Pros and Cons of Dropshipping

Found this great summary of the Pros and cons of drop shipping. 

Taken from https://www.3dcart.co.za/dropshipping.html

Pros of Dropshipping

Dropshipping sounds like a great choice on the surface. But before you jump into building an online store from a dropshipping business model, it's good to look at its strengths.

Inexpensive to get started: You already know dropshipping’s biggest strength -- a low barrier to entry. (We’re guessing you wouldn’t be here otherwise.) With dropshipping, you spend all of your setup time building relationships and creating a great website. Your ecommerce software and website design, are likely to run up the biggest tabs.

Buying raw materials to create your own goods or buying products in bulk outright requires a much larger sum of cash in addition to the cost of your ecommerce software and website. There’s no question you need far less money on average to get up and running with an online store built on dropshipping.

Less supply chain hassle: Retail entrepreneurs who manage the bulk of the supply chain -- from storing goods to shipping them -- have to wear dozens of hats to run a successful business. With dropshipping, you cut out expensive and time-consuming tasks like stocking goods, managing your inventory, renting storage space for your products, and packaging and shipping orders.

Easier to grow: Dropshipping gives you the option to start as small as you want and scale up for many of the reasons we already mentioned. You don’t have sink gobs of money into your store to take it the next level. If you’re selling well, you don’t have to worry about putting out more capital to buy more products. You won’t need to build out more infrastructure around inventory or order management, either.

Cons of Dropshipping

In addition to looking at its strengths, it’s important to know where dropshipping can limit your business. What are some of the knocks against a dropshipping model for your ecommerce business?

Lower profit per sale: With a lower barrier to entry comes a different set of financial limitations. Suppliers, wholesalers, and manufacturers who dropship provide shipping and storage services, which means you have to pay a slight premium as compared to bulk wholesale prices. A higher price per product means less wiggle room on your consumer price point.

What this ultimately means for your business is you’ll have to sell more products to make the same amount of revenue you would if you bought your inventory outright. Your online store has to be a well-oiled machine, running at full steam all the time.

Less control Businesses aren’t perfect. If you trust a third-party with a core part of your business, you have to relinquish some control. That means embracing and fixing mistakes that aren’t necessarily your fault. Because your dropshipper is invisible, it’s your responsibility to make right on any issue the customer experiences -- even if it isn’t your fault.

Tougher to differentiate: Suppliers typically partner with more than one online retailer, which means you aren’t the only one selling their products. The more popular the brand, the stiffer the competition. When you’re selling handmade goods, differentiation is much easier. But one of the most difficult parts of succeeding with a dropshipping business model is getting to customers before the competition does.