Dropshipping 101 – Is It Really the Best Solution for Small Businesses?

Dropshipping 101 – Is It Really the Best Solution for Small Businesses?

The retail business is an ever-changing industry. Every other day, we hear about new terms, strategies, technologies and trends. Dropshipping has been around for quite a while but it has never been as popular as it is today. The emergence of a large number of small online businesses and start-ups during the last few years has made dropshipping ever more popular.

There are now a number of drop ship automation software that specifically cater to small businesses and start-ups. However, a large majority of businesses still haven’t realized the benefits of dropshipping primarily because they don’t understand what it actually is and how it can help them.

So, here is a small guide that explains the basics of dropshipping and how small businesses can benefit from it.

What Exactly Is Dropshipping?

Dropshipping, often a third party service, allows online retailers to cater to their customer’s order without having to keep anything in stock. The retailer transfers the order details to the dropshipping company that ships the product directly to the customers. Retailers can choose to build their own eCommerce website or open an account with an online platform such as eBay or Amazon. If you want to learn more about popular eCommerce sites like Shopify, Sharp Commerce has a great article on this. The key to a successful eCommerce website is research!

Dropshipping reduces the time and hassle involved in inventory management and order fulfillment. It offers a risk free and flexible solution for online retailers. Sometimes dropshipping services can be offered by the manufacturer. In other cases, manufacturers do not provide dropshipping but have a network of qualified distributors who offer dropshipping to their retailers.

Benefits for Small Businesses

The aforementioned definition of dropshipping is sufficient enough to explain the benefits. These benefits are doubled for small businesses that are unable to afford a warehouse or storage space. If small businesses find they can’t afford storage space, but they may fulfill too many orders to dropship efficiently, other alternatives include something like cheap to construct fabric buildings, manufactured and installed by the likes of Norseman Structures and other companies also.

Small Investment – Dropshipping can greatly cut down the investment capital required for setting up an online store. While you won’t have to pay the warehouse rent, you will also save money on inventory. Whether it’s a single item order or a big order for around a thousand items, you can order the exact amount of inventory as per your customer’s demand.

Inventory Management – Traditionally, businesses used to spend plenty of time and resources on inventory management. Although new software have greatly simplified and automated the process, it can still take up plenty of time and resources. In dropshipping, retailers are free of all the responsibility and tasks related to inventory and can focus on more important aspects such as marketing and operations.

Minimum Risk – Risks are inevitable part of business, but for small businesses their impact can be devastating. A majority of risks are associated with unsold inventory and since it doesn’t generate revenue. With dropshipping, this risk can be eliminated completely. Not to mention, it also allows you to cater to the changing tastes and requirements of your customers. Other risks in business can stem from the performance of a third party having a negative impact on your reputation if the service they provide is poor or not up to standard. Risk management from Aravo could be used to assess this relationship to ensure that it is a positive one.

Flexibility – Dropshipping offers the convenience and flexibility to operate the business from anywhere you wish to. Business owners don’t even require a separate office. All that is needed is an internet connection and an online store.

Overall, dropshipping makes e-commerce store management extremely easy. Today multichannel order management and multichannel inventory management software have further improved the process and made it a valuable option for manufacturers, retailers, customers as well as businesses that provide dropshipping services.

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