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The Benefits of the Drop Shipping Model – an Explainer

Nikita Tilsley January 13th 2022 - 3 minute read

In recent years, the word ‘drop shipping’ has become increasingly prominent in business articles, especially in the retail sector and amongst online sellers. For those who are scratching their heads, wondering what it’s all about – this article is for you.

So what exactly is drop shipping and how can it help your business flourish?

Drop Shipping: A Revolutionary Order Fulfilment Method?

Big Commerce defines drop shipping as an “order fulfilment method that does not require a business to keep products in stock. Instead, the store sells the product, and passes on the sales order to a third-party supplier, who then ships the order to the customer.”

If you’re a business – online or off – looking to either selloff your warehouse or avoid brick and mortar storage for your products altogether, then drop shipping helps to eliminate the costs by outsourcing the role of shipping to a third-party.

Aspiring entrepreneurs often start out with drop shipping because it is eminently accessible, meaning that you can quickly test-run novel business ideas without the downsides of investing huge capital in storage or warehouses.

Corey Ferreira, writing for the Shopify Blog, explains: “[T]he biggest advantage to drop shipping is that it’s possible to launch an ecommerce store without having to invest thousands of dollars in inventory up front. Traditionally, retailers have had to tie up huge amounts of capital purchasing inventory.

“With the drop shipping model, you don’t have to purchase a product unless you’ve already made the sale and have been paid by the customer. Without significant up-front inventory investments, it’s possible to start sourcing products and launch a successful drop shipping business with very little money.”

Another major benefit of drop shipping is that it is easy. After all, your business will not be dealing with physical products, meaning that you will not have to pack or ship your orders – that is all done by the drop shipping company. And for accounting, it is even more straightforward, as tracking inventory will all be taken care of.

What are the Perks of the Drop Shipping Model?

If your company deals with returns and inbound shipments, the drop shipping model also handles all the tricky bureaucracy involved, meaning that you and your business can use both time and capital for more fulfilling and urgent developments.

Low overheads are, of course, one of the major attractions of the drop shipping model. Many businesses are in fact home-based businesses, and this is especially important in a world where working-from-home is being increasingly adopted by companies and entrepreneurs alike.

And as your company grows, drop shipping will see your income increases while the costs of brick-and-mortar businesses are likely to surge under rising inflationary pressures.

With the world becoming evermore interconnected and global, the flexible locations of drop shipping businesses enable you to reach your customers wherever they might be.

Dear Systems describes another perk to the drop shipping model: “Without the constraints of a physical inventory and the costs associated with it, drop shipping allows you to update your inventory quickly, easily, and cheaply.

“If you know a product is doing well for another retailer or reseller, you can immediately offer it to your customers without waiting for it to arrive in your warehouse.

“Dropshipping allows you to test new items without the risk of carrying obsolete inventory. You only pay for what you sell.”
 

The drop shipping model is being increasingly adopted by businesses and entrepreneurs worldwide. Effectively a fast-track to establishing a successful eCommerce venture with low overheads, this flexible and cost-effective model could make the difference between make and break these highly competitive times.

So, if you are considering buying products in bulk but don’t have the room, drop shipping can help you run a business without the limitations of space and storage costs. Like many others seeking either to establish or reinvent their business, drop shipping might be just the business option you have been looking for.

Written by
Nikita Tilsley

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