to relevant third party let say manufacturer, wholesaler or supplier who directly ships the products to customers. The store owner earns the commission as the profit.
The parties involved in this method are –
- Storefront owner
- Third Party Businesses (Manufacturer, Wholesaler or Supplier)
Here in the case, the storefront owner doesn’t actually have to own the products or keep the inventory to sell the products. It is actually a retail supply chain management system that connects buyers and sellers without disclosing seller’s identity to the customer.
How it contradicts with Multi-Vendor Marketplaces Solution?
Multi-vendor Marketplace displays the details of sellers to customers and they do get to know from whom they’re buying which is not in the case of Dropshipping. Marketplace platform displays the details of vendors along with vendor badges based on the quality of products and services they offers. It also showcases product reviews so that customers can analyze and identify whether to buy from that vendor or not. Whereas in case of drop shipping, the customer does all the transactions with an admin who precedes the order further without disclosing any third party involvement.
A Feature-rich Business Model
A Storefront owner doesn’t have to keep the product inventory specifies that there is No hi-fi budget requirement for inventory management! Lot many other such benefits are offered by this method as stated below.
- Less Capital Investment
- Easy to Jump Start Your Own Business
- Flexible Business Location
- Wide Range of Product Option For Customers
- No Inventory or Logistics Management
A few Major drawbacks of Dropshipping Method –
It would be difficult in many instances to start a business at low capital without any back-end strong internal support center. The risk factor remains high when the core factor of your business or services are hired from external sources.
- Reduced Profit Margin as Multi-level Process
- Complexities in Shipping as different vendors from different locations
- Inventory Issues as the control is in external hand
- Lack of control over customer experience
- Supplier Management Problems
Irrespective of the drawbacks, if you use the proven strategies and perform smartly you definitely can build a successful business without any hustles of inventory or logistics management also at minute capital investment.
Top Dropshipping trends of 2018 to uplift your business –
1. Offer ‘Discount’ to attract clients
2. Win the battle with Free Shipping
64% of the ecommerce owners offers free shipping and yields more business.
(Data Source – https://market.dropwow.com/blog/dropshipping-tips-and-trends)
The per visit session time spent by shoppers has now increased to 4 minutes which definitely a signs of enhanced sales level.
3. Go Social and Promote well
Reach out various social platforms like Facebook, Instagram – use them wisely and reach out to more audiences. You also can use that platform to take a feedback from your client about services.
Perfect Practices to Follow:
Market Research is the key to success
Don’t jump directly into any business without any research or strong analysis. You can use Dropshipping method as your market research strategy.
This will be best suitable when you plan to launch a new product or services. Rather than investing up whole, this method can help you to determine whether to go for it or not along with offering multiple options for modification.
It is an added advantage if you’ve already settled your own ecommerce business and planning to expand your business.
The Best method to go for when you practice seasonal fluctuation
Many of the cases due to the seasonal overflow of demand, you might face low inventory issues or late delivery. It is the best practice to overcome such hurdles using this method. You can keep the inventory of predictable sales products and rest can accomplish with it.
The Bottom line –
Considering it as the sole business practice might come-up with crucial business challenges at the advantage of low set-up investment. Applying Drop shipping as an additional channel for strategic business planning can be beneficial to you. If you decide to perform shipping by yourself, considering alternatives regarding discount shipping is always a good idea!