Customers of online shops using dropshipping will hardly notice any difference from conventional online shops, at least in terms of the ordering process, since the shops respond immediately upon receiving their payment. When paying by credit card or PayPal, this happens virtually at the same moment the order is placed. Those who pay by bank transfer or the like will have to wait two to three working days for the bank to process the payment. Online retailers using dropshipping usually will not forward the order to the wholesaler/manufacturer until they have received the payment. Otherwise, they run the risk that the goods will be shipped without the payment being made.
In terms of its definition, dropshipping sounds like it provides retailers with quite a few advantages. It also, however, offers some advantages to manufacturers and wholesalers. It allows them to concentrate exclusively on shipping their goods. It does not require any knowledge of e-commerce, and they do not need to worry about proving themselves in the fast-paced market or taking their product international. They can just focus on their products, shipping, and returns.
For shop owners, the biggest advantage of dropshipping is probably how easy it makes it to get started in e-commerce. Normally, this would require a lot of start-up capital; after all, there have to be goods in stock to be able to process customer orders quickly. The retailer is then left sitting on these goods if it does not manage to sell them. Dropshipping does away with all that. Retailers do not have to worry about buying goods, storage costs or insurance premiums. If a product is selling poorly or not at all, it can simply be removed from the range of products. This makes it much easier to create a business plan.
In addition, dropshipping can increase sales because it enables online shops to offer a nearly unlimited variety of products. Having a wide range of products makes an online retailer more attractive to customers. Another advantage is that it does not require a location. This applies to both the company’s headquarters and the shop’s operations. All you need is a good internet connection. Dropshipping is thus perfect for digital nomads who want to be able to work from anywhere in the world.
With all that in mind, dropshipping also has some disadvantages. Online retailers using dropshipping have no influence over crucial factors in the customer experience and have to rely entirely on their partners. This includes shipping, guaranteeing the quality of ordered goods and the returns process. If something goes wrong at any point, the online shop is responsible to the customer, even if the fault lies with the wholesaler or manufacturer. It takes time to grow your reputation and brand loyalty, and both can quickly be eroded by the failings of others. This is especially true if you did not properly vet your wholesalers or manufacturers beforehand. If you sell defective or counterfeit goods through your online shop, you will also have to bear the consequences.
The major advantage of not carrying your own stock can also be a great disadvantage. With dropshipping, there will always be multiple online shops vying for the stock of a manufacturer or wholesaler. This can lead to items selling out before the online retailer notices. This in turn leads to extra work since all customers who ordered that item have to be informed immediately about the delay.