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Sunday, July 31, 2016

Thursday, July 28, 2016

Pro and Con of Drop Shipping

Drop shipping has as many upsides as downsides. I’ll address the strategic benefits and liabilities of drop shipping.
Advantages of Drop Shipping
  • Upfront Cost - being an online retailer you will have a virtual store, and also a virtual inventory as well.  Drop shipping can reduce your upfront cost and commitment. You will have no inventory carrying cost or storing cost.  You don't have to buy products in lots or meet minimum purchase requirements to order or restock.  You will not have the need to maintain a large warehouse and lesser staff to pay regardless of weather or not they're working.
  • Bulky Items - certain types of products lend themselves to drop shipping, especially big and bulky items.  These items are expensive to receive, store, and ship back.  That's why it makes a lot of sense to drop ship them from the manufacturer.
  • Location - the location of certain suppliers can also provide a geographic shipping advantage.  An example would be the supplier and the buyer happen to be closer than your company.
Disadvantages of Drop Shipping
  • Drop Shipping sometimes increases cost of goods sold - this is because usually a stocking retailer is paying less while buying in bulk.  Stocking retailer typically get better pricing, additional bonus, marketing incentives such as co-op advertising.
  • Drop Shipping can limit product selection - when you limit your store's merchandise to drop ship only manufacturers and distributors you limit your customers options.
  • Drop Shipping can increase customer service headaches - drop shipping entails at least twice as much customer service work on every order.  and problem with orders are more difficult to sort out.
To sum it up all the decision to use or not to use drop shipping is all up to you.  As any other business decision weighing up the pros and cons can help in your company decide on what path to take.

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