If you’ve ever shopped online, you’ve likely done so through a dropshipping business. Dropshipping is when a retailer doesn’t keep inventory and instead uses a third-party fulfilment centre to send the items to customers after an order has been placed. The retailer only handles marketing, sales, and customer service — the fulfilment centre or an fmcg distributor handles all the rest.
This model makes sense for many businesses because it lets them focus on what they do best while reducing the risk involved in eCommerce. However, many entrepreneurs are often confused whether they should pick the dropshipping model for their business or the traditional mode. Perhaps understanding the differences between dropshipping and standard retail could help you decide which one is right for your business.
Dropshipping vs. In-House Fulfillment: What’s the Difference?
While both models have pros and cons, there are some key differences between dropshipping and traditional in-house fulfilment. In a nutshell, dropshipping is a fulfilment method in which the retailer does not stock or create inventory. Instead, they fulfil orders like a wholesaler or manufacturer, and they act as a middleman between their customers and the third-party supplier. However, In-house fulfilment, you have complete control over inventory management but you also need to deal with the end-to-end process of product delivery.
Why you should consider dropshipping
- Dropshipping is a great way for new entrepreneurs to get started with very little capital investment. With dropshipping, all of your inventory stays in the warehouse until someone buys it. You don’t have to worry about storage or shipping costs because those costs are absorbed by the manufacturer or wholesaler that drops off the product at your door.
- You can use dropshipping as an additional revenue stream for your existing bricks-and-mortar store or online store. It’s also a great way to test out products before investing in them yourself by buying wholesale quantities and reselling them at higher prices.
- Another benefit of dropshipping is that it’s cheap and easy to set up — all you need is a product and an eCommerce platform where you can list it for sale.
But there are also drawbacks: You could end up with too much inventory that you have no idea what to do with (or how to get rid of).
Dropshipping is one of the most profitable business models across the globe and dropshipping India is rapidly becoming popular because it doesn’t require any upfront investment in inventory or fixed costs such as rent, utilities etc. All you need to get started is a computer with internet access and some basic entrepreneurial skills. In some cases, you won’t even know who’s selling your products as this can be handled through an eCommerce platform like Shopify or Etsy. Many drop shippers don’t even know how much their products cost because they’re paying wholesale prices for them.