The dropshipping method does take way some burden from the entrepreneurs so that they can focus on important marketing issues, however, along with the benefits, this business model also has some drawbacks. Let us explore both aspects.Some pros of dropshipping:
With dropshipping, the biggest advantage is less capital requirement. You can install an online store of your own without having to invest in the purchase and maintenance of inventory worth large amounts of money. You purchase a product only after you sell it to the consumer.
Since dropshipping business does not involve directly dealing with physical products, the setup and installation of the business are easy and relatively simpler than the traditional business model. We do not have to worry about the following constraints:
· Product inventory
· Warehouse maintenance and rents
· Packaging and shipping
· Continuous monitoring of stock and inventory level changes
While dropshipping involves lesser capital investments for set up, the overheads are also low. The business does not have to manage the warehousing, packaging, and logistics, which greatly reduces the regular expenses. In fact, there are many dropshipping businesses that are managing their entire business from a single laptop, that too sitting at home. No office space, no warehouse, and no logistics or transport hassles, as in the case of brick-and-mortar businesses.
- No physical office space required
A huge amount of money is involved in paying monthly overheads in the physical office spaces occupied by businesses. For a dropshipping business, you need to have a laptop, Internet connection, and the communication skills to deal with consumers and suppliers.
Dropshipping merchants do not purchase the inventory, hence they are in a position to increase their list of products for sale, at no extra costs.
In a traditional business, additional orders and expansion mean greater investments and resources scaled in the same proportions. With dropshipping the increase in sales does increase the need for greater resources (esp. customer handling) but not at the same scale.