Pros and Cons of Drop Shipping

You’ve probably already got a fairly good idea of the benefits that drop shipping can provide. But like anything, drop shipping also has its downsides too. Here’s a brief look at both:

Pros

  • Low / No Capital: You don’t need capital to get started. Drop shipping is “pay as you go.”
  • No storage: No need to store product on your premises.
  • Fulfillment: All inventory management, packing and shipping is taken care of.
  • Wide range: You are able to offer a wider range of products to your customers.

Cons

  • Narrower Margin: Drop shipping is slightly more expensive because you are not benefiting from bulk discounts. You are also charged a small fee per shipment to cover the drop shipper’s handling costs. Combined, these additional costs can make it more difficult to compete in some categories on eBay.
  • You need to do your research: You need to watch out for drop shippers who charge excessive fees 
  • Unfulfilled Order: Back-orders and fulfillment problems are reasonably common. Back-orders occur when the supplier suddenly runs out of stock, leaving you with sales that can’t be fulfilled. Some marketplace are quite strict on unfulfilled order. 
  • Poor Services Possible: Some drop shippers provide poor service that can result in negative feedback from your customer.

Oh, remember to do market research, risk analysis and don’t try to short cut everything.

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Categories: Personal Finance

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