E-commerce is growing 23% year-over-year with 51% of Americans preferring to shop online. With this as the current trend, it's no wonder why some businesses are shutting down their brick-and-mortar locations to go online. Meanwhile, other brands forego the idea of having a physical store from the start. One of the contributing factors to such a change is dropshipping.

What is dropshipping? How does it work?

        By definition, dropshipping is a supply chain management model in which online sellers and retailers transfer customer orders and shipping information to their supplier. The supplier then will then ship the goods directly to the customer. This method allows online sellers and retailers to sell physical products without a storefront and get wholesale price without buying inventory in bulk or at all. Suppliers would even include the seller/retailer's marketing collaterals and packing slips to align with the latter's brand.

Advantages

•   Low capital and overhead costs

        In terms of getting started in e-commerce, dropshipping is a low-risk option as it requires little capital investment. No need to worry about storage, inventory, and all the costs that come with them. Bigger business utilize this model to save money on warehouse, equipment, and employees.

•   Flexible location

        Hate being confined in the office or being stuck in your everyday commute to work? One of the pros of dropshipping is that you can have the freedom to work anywhere - just as long as there is an internet connection. Do business with your phone, laptop, or tablet.

•   Product introduction/expansion with low risk

        There's a wide range of products at your disposal. Either you want to test initial product ideas or expand your product line, dropshipping will help you do that with little to no risk. Be able to observe your customers' tastes and preferences. Know what works and what doesn't then make the appropriate adjustments.

•   Additional time for marketing and customer service

        Inventory management, packaging, and shipping will no longer be part of your to-do list when you drop ship. Let your suppliers handle them for you while you focus more on marketing, promotions, sales, and customer service. This leads to the next point.

•   Business is easy to scale

        With your focus being where it should be, you can spend more time on your business' growth. Even with the surge of online customers, all you need to do is manage them while your supplier handles the operations. That said, generating high volume of orders can be an opportunity to negotiate product and shipping prices with your supplier.

Disadvantages

•   Low barrier entry mean high competition

        Competition is stiff. Low risk at minimum cost is reason enough for several online sellers to dive in - be it eBay, Amazon, or Etsy. Standing out can be difficult although some markets are more crowded than others. A targeted niche - having clear focus on what you want to sell and who you want to sell to - is key to keep your brand afloat in the crowded sea of e-commerce.

•   Lack of control in product quality

        Opting to dropship will free you from handling inventory but it also strips you of the ability to oversee quality. Your supplier is an extension of your brand. Be sure to test their products. Order samples to see if they meet your standards. Establish a good relationship with them and they're sure to go above and beyond.

•   Lower profit margins

        Take your base price into account when setting your retail price. Profit margins usually range within 10% to 20%. What you might not earn from sales, you'll save from overhead and startup costs. One way to maximize profits is to increase sales by making the most out of marketing, sales, and customer service.

•   Complications in logistics

        Dropshipping is also susceptible to human error. Things don't go as smoothly as we want them to. There are a number of ways logistics can go wrong: damaged product, order mix-up, delayed shipment, lost order. Be prepared on how to handle these scenarios and your customers. Great customer experience isn't always about getting everything right, but also being able to properly amend situations when they go wrong.

        Dropshipping may not be for everyone. As with anything in business, it's about finding the right fit. For artists, photographers, and other professionals: if you want to get started with dropshipping, then sign up for our Pro User Program. Choose from a variety of products: stretched canvas, rolled canvas, framed canvas, metal print, fine art paper prints, t-shirts. Enjoy great pricing and personalisation. Go to www.lumaprints.com/proprogram.html for more details.

Tags: dropshipping
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