All You Need to Know About Dropshipping

Retail has evolved, and dropshipping is a retail fulfilment process emerging as a leading business model that can help retailers significantly reduce their capital investment and overhead costs. It allows small and mid-size e-commerce entrepreneurs to outsource complex logistics operations to handle all transportation operations.

This allows businesses to focus on marketing their products and growing their brand while the logistics provider facilitates streamlined supply management, inventory storage, and fast and reliable deliveries to customers.  

Keep reading to learn what dropshipping is, its benefits, common business models, and more.    

What is Dropshipping – An Overview

Dropshipping is an order fulfilment mechanism that enables e-commerce businesses to outsource tasks like procuring, storing, and shipping goods to third-party service providers. This business model enables retailers to receive orders for products listed on their websites and forward them to suppliers for shipping to customers.

Thus, drop shipping facilitates sales without businesses having to handle the hassles of inventory storage. Third parties ship the product directly to customers, whereas last-mile delivery companies handle the final leg of the journey. This ensures timely and reliable deliveries to the customer’s doorstep.

For seamless last-mile delivery services, you could opt for Porter Enterprise. It offers hassle-free and on-time deliveries for a wide range of goods in 20 cities across India.

Dropshipping: A Breakdown of its Workflow 

In drop-shipping business models, sellers are responsible for advertising their products and hosting an online storefront to interact with buyers. When customers place orders, the seller transfers the order to the supplier and informs them that their orders are being fulfilled.      

The drop shipper handles all other aspects of the physical fulfilment process.

Let’s look at an example to understand better how e-commerce dropshipping works. 

Suppose you have an e-commerce business that sells shoes. You have an online storefront where customers can visit, check out the collection, and place orders. When a buyer places an order, you transfer it to the supplier.

The drop shipping company procures the products from the supplier, packs them, and delivers them to the respective buyers. 

Now, all drop shipping companies may not handle last-mile delivery. In this regard, a reliable logistics partner can make handling deliveries seamless.  

Pros and Cons of Dropshipping

Now that you know what drop shipping is, you must understand that all business models have their fair share of benefits and drawbacks. Hence, whether you should adopt drop shipping solely depends on your business situation and financial goals. 

Let’s explore the pros and cons of drop shipping in detail.    

Advantages of Drop Shipping

Drop shipping can be ideal for businesses looking to sell generic products. Moreover, as it has lower startup costs, it is highly suitable for new entrepreneurs who do not have much experience in the e-commerce segment. 

Following are some of the advantages of drop shipping:

• Easy to Setup: Running an e-commerce business via drop shipping requires setting up a website for processing orders and forwarding them to suppliers and a payment gateway for processing payments. Maintaining inventory and handling shipping and returns is optional, as the suppliers and the third-party logistics provider take care of these. Thus, dropshipping is much easier than setting up a physical store.   

• High Flexibility: All operations are conducted online, so businesses can run their websites from anywhere. They simply need a computer and a stable internet connection. Additionally, as they are not responsible for maintaining inventory, they can easily diversify their offerings based on consumer demand.
• Requires Lower Startup Costs: In drop shipping, there is no need to lease a physical store, stock inventory, or hire staff to run operations. Moreover, businesses can easily opt for popular e-commerce platforms like Amazon and Flipkart instead of setting up their own websites. Hence, the overall startup costs are much lower than those of traditional business models.  
• Easier to Scale: Drop shipping business models also allow entrepreneurs to scale operations much faster. The reason is that they simply need to focus on accepting orders, processing payments and advertising their products and brand. The suppliers and the logistics partner cater to all other activities.

Disadvantages of Drop Shipping

Although drop shipping is a very popular retail strategy, certain associated challenges can make its implementation a bit tricky. Moreover, this business model is highly reliant on third parties, which can raise several issues.

Here are some of the common disadvantages of drop shipping:

• Lower Control over Inventory: As the supplier is solely responsible for maintaining inventory and preparing it for shipping, businesses do not have much control over product quality and availability.
• Low-Profit Margins: Due to lower entry barriers and stiff market competition, profit margins in the drop shipping business are usually low. To make a good profit, businesses need to achieve higher sales volumes.
• Limited Customisation Options: As retailers are not maintaining inventory or handling the shipping process, they do not have the scope for customising their products. Additionally, they do not have the option of adding value-added services that can improve the customer’s user experience.
• Challenging to Provide Customer Support: Conducting customer support operations like product returns or exchanges can be very time-consuming for drop shipping businesses. This is because the company needs to facilitate the return or exchange with the supplier in a way that leads to a positive customer experience.

Some Common Drop Shipping Business Models

Drop shipping business models can be of various types. Some of the common ones are listed below:

Single-Item Drop Shipping

Single-item drop shipping is a business model in which e-commerce companies sell only one product or a small set of related items. 

Multiple-Item Drop Shipping

Multiple-item drop shipping is a business model in which companies partner with numerous suppliers to fulfil orders across a wide range of products.

Marketplace Drop Shipping

Marketplace drop shipping refers to an online market where customers and businesses can buy and sell goods, with drop shipping being the default fulfilment method.

Print-on-Demand Drop Shipping

Print-on-demand is a fulfilment mechanism where businesses drop ship products to customers only after the sale is processed.

For instance, companies can sell customisable merchandise that customers can purchase on their website, and their orders are processed directly by the print provider, eliminating the need for storage and fulfilment.

Now that you have a clear idea of drop shipping and what you need to get started, the only thing left to do is hire a reliable logistics partner.

In this regard, Porter Enterprise is all you need,

We cater to a wide range of industrial goods, including e-commerce merchandise, FMCG, medical supplies, agricultural goods, frozen and processed goods, and more. Our vast fleet of trucks enables us to handle varying order volumes from startups and large enterprises.

The best part is that there are no monthly charges. You only pay for the time and distance you use our service.  

Opt for Porter Enterprise today and handle your drop shipping business seamlessly!

Frequently Asked Questions About Dropshipping