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Opportunities & Challenges Dropshipers Face in Post-Epidemic Era

Dropshipping is a retail approach in which businesses don’t keep or distribute their own inventory. Instead, when a company receives an order, it sends information such as the product number, shipping address, and order date to a third party who will handle the purchase on its behalf.

Many e-commerce platforms, such as Shoplazza and Shopify, integrate with dropshipping providers to help online shop owners start their entrepreneurial lives. However, the ease of use comes with big challenges.

In this article, we will break down the benefits and challenges of dropshipping.

 

Why is Dropshipping in High-Demand?

Dropshipping has gotten a lot of attention recently, and for good reason. For e-commerce merchants, dropshipping has several benefits:

Reduce Expenses

Any company that uses the dropshipping model will not have to invest in inventory or build up a warehouse. In the end, this saves time for businesses because they don’t have to organize inventory or hire staff to fill orders. The expenses associated with the start-ups are reduced.

To summarise, the dropshipping business offers a low entry barrier, reduces startup costs, and makes new enterprises have a market to access.

Scalability

A dropshipping firm may scale quickly since order fulfillment is not dependent on the size of the warehouse or the number of personnel necessary to send out orders. As a result, dropshipping can be extremely useful to organizations that deal with fluctuating product demand.

Easy Inventory Management

Dropshipping relieves retailers of their administrative burden by eliminating the need to maintain physical inventories.

Because everything is outsourced to suppliers, they don’t have to track inventory, manage the infrastructure that houses it, or manage the shipment.

Offering a diverse assortment of goods

Dropshipping allows you to have a larger product selection. Retailers can offer a greater choice of products, allowing a small firm that normally wouldn’t be able to due to a lack of storage space to do so.

Flexibility

Dropshipping can help a retailer in a variety of ways. A brand may operate from any location, offer a diverse product line, and easily adjust its offerings as market tastes shift.

 

Dropshipping Challenges

Dropshipping is a popular retail approach, but it has its own set of challenges. The intricacies of dropshipping’s workflow must align with your business objectives to be successful. You should also evaluate the disadvantages of dropshipping, such as lower profit margins and the potential for legal issues.

Relying on Third-party Vendors

Retailers are usually reliant on their suppliers, but dropshipping services are an exception. When a third-party supplier fails to deliver an order, the retailer is accountable if the buyer files a complaint. A retailer’s business operations will be significantly impacted if a supplier goes out of business abruptly.

These kinds of issues would be less of a setback if a merchant had actual product on hand, allowing operations to continue while a new source was identified. It’s vital for new brands to have a solid contingency plan in place in such a disruption.

Dropshipping also allows third parties to handle product availability and quality control. It makes it impossible for firms to test products before shipping them to clients or provide value-added services like pre-installing software on a phone or engraving a personalized message on jewelry.

Intense Competition

You’ll undoubtedly face fierce competition because dropshipping is so straightforward for a store to employ. Unless you have an exclusive arrangement with a supplier to dropship certain products, there’s nothing stopping competitors from selling the same things you do.

Dropshipping enterprises may find it difficult to stand out from the crowd because they can’t offer things or services exclusive to their brands. Retailers will have to compete in other ways, such as by offering a memorable and user-friendly online shopping experience.

Low Profit Margins

Dropshipping diminishes your revenue because it requires outsourcing part of the order fulfillment process to a third party. This means that you’ll need to increase your sales volume to generate the same profit as a regular shop.

Hard to Manage Customer Service

When something goes wrong with an order, it’s more difficult for businesses that don’t control their inventory to provide customer care. If the customer has a question about the goods, claims they were defective, or never received them, the retailer may need to work with the third-party seller to resolve the issue. This adds more work and administrative overhead to the order fulfilment process, in comparison to when no suppliers are engaged.

 

(Contributed by Ibrahim Imran & Hermes Fang)

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