Advantages and Disadvantages of Using Dropshipping as a Business Model
For many businesses the idea of dropshipping from China appears to be relatively easy way to make money on auction sites such as eBay and Amazon. However, many do not complete the research that is necessary to make this model of business work.
When it comes to purchasing merchandise from China, it is generally less expensive because of the way items are mass-produced in China. They are a huge exporter of many different products, but because of the distance and the prices of delivery to countries such as the USA or the UK, items often take a several days if not weeks to get to the intended destination.
This is the the first major stubling block when a business is using a Chinese factory to dropship single items to their end customer - the delivery time.
Assuming the product is a phone case or even a screen saver then without a doubt many buyers would not make the purchase. In essence, a buyer can get these products the very next working day through any seller in their residing country, for a similar price. For many buyers, to wait prolonged periods of time they really would have to be saving an amount of money to make it beneficial.
Another thing to consider is the many holidays which go on within China - which essentially means factories and outlets shut down for up to a week at a time (Google China Holidays and see for yourself). Businesses will have a duty to notify prospective buyers about this, meaning that the expected delivery time could be far greater than originally anticipated.
Customs clearance into the destination country needs to be considered on top of that. In the event the item is actually stopped your customer may well be charged by customs (dependant on the customs laws and policies of the country the product is entering).
Some businesses who drop ship state within their terms and conditions that if this occurs they will pay for the charges. That is all well and good but what happens when a buyer contacts the business and wants a refund because they state the product isn’t working, not as described, or have even just changed their mind? The business will have to refund them, not the dropshipper, often meaning that a business will be substantially out-of-pocket. Suddenly, using dropshipping as a business model is not so easy at all.
Any business that uses this model will also be responsible with regard to all shipping and delivery issues, and this is another consideration – will the dropshipper resend the item, or will they claim it is out of their hands once they have shipped it?
However, among all the considerations that must be made regarding disadvantages of using a dropshipper who is located in China, there are many advantages. Some of the advantages of dropshipping are very clear to see; zero stock is needed for a start. Sellers won’t have to endure the hassle of storing products and packaging, don't need to pay for storage space, and won't need to sort out a delivery strategy.
This business model also means that no packaging material is required, as of course the dropshipper sorts out the packaging of items from their end.
Businesses also have the advantage of having no costs of getting products delivered to their customers. Fortunately, there is no need to spend any money on domestic carrier services to ship products to their customers, as again,the dropshipper sorts all of that out from their end.
Another great advantage of using a dropshipper is a business can offer a huge inventory of different products for sale to their customers, giving them a great choice when it comes to purchasing.
Overall, dropshipping is a difficult method of offering products for sale to customers. And although many businesses use this format to sell, a lot struggle to make a profit simply because they are competing against other businesses who purchase their stock in huge bulk.
Ultimately, it is down to the research the business conducts before going ahead and using dropshipping as a reliable way of offering consumer products to their customer base.