While delivery product efficiency is the major concern of the businesses and the customers as well. Nowadays retailers and service providers are in continuous search of a model that perfectly satisfies the customer experience while working on all aspects of the supply chain. Among many others, dropshipping is the one that has a strong customer base and complies with the giant e-commerce model. Just read this article to know all about the What Is Dropshipping Business Model? its pros, and cons. Let’s begin!
How it works
Dropshipping is a unique business model that doesn’t require stock. Instead, it sells the product and is handed over to a third-party supplier. The third-party supplier is responsible for shipping the order to the customer. This is a unique order fulfillment method. In the dropshipping business model, the person or the drop shipper becomes the selling relay between the consumer and the wholesalers. It is based on the simple principle in which you receive the order and forward it to your supplier. Who, in turn, manages and invigilates the fulfillment process and delivers it to your customer at this doorstep.
Keep reading the article to get some new how about the pros and cons of dropshipping business model. what are its upsides and downsides? how it’s different from other business models and everything about how to start it?
Pros of Dropshipping
Low operational cost
The uniqueness of the dropshipping business model is that it doesn’t require a stocking place or warehouses that can reduce the debt to a greater extent. Coz all the system is online with none of the cost required to stock the product. And the money can be invested in developing the advanced Management system. The infrastructure cost accounts for the major expense regardless of whether you buy or rent warehouse space. Dropshipping on the other hand enables you to avoid this headache by outsourcing the delivery fulfillment to a third party. So that you can handle other hassles. And you can focus more on growing your customer base and enhancing your customer experience.
No inventory management
Since dropshipping totally eliminate the warehouse infrastructure inventory cost. The expenses accounted for or the infrastructure can give retailers or the service provider an option to enhance their services at a lower cost easily. Likewise the retailer themselves have to decide what to do with the unsold items. let’s say if the unsold items are perishable goods like some seasonal items that sell at a specific time and a period, then this product can be stored, so to sell in the next season. In short, nothing is wasted in the dropshipping model. Moreover, it also leaves less room for error and waste.
Cons of Dropshipping business model
As we have discussed earlier that dropshipping incorporates third-party logistics, so to deliver their product to the customers quickly. let’s say if the product is not delivered to the customer on time then it will alter your customer experience and satisfaction as well. Moreover, resolving a customer complaint will take time as the complaint will have to go through a third-party supplier before it can be solved.
Bit Complicated delivery model:
As dropshipping doesn’t have its own warehouse or a place to stock its product. They have to contact multiple wholesalers to meet their different requirements. And have a different order processing formula with every wholesaler. This makes the delivery business quite complicated. Moreover, the time between selling a product and dispatching it can be longer because it’s not in your hand and you depend on the shipper to process your order quickly.
Loss due to infrastructure
Dropshipping business model is unique in its own way. It doesn’t have any inventory or the place where it stocks its products so it is dispatched to the shipper. In addition to this dependence on a supplier can sometimes affect the delivery operation. In case of if the suppliers run out of stock so does the seller, which will result in an increase in time to deliver the product. That eventually leads to customer loss. For this purpose, you should have a highly communicated and managed system. So that retailers or the service providers have limited control over the supply chain operation and led to a smooth delivery and a happy customer at the end.
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