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Just like the other business models, dropshipping comes with a number of advantages and disadvantages. We have compiled a few of the most important points.

 

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Benefits of dropshipping

Costs
In contrast to most business models, opening a dropshipping business requires comparatively little start-up capital. This makes it ideal for prospective entrepreneurs. The fixed costs are also low. Since the products do not have to be purchased in advance and therefore do not have to be stored temporarily, the shop operator saves costs for premises, staff and equipment and can invest this money elsewhere.

 

Risk
Due to the low start-up capital, the dropshipping business poses a low risk for newcomers. Even if no quick sales can be achieved, the loss remains small because there is no inventory to be cleared. This makes dropshipping ideal for testing the popularity of certain products or different marketing strategies without much risk.

 

Flexibility
Be it the type of product or the workplace, the dropshipping business offers flexibility. Thanks to a wide range of products and the purchase of products on demand, without a fixed stock, the switch to trend products is possible without major detours. In addition, dropshipping trade can be done conveniently from home. Retailers actually only need a good internet connection and the opportunity to stay in contact with the provider and the consumer.  

 

Order processing
The products are stored, assembled, packaged and shipped by a third party, leaving more time for other areas such as customer service or marketing.

 

Disadvantages of dropshipping

Dispatch and product quality
Because the order is processed externally by a third party, the retailer has little influence on the correct dispatch or the quality of the products. Many suppliers are not from Europe and therefore have long delivery times. If a product arrives late or even damaged, customer satisfaction suffers and with it the reputation of the retailer. Good customer service is the be-all and end-all here.

 

Communication channels
In the event of complaints, it must be possible to trace orders as quickly as possible in order to find a satisfactory solution for the customer. In the role of the middleman, however, this is difficult. Here it is important to establish good communication with the third-party provider in order to be able to give feedback quickly.

 

Profit Margin
Since the products are purchased on demand, the unit cost of each product is higher and the profit is smaller. This is made even more difficult by the numerous competition in the dropshipping market. Already established dropshippers lure with low prices. The focus on niche or trend products can help here.

 

Branding
Retailers have little opportunity to personalize the product or the packaging.
In most cases, the brand name can only be found as the sender on the package.
However, a longer cooperation with a partner can open up more opportunities for branding. 

 

Conclusion

The popularity of dropshipping more than doubled in 2022 compared to 2019. No wonder, because comparatively low costs, flexibility and low risk make the business model very beginner-friendly.

In return, this popularity also creates a lot of competition. A good marketing strategy should not be underestimated. Equally important is the communication between the supplier and the retailer, as the supplier handles most of the ordering process. 

 

So, is it worth doing dropshipping?
Definitely with the right strategy. The online business is booming and as a newcomer, dropshipping offers a low-risk start in digital trade. However, long delivery times and communication channels can be fatal. For long-term success, the fulfillment of your own inventory with a suitable service provider is a good idea.

 

If you are looking for a service provider who takes over the logistics of your online shop, you have come to the right place.
With Warehousing1 you get e-commerce fulfilment, warehouse logistics and digital administration from a single source.

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