Pros and cons of dropshipping trading

What is the point of dropshipping?

Many traders start with dropshipping to solve all the logistics tasks - stocking, packing, delivery, etc. Thanks to this service, all these tasks will be taken by a third party. 

One of the points of dropshipping is to bring the product to the buyer without involving any other traders, or it helps to a marketplace, where the products are not stored by the trader, but the customer will buy the product from a third party, they will pack and deliver it. In this case, the trader won’t even meet with the products physically. 

So you can sell products when in the meantime, most of the processes are done by another company in the background. 

Tehát a dropshipping modellel úgy értékesítünk termékeket, hogy valójában számos lényeges tevékenységet egy másik cég végez el a háttérben. For example, when you get an order in your online store, all you have to do is forward the order to the dropshipping company, which wraps the goods for you, with your logo and delivers them to the customer. 

What are the pros?

One of the most important points is that you can start a webstore with fewer costs. It can be a uniquely developed store (although this is the most expensive), can be an open-source webstore - like Magento - or rentable webshop platforms - like Shopify. 

You do not have to keep storage.

Delivery is not your fee - you can spare human resource costs. The webshop can be operated with a smaller team, even as a family business.

Start-up e-commerce with a dropshipping system does not require as much start-up capital as an online store, where the store itself buys the products and stores them, as well as managing the inventory itself. Dropshippers only buy a product when a customer orders it through them, so the webshop can offer a large selection without having to buy the products in advance.

An additional benefit of running a dropshipping webstore is that fixed monthly costs are also lower, making it easier for your business to plan.

As a dropshipper, the product category can also be modified more flexibly, the only limit is how our dropshipping partner can serve our web store and how they can provide the products to us.

Another advantage is that manufacturers and retailers often provide a complete service during dropshipping for the webshops. These are already working systems, you do not have to start from scratch. It is also important that almost all processes can be outsourced, only management, marketing, and communication tasks are worth keeping in your own hands. 

Thanks to the many outsourced tasks, you will gain time that you can use to tackle other tasks, for example, business development. 

What are the cons?

For us to succeed in this business model, we need good positioning, excellent product knowledge, and well-structured marketing activity. Product knowledge is essential because the trader, or more precisely the reseller, becomes credible if their knowledge of all the information is up-to-date. However, in e-commerce, reliability, and credibility are essential for consumers.

The main disadvantage of the dropshipping model is the dependence on others, the exposure to external factors that we cannot influence. For example, if a wholesaler or manufacturer has a problem, for example, a product cannot be manufactured for some time due to a missing part, or the wholesaler is late due to an unforeseen problem, or the demand for the product is so high that the manufacturer does not meet orders, dropshipping partners will notice it.

It will be more difficult to obtain the product that customers are looking for, it may take much longer between the date of order and the time of delivery. Unfortunately, this will cast a bad light on both the dropshipping partner, the web store, even if it is not his responsibility. This negatively affects credibility.

Another disadvantage is that as a dropshipper you can't make as much profit as when a business has its own product, its own webstore. It’s harder to raise the price because competitors sometimes offer products at lower prices to break down the competition, and if we’re permanently more expensive than the other webstore, consumers won’t buy from us.

Another disadvantage is that as a dropshipper you can't make as much profit as when a business has its own product, its own web store. It’s harder to raise the price because competitors sometimes offer products at lower prices to break down the competition, and if we’re permanently more expensive than the other web store, consumers won’t buy from us.

If you do not have a look directly at the logistics, stocking, and pace of the deliveries, you will lose control. It is difficult to find partners and retailers. 

In order to know, how much it is worth to usw dropshipping, you need to count operation, purchase, and advertising costs: how much do you spend on a Facebook, Google, or any other ad, until you get a visitor on your webshop and convert it to a customer. 

Dropshipping is primarily worth it to those who sell unique, exclusive products, or have an exclusive contract to distribute certain products, or have few competitors