What is Drop Shipping? (Part 2)
As mentioned in our previous post, dropshipping is not a bed-of-roses method to succeed in an online business. The model definitely has its benefits, but also comes with some issues and problems to resolve.
Cons of Drop shipping
Low margins are the biggest drawback to selling in a competitive dropshipping market. Because it’s so easy to start, many business owners simply just set up their shop and start selling items at low prices to grow revenue. Their initial investment is so little so they can afford to operate on small margins.
These merchants often have low-quality websites and probably unresponsive customer service. But that won’t stop customers from comparing their prices to yours. This increase in competition will quickly destroy the profit margin in a niche. However, you can counter this issue by choosing a potential market suitable for dropshipping.
If you have a warehouse for your own business, it’s relatively easy to track which products are in and out of stock. But when you’re sourcing from a few warehouses, which are also fulfilling orders for other resellers, their inventory goes up and down every day. Yes, there are ways to better sync your shop’s inventory with your suppliers’, but these solutions do not always work together smoothly, and suppliers do not always have compatible technology with yours.
If you are dealing with several wholesalers, your products will be sourced through different drop shippers. This results in complicated shipping costs.
Scenario: A customer purchases 4 items in one order, all of which are from 4 different suppliers.
You will incur 4 separate shipping charges for sending each item to the customer, but it’s probably not a good idea to charge this along to the customer, as they’ll think you’re overcharging for shipping! Additionally, automating these calculations on your eCommerce platform Malaysia can be quite a hassle.
Even established dropshipping suppliers can make errors in fulfilling orders – errors for which you have to take responsibility for and possibly apologize to your customers. Worse still, unreliable suppliers will cause frustration with lost/spoilt items, ruined shipments and inferior packaging, which can eventually damage the reputation of your business.
Are you prepared to be blamed for something that wasn’t your fault, but ready to accept responsibility for the error anyway?
Like all businesses, creating the path to success depends on several factors. But when drop shipping is done right, highly profitable online businesses can be achieved. This model is not a magic formula, but it’s a feasible one with very low risk.