3 Disadvantages and 5 Advantages of Dropshipping for eCommerce

You’ve probably heard about dropshipping somewhere on the internet. However, the popularity of this order fulfillment method doesn’t make it suitable for everyone. This article describes eCommerce dropshipping and explains the advantages and disadvantages of this business model.

Reading Time: 4 minutes

<img alt=”MacBook with opened online store”>

Description:

Retailers fulfill orders from their inventory in a conventional supply chain. However, dropshipping eliminates inventory risk to make your business experience as smooth as playing overdrive. When you receive an order, you send the details to eCommerce dropshipping suppliers who control production, warehousing, and shipping. By so doing, dropshipping eliminates processes like receiving, sorting, storing, and dispatching products. But although dropshipping has many advantages, it isn’t right for everyone. Read on for the advantages and disadvantages of this business model.

eCommerce Dropshipping Advantages

The global eCommerce dropshipping market size was $128 billion in 2020 and is expected to hit a 32% CAGR between 2021 and 2026. Here’s why more people are embracing this business model.

  • Minimal Costs

Unlike traditional retail stores, dropshipping businesses don’t buy inventory in bulk or encounter minimum purchase requirements when restocking. Additionally, you don’t incur storage costs like rent, lighting, and ventilation. This fulfillment method also saves you labor costs. You don’t have to pay employees to receive and process orders. Another cost you avoid is spoilage costs. Since you only send confirmed customer orders, dropshipping prevents stock from rotting or expiring in your warehouse when it stays for too long. The best part is you don’t even need a website. You can start your business on eCommerce dropshipping platforms.

  • Saving Time

From storage and labeling to packing and shipping, order fulfillment is time-consuming. By eliminating these processes, dropshipping allows sellers to experiment with products until they find what works for them. If a product doesn’t sell, vendors can move to the next until they find a profitable commodity. Likewise, customers have time to study the market and develop winning advertising strategies. 

  • More Customers

<img alt=”monitor screengrab”>

Having more time on your hands allows you to create lasting customer relationships. In turn, your loyal customers recommend your business to their friends and increase your sales. eCommerce dropshipping is also an opportunity to diversify. You can explore different niches without worrying about storage. Moreover, you’re not limited to particular areas; you can even ship overseas. 

  • Easier To Scale

More orders mean you have to work harder to meet customer demands. For starters, you might need to hire more employees or introduce overtime hours to fulfill orders. The increased workload could affect staff morale and cause mistakes. However, suppliers handle order fulfillment in an eCommerce dropshipping business plan, allowing businesses to concentrate on expansion.

  • Flexible Location

Since your business is more virtual than physical, you can run your store from anywhere. All you need is fast internet and a strong relationship with buyers and suppliers. Additionally, you can send your product to overseas customers provided your dropshipping supplier ships to those countries. You could also find suppliers in different countries for faster shipping to locals. 

eCommerce Dropshipping Disadvantages

This eCommerce order fulfillment method isn’t all roses. Here are some hurdles to expect. 

  • Quality Control Issues

<img alt= “large rack with products”>

Since they don’t touch the commodities on their eCommerce dropshipping website, vendors cannot verify product quality. It’s not uncommon to receive complaint emails and negative reviews for products listed on your eCommerce site. You can avoid this problem by requesting samples from suppliers. Alternatively, order a product and send it to your address to see its packaging, quality, and delivery speed. Moreover, you can measure product dimensions and take accurate photos and videos for your website.

  • Narrow Profit Margins

eCommerce dropshipping businesses don’t enjoy bulk pricing. As such, they have to sell many units to make a profit. On the other hand, stock retailers get volume discounts and can sell their commodities in bulk. Worse still, you have to deal with the fierce competition. More entrepreneurs are joining this eCommerce business because of its low overheads and flexibility. Take time to study the market before choosing eCommerce dropshipping platforms and products. Your niche should have low competition but retain healthy demand.

  • Lack of Control

Though you can decide the products you sell on your eCommerce website and their prices, many factors are out of your control in an eCommerce dropshipping business. For example, you cannot customize an order. Since merchants don’t handle orders physically, you cannot leave a thank you note in the parcel or dictate the package design. eCommerce dropshipping also limits the number of products per order. If a customer wants products from different eCommerce dropshipping suppliers, you cannot put these products in one parcel. Shipping times are also beyond your control. Though you can switch carriers, orders may reach customers later than you expected. 

Conclusion: Is eCommerce Dropshipping Worth It?

Like other businesses models, eCommerce dropshipping isn’t foolproof. The order fulfillment method may seem perfect for your business, but you have to address some challenges along the way. As such, weigh the risks of eCommerce dropshipping against the rewards to determine whether it’s a suitable business model. What does it take to create the best eCommerce dropshipping business? Tell us how to build a profitable eCommerce dropshipping store in the comments.

Author’s Bio

Edward is enthusiastic about assisting businesses, especially local firms, in developing a more personal online relationship with their consumers and prospects. While trading and market research is his strong USP, his expertise in finance works like an added charm to his credentials! He is a finance genius!

Comments