Dropshipping is a relatively new means of making money online.

What is dropshipping? What are the advantages and disadvantages?

Dropshipping is a supply chain management approach wherein the seller accepts payment for an order but sends the product directly from the manufacturer's warehouse to the buyer. The seller works as a middleman between the manufacturer and the client. The difference between the wholesale and retail price of the item sold is his profit.

The dropshipping business model is dependent on a number of factors, including:

1. The item being sold – Seller must make sure that he only sells high-quality items. If customers ask for a replacement or refund, the seller will lose a lot of money because he is responsible for the shipping costs.
2. The price of the item - If the supplier asks for a higher price than its competitors, the seller won't be able to give a competitive price.
3. Delivery time - The supplier plays a major part in dropshipping. If the consumers are dissatisfied with the delivery, they will leave negative feedback.
4. Supplier Integrity - A good supplier is extremely important in a dropshipping operation so choosing a source is crucial. There have been numerous instances where suppliers have defrauded merchants by sending defective or low-quality products to buyers,

Here are the advantages of forming a dropshipping partnership:

1. Lack of physical inventory - All of the products will be housed at the supplier's warehouse, thus, it will save the seller a lot of money on warehouse storage.
2. More products in seller's online store - Sellers are not restricted by the size of the warehouse so they can sell as many products as they want in their online store. They can even sell things from multiple vendors.
3. Lower delivery costs - Dropshipping manufacturers typically receive lower shipping costs as a result of the volume of the products that they ship out every day.

Here are the disadvantages of a dropshipping business:

1. The most significant risk involved with a dropshipping business is that it is dependent on the supplier. If the supplier gives different goods, or even a damaged product, and then claims that it broke during shipping, the seller would be responsible for the expense of returning the item.
2. A significant risk is posed by the buyers too. They may receive the merchandise and then claim that the purchase was not approved by them and that their credit card was used without their consent. It will result in a chargeback against the seller. It will then leave the seller with no money and no product.
3. The pricing should be considered. The wholesale price of dropshipped products is greater than the wholesale price when the products are bought in bulk.

Now, have you decided to start your dropshipping business?

Click here to Learn more about Dropshipping Business Model.