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Dropshipping is an element of retail fulfillment practice in the standard retail model that allows a store selling products and merchandise to not hold its own inventory or, in other words, do away with keeping their products in stock, or shipping their products to their customers on their own or owning a warehouse to store its products.

In this case, whenever there is an order for the product, the seller purchases its item from a third-party vendor and this third-party vendor ships it directly to the customer. This retailer partner with a dropship supplier that does the manufacturing, warehousing, packaging, and shipping of these products, on the retailer's behalf. The merchant does not see or handles the said product.

There are plenty of benefits to this dropshipping business model. These are:

It is extremely easy to set up. Unlike setting up a brick-and-mortar business space, this retail model only involves just three steps which is i) finding the supplier ii) setting up a good website and once that is done iii) selling your products and services

This model is easy to understand and implement especially for a new coming into the e-commerce industry

To set up your business with the dropship model, the cost involved is literally next to nothing. Unlike in traditional business models where the major costs go into the setting and running of the operations, in dropshipping this step is eliminated and all the cost you need to think of is the applications you need to run your website, domain registration, hosting as well as themes you use - which is not much.

There are no unreasonably high overhead costs involved. The merchant or business owner can do away with renting or buying warehouses to store their products and also do away with utility bills that come with it. The costs of managing the website are they need to worry about.

Dropshipping risks are significantly lower because there is little to no pressure about selling inventory.

This type of business model can be run from anyvvhere meaning the business owner or merchant's location independent. There is no warehouse, no sales location, no offices, not much employees and no hassles.

There is little to absolutely no commitment to a physical space requirement which means the business owner can run their business by the beach, in their home, while flying on the plane. All you need is an internet connection and your laptop, iPad, tablet or any device you can access the internet with.

You can sell just about anything over the internet and there's a dropship supplier for almost anything out there. Either sell only one product, or a mix of products - it is entirely up to you. Just find your niche and the right dropship supplier you need.

You will have more time and resources to look into scaling your business. With traditional business models, the more you profit, the more work you have to put in and the more you need to invest in the resource section. Of course, even with the dropshipping model, you need to put in some investment but not to a huge amount. Dropshipping enables you to send more orders to your supplier, from here on you let them handle everything else while all you need to do is earn profits.

Dropshipping also reduces losses on damaged goods. Shipment is directly from supplier to customer and because there are fewer shipment steps involved, the risk of the items being damaged is also reduced.

Where there are pros, there are also cons even when it comes to dropshipping. Here are some of them:

You will receive slightly lower profit margins compared to sourcing from a manufacturer or a wholesaler. Dropship suppliers will charge you higher prices depending on your niche, requirements, and location and this will cut into your profit margins.

You must bear complete liability if anything goes wrong, even if it is the supplier's fault. The customer purchases the product from your site- the merchant's website. In the event, something happens or if the supplier doesn't keep their end of the bargain or messes up, it is still the merchant's fault. Your customers will contact you because you are the face of the brand. Therefore, it is extremely important to hire the right dropship supplier.

You have lower control over the creative process. Your customers will have lesser satisfaction with your product because you will not be able to determine personalized packaging or the branding of the shipped products- this is dependent on the supplier. You have less control over how your product is presented during the fulfillment and delivery process as this is the supplier's job to ship the products to the customers. However, having the right supplier and establishing a good relationship with them will give you better control as some suppliers will go the extra mile in ensuring your creative process is delivered through the product. However, this may cost more.

There may be more issues especially when it comes to shipping. Selling multiple products is a good idea as it can increase sales and make you profit, however, it can also pose a problem if the merchant has too many suppliers to deal with for each product they sell. Also, different suppliers will change different shipping costs as this would depend on where they are located and what kind of product you have.

The competition in dropshipping retail is extremely high due to the attractiveness and the popularity of this business model. Unless the merchant caters to an extremely specific niche, the competition is detrimental.

It is hard to keep track of the inventory from the supplier. Due to miscommunications due to cancellations and having backorders. However, with new software coming in and improved communication abilities, this matter can be solved. Of course, this software also comes with a price and may also increase your overhead costs.

Profit margins for dropshipping usually range from 15% to 45%. For consumer goods such as luxury items and durables, the profit margin can be up to 100%. When it comes to dropshipping, it entirely depends on the kind of niche you are in and then getting the right supplier. You do not want to enter a heavily saturated market.

More you can read in the book DROPSHIPPING FOR BEGINNERS

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