Can dropshipping help your small business? Dropshipping is a retail fulfillment method in which a store doesn’t keep the products it sells in stock. Instead, when a product is sold, the store purchases the item from a third party and has it shipped to the customer.
The Dropshipping Difference
The biggest difference between the standard retail fulfillment method and dropshipping is that the selling merchant doesn’t own the inventory they sell. Instead, the merchant purchases items as needed from a third party to fulfill orders.
- Requires a much smaller up-front investment
- No managing or paying for a warehouse
- You aren’t responsible for tracking inventory or shipping the items
- You’re overhead is considerably lower
- You can operate your business from anywhere
- Cutthroat competition can destroy your profit margin
- Without your own inventory, you have to rely on a third party that may not always be reliable
- Working with multiple suppliers complicates your shipping costs
- Customer satisfaction hinges on your supplier, so you’re at their mercy
Weighing Your Options
Dropshipping isn’t the perfect way to build a successful business. The model has some obvious advantages but comes with a number of complexities and problems you’ll need to be able to address in order to turn a profit. However, given that there is no “perfect way” to build a business, it’s certainly worth considering if you have the right business model.
Is it Worth It?
Ultimately, dropshipping is worth it if you know what you’re doing. Dropshipping is a pretty great business model for small businesses just getting into the online business world. It’s attractive because it’s a low-risk way to start your own business, so it’s not as big of a gamble.