What is digital Dropshipping and how does it work? Well, in theory is not that complicated. It is the process where a third-party retailer or seller who has a website acts as an intermediary between the Dropshipper (the fulfillment center) and the end user, the client.
The seller, the third-party retailer, benefits from the process by charging a higher price than the Dropshipper’s price, making a profit from the difference between the two parameters.
For example, the Dropshipper which is the wholesaler, manufacturer, distributor packs and ships a product or item in stock at the price of €30, and the seller, the third-party retailer, sells this product or item for €40. The difference between the two price parameters is €10 which is the profit for the third-party seller.
Benefits and drawbacks of Dropshipping
Therefore, what are the benefits and drawbacks of the Dropshipping in general?
Let’s start with the benefits first which are the following:
- Low funding investment: The capital requirements are limited compared to a standardized business as with a Dropshipping model you don’t have to create or manufacture a new product or hold inventory
- Low risk setup: Dropshipping enables you, the third-party seller, to test various Dropshippers and see which one works best with your setup
- Easily manageable: As the third-party seller, you just need to have your online store and a laptop
- Branded private label setup: There are instances which Dropshippers allow you to dropship their products with the labeling of your brand
Alternatively, the drawbacks are the following:
- High competition: Recently, and over the last 5 years, Dropshipping became popular and therefore having increased the level of competition
- Lack of uniqueness: The best Dropshipers are few, and therefore the third-party sellers lack uniqueness in their products
- No quality control: As a third-party seller you cannot check the quality of the finished products that you are reselling and this could be a problem
- Low profit margins: There are cases where as the reseller (third-party seller) you may charge low prices to sell bigger quantities thus resulting to lower profit margins
- No stock management: In the condition that some products are out of stock it can be frustrating, as customers’ orders may not be fulfilled
Having said the above, you now know what is digital Dropshipping. Is it a business that you would be interested in?
The answer is not that simple. Dropshipping is a business model that can boost your revenue and income, whereas on the other hand it could have a negative impact on your profit and loss.
Therefore, the best suggestion is to search wisely for a good Dropshipper one that is trustworthy in terms of stock credibility, delivery, and quality. Also, your online store’s user-friendliness is another key factor to consider, as well as the prices you are planning to charge your clients for.
If you are interested to create a Dropshipping business, you can refer to Rankonlinetoday.com for guidance and support.
Moreover, you can always contact us for any questions or support that you may need.