Dropshipping

Definition of dropshipping

Dropshipping is an approach to inventory management and order fulfillment where the retailer or wholesaler transfers customer orders and shipment details to the manufacturer, who then ships the goods directly to the customer.

What are the benefits of dropshipping?

Dropshipping enables wholesalers and retailers to sell products that they don’t have in stock in their warehouses. One of the biggest benefits of using a dropshipping method is that wholesalers don’t need to deal with large amounts of product inventory that they don’t usually sell on a regular basis. It also keeps upfront costs low. Dropshipping is also a great way to test if products appeal to customers, without risking a large investment in inventory.

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What are the challenges with dropshipping?

The biggest risks with dropshipping are:

  • Not having any quality control over the products you’re dropshipping. Of course, you can get samples delivered before you start selling these products. But you can never have 100% certainty that, in a few months’ time, the quality of that same product won’t have changed.
  • Being dependent on your manufacturers’ stock levels.
  • Long shipping times for orders. In this day and age, with Amazon providing next-day delivery, customers do not tolerate long shipping times and will often cancel orders if products take longer than expected to arrive.

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