Drop shipping is an easy way to get involved with e-commerce. No need to have a warehouse, no need to carry inventory, no need to package and ship orders. How much easier can it get?
Despite all of the pluses, drop shipping does have a big downside.
Here are some of the downsides:
- Price- you pay for the convenience of having someone else handle inventory and service, and often you pay a heavy premium for that convenience. Suppliers add a markup to the cost of packing materials, they will add a markup to shipping costs, and often they will markup their labor costs. After all, nothing is free.
- Information- Your drop ship supplier must keep you informed about inventory levels and any price changes. If you are selling on Amazon, eBay, or other similar sales platforms and you cancel too many orders because of a back order situation from your supplier, your service ranking will be affected and if your metrics drop too low your selling account may be suspended or even cancelled.
- Convenience- The number one reason to use drop shipping is also its biggest downside. Drop shipping makes it easy for just about anyone to enter the market. This easy entry results in massive competition since sellers don’t need any investment to start a business.This massive competition often results in sellers competing on price only. Profits suffer for everyone
- Control- When you drop ship you give up control of all of your order handling. How do you ensure your orders will be shipped quickly? How do you ensure good quality? How will your supplier handle problems or returns when they occur? You have to find trustworthy suppliers. That is a difficult thing to do. Some suppliers will be excellent, some just good, and some totally terrible. You have to hope you have made the correct choice.
- Your effort and involvement- Again, drop shipping is a good way to get started but it is not as easy as a lot of the companies trying to sell you tutorials or drop shipping services would like you to believe.It is not passive income. It is not a low effort way to do business. You have to pay attention and actually put a lot of effort into the business to succeed. You have to process orders. You have to provide customer service and answer questions. You have to communicate with your customers about shipping, tracking numbers, possible service issues and more. You also have to keep aware of your competition and monitor prices, monitor new items, and make sure nothing is happening to disrupt your market.