What is Dropshipping?
The easiest way to describe dropshipping is to resell other people’s products with this method. An owner of a webshop offers certain products, but does not have them in stock.
The customer places the order through your webshop , you pass the order on to the supplier who sends the product directly to the customer.
Take a webshop, specialized in agricultural products, as an example. A farmer would like to order a country fence from your webshop, you just don’t have space to store a stock of country fences.
With dropshipping you place the customer ‘s order to the producer. He then delivers the end product directly to the customer.
The customer pays the sales price to you, you pay the supplier the purchase price plus shipping costs and an amount for order processing. The difference between them is your profit.
It is an almost risk-free form of business. You completely outsource the logistics process. Furthermore, you do not have to invest in stocks, you do not have to rent extra storage space, you have no purchasing risk and no personnel is needed to ship the products.
What are the pros and cons of inventory management?
Stock management is a difficult aspect for many owners of a webshop. After a while, whoever has the stock in-house usually faces a dilemma. For example, as a small-scale webshop you store the products in the attic or in the office.
Until you grow out, you have to store everything in the shed or are faced with the choice of renting an external building. Apart from this housing of the products , there is also the logistics aspect. The products must be ordered, packed and shipped.
An alternative to this is fulfillment. You hand over the entire logistics process to an external party. That is to say: the complete order processing, including customer service and returns processing. It gives you the space to fully concentrate on business and the growth of the webshop .
The big difference with dropshipping is that you still have to manage a stock yourself with fulfillment. You only store the stock at the external company that takes over the logistics process from you. So you have to buy the products yourself, and that has the risk that you can be left with a stock.