What is Drop Shipping?

Drop shipping is a method of retail business where the seller accepts customer orders but does not keep inventory in stock. Instead, it transfers the order to a third party and has it shipped directly to the customer. As a result, the retailer is responsible for selling the products with little or no control over the product quality, storage, inventory management, or shipping. 

The major difference between drop shipping and the traditional retail model is that the selling merchant doesn’t have to stock their own inventory. Instead, the seller purchases inventory from a third party--mostly manufacturers, or wholesellers.

Advantages of Drop Shipping

Low cost of inventory

It requires a lot of capital to stock a warehouse. By implementing drop shipping, you can eliminate the risk of having a financial burden. 

Increased product variety

Without the limitations of space and startup costs, the retailer is now free to offer its customer more diverse goods. 

Low risk

There is undoubtedly less pressure to test the products without the risk of carrying obsolete inventory.

Disadvantages of Drop Shipping

Less control

Drop shipping makes it difficult for the retailer to ensure the consistency of the product quality as well as monitor the shipping process. However, if the purchase experience disappoints the customer, it will reflect on the business. 

Reliance on Other People’s Stock

Being able to update your product listing is a big benefit of drop shipping. However, you have no control over the stock. If the supplier is having a stock shortage, the drop shipper will not be able to sell the product. 

Less competitive pricing

Drop shipping means no more bulk inventory. In other worlds, there is no bulk pricing. Without the benefit of selling in bulk, there will be less profit. 

Poor customer service

When the supplier delivers products late, with damage, or wrong items, the customer will complain about the retailer. It is hard to maintain good customer support when retailers are not able to foresee and solve customer issues quickly.