Dropshipping: basic guide for 2022
In this article, we will explain dropshipping, analysing its main advantages and disadvantages.
The term dropshipping is a combination of the words “to drop” and “shipping”. This retail method is given this name because the seller is not required to store their items in a warehouse.
Dropshipping can in fact be defined as a sale with “direct shipping” from the producer to the consumer.
The main advantages of this system are:
The term dropshipping is a combination of the words “to drop” and “shipping”. This retail method is given this name because the seller is not required to store their items in a warehouse.
Dropshipping can in fact be defined as a sale with “direct shipping” from the producer to the consumer.
The main advantages of this system are:
- Reduced initial investment capital
This is probably the main benefit. Not having to buy products in advance offers the seller the opportunity to start their own E-commerce business without having to invest in inventory. - Easy to start and manage an E-commerce business
In the absence of physical products, skipping the production phase makes managing an E-commerce business much easier. - Low overhead costs
Overhead costs are rather low due to the absence of an inventory and warehouse. - Flexibility
Your business can be managed from anywhere, as long as there is an internet connection. In fact, all you need to be able to do is communicate with suppliers and customers, with no need to be tied to a specific physical location. - No unsold goods
Not having a warehouse means no unsold goods: the seller only requests the product when a purchase is made by a customer. This allows the seller to focus on other activities, such as establishing a marketing plan to develop an E-commerce business.
The main drawbacks of this system are:
- High competition
Multiple sellers can sell identical products and this generates particularly high competition, leading to a reduction in profit margins. - Inventory issues
With a proprietary warehouse, it is relatively easy to keep track of the availability of your items, but by sourcing from collective warehouses that also execute orders for other customers, there is a greater risk of a product being sold out without the seller's knowledge. - Possible errors on the part of the supplier
Even the best dropshipping suppliers make mistakes when fulfilling orders. - Limited customisation
The product is generally designed and branded by the supplier. In order to be implemented and to be cost-effective for the manufacturer, any change requires a minimum quantity of orders.
Fulfilment by Amazon (FBA)
An alternative model to dropshipping is Fulfilment by Amazon, also known as FBA, an order fulfilment service offered by Amazon.
The service includes the entire collection and shipment operation, from the storage of the products in the warehouse to packaging, from labelling to shipping to the customer. Customer support services are also managed by Amazon. The only step for the seller is to send their items to the company's logistics centres.
The service includes the entire collection and shipment operation, from the storage of the products in the warehouse to packaging, from labelling to shipping to the customer. Customer support services are also managed by Amazon. The only step for the seller is to send their items to the company's logistics centres.
Conclusions
This short article explains how dropshipping works. Starting from the definition, the main positive and negative aspects are listed in a straightforward manner.
FAQ
What is dropshipping?
The term dropshipping is a combination of the words “to drop” and “shipping” and is a retail method that enables a seller, known as the dropshipper, to ship a product from the wholesaler's or manufacturer's warehouse directly to the customer's home, without having to worry about fulfilling the logistics operations itself.
What are the main advantages of dropshipping?
- Reduced initial investment capital;
- easy to start up and manage an E-commerce business;
- low overhead costs;
- flexibility;
- no unsold goods.
What are the main drawbacks of dropshipping?
- high competition;
- inventory issues;
- complexity in shipping;
- possible errors on the part of the supplier;
- limited customisation.
What is a valid alternative to traditional dropshipping?
An alternative to dropshipping is offered by Fulfilment by Amazon (FBA). With this service, the seller entrusts Amazon with fulfilling the entire process of collecting and shipping the products, from their storage in the warehouse to packaging, from labelling to shipping to the end customer.
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