The role of Dropshipping in eCommerce

Dropshipping is a retail fulfillment method where a store doesn’t keep the products it sells in stock. It consists of 4 main steps. In step one your customer places an order from your online store. On the other step, your store automatically sends the order to your dropshipping supplier. After that, your dropshipping supplier prepares your customer’s order. Finally, your dropshipping supplier ships the order directly to your customer.

The biggest benefit of dropshipping is that it’s possible to launch an eCommerce store without having to invest thousands of dollars in your business.

With a traditional retail business, if you receive three times the number of orders, you’ll usually need to do three times as much work. Most of the work to process additional orders will be borne by the suppliers. It will allow you to expand with fewer growing pains and less incremental work. Sales growth will always bring additional work specially related to customer support. However, businesses that utilize dropshipping scale particularly well relative to traditional eCommerce businesses.

Low margins are the biggest disadvantage to operating in a highly competitive dropshipping niche. Because it’s so easy to get started, and the overhead costs are so minimal, many competing stores will set up shop and sell items at rock-bottom prices in an attempt to grow revenue. Since they’ve invested so little in getting the business started, they can afford to operate on minuscule margins. Fortunately, you can do a lot to mitigate this problem by selecting a niche/vertical that’s well suited for dropshipping.

Sudden stock shortages are one of the most common problems sellers have with drop shippers. If customers suddenly rush for a particular product, the drop shipper may sell out, leaving you in a situation where you have orders to fill but no products.

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