The Benefits and Drawbacks of Dropshipping

Wholesale drop shipping is a very popular form of sourcing products because it allows you to pay only for the items that you sell.

It works like this: You find a supplier offering drop shipping services (you may need to email them to find out) and set up an account. Different drop shippers have different setups but usually you can choose to credit your account, or, you can simply leave it empty and pay for each item as you sell it. Once you've created an account, all you need to do is grab the drop shipper's provided photos and product descriptions for the items you wish to sell and list them on eBay or your website.

After you make a sale and receive payment, log into your supplier's site, select the product you have just sold and take it through the checkout and pay for it. Enter the buyer's address details, and the supplier will package it up and ship it!

The Benefits:

  • Drop ship suppliers really take all the responsibility of handling and managing stock, saving you a heck of a lot of time!
  • You don't have to store stock on site,
  • All packaging and postage is taken care of
  • You only pay for the stock you sell, so you remove the risk of holding stock and being stuck with it
  • No minimum order - you don't need to have a lot of cash to get started
  • For new sellers the main advantage of drop shipping is the lack of risk. But for more advanced sellers, I believe that the greatest benefit drop shipping holds is the ability to offer more choice.

You may have heard the phrase 'long-tail', a bit of a marketing buzz-word in recent months. In a nutshell, the 'long-tail' means targeting the far corners of niche markets that are normally untapped by selling a lot of low-demand products. Experts have worked out that when added together, sales of low-demand products actually exceed those of single products with very high demand!

 Drop shipping enables you to take advantage of that strategy very easily. For example, a DVD seller using a drop shipping supplier could promote 400,000 different DVDs! They are able to make money by selling a lot of low-demand products without any risk or storage inconvenience. This gives the DVD seller a massive advantage over regular DVD stores.

 The Drawbacks:

  • Probably one of the most common problems sellers have with drop shippers is sudden stock shortages. A sudden rush for a particular product might cause the drop shipper to sell out, leaving you in a bit of a sticky situation if you've got orders to fill!
  • Having no control over your inventory means that if buyers ask you for a unique photo of the item (which some do after being caught out by fraud in the past), you are unable to meet their request.
  • Drop shippers aren't perfect, but if they stuff up, you get the blame. If the supplier packages the item poorly, causes delays in shipping, or makes a mistake with the order, then you are held responsible, even when there is very little you can do about it.