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What is drop shipping model

This era of digitalization has entirely changed the structure of businesses. Traditional business models are abruptly swapped by new trending business models. Models that are relevant in today’s scenario have hit the old conventional methods. One of the popular business models trending these days is Dropshipping Business Model.

Here comes everything that one wants to know about Dropshipping Business Model.

The topics covered are:

What is Dropshipping?

How does it work?

Benefits of Dropshipping Business

Glitches in Dropshipping Business

What is Dropshipping?

Dropshipping is a retailing/reselling model of business where products are not warehoused by the sellers. In this business model products are directly purchased from the suppliers and are then redirected to the customer. Seller is not directly involved in managing the products.

How does it work?

It is a simple three steps process –

  • seller takes orders from the customers
  •  purchases it from the third party and
  • gets it delivered directly to the customer.

Let’s understand it in detail.

In Dropshipping business seller stays in contact with different warehouses and uses their catalogues to get the business. Orders received are purchased by the seller and are shipped directly to the address of the customer. It sets free the seller from maintaining stock, arranging shop or managing the inventory.

Once an official contract is made with the retailers of selected products, sellers start showcasing the catalogues to customers through various online channels. Customers ask for the details of the desired product like pricing, shipping charges, material, delivery time and other available options. The seller must have the details for all the probable queries of customers. When an order is placed, the seller gives the product details to the vendor and the address of the customer. After packaging the product is shipped by the vendor at the given address. Sellers receive shipping details and tracking ID to track the order. When an order reaches its destination, the customer’s feedback and review on the product is taken by the sellers. It helps them in analysing the services provided by the vendor from the business perspective.

Benefits of Dropshipping Business

  • Freedom of Choosing Products

Dropshipping business gives the freedom of choosing products. Sellers can survey for the most desirable and profit earning products for their business. They can target their social account followers too for the products that they prefer the most. Dropshipping gives freedom of choosing more than one product and even sellers are free to change the product anytime based on market demand.

  • Freedom to Work from Anywhere, Anytime

Dropshipping business can be done anywhere, anytime. One can operate it from work, home or even while travelling. It is not time-bound even, so one can work freely as per his convenience.

  • Minimal Investment Business

It is one of the low-cost, low-investment businesses with minimal requirements. To start the dropshipping business we require a computer with a good internet connection. The next thing required is the Website to showcase the products and a Host as Service Provider. Nowadays the majority of people already have one or all of these requirements with them. One can join the already existing e-commerce platforms too to sell the products that turn them into zero investment plans.

Once this requirement is arranged, the next step is marketing which is the key element for the growth of any business model.

  • Easy to Start

Dropshipping doesn’t require big infrastructure or hiring to start the business. It doesn’t need stock or a warehouse to maintain, which makes it the easiest business to start.

Dropshipping model of business is minimal investment and minimal liability business model

Glitches in Dropshipping Business

  • Less Profit Margin

One of the biggest disadvantages of Dropshipping model is less margin of profit. Marketplace platform used as well as the vendors who supply the product keep a larger amount of profit for their services. Sellers are often left with the minimal part of the sale.   

  • No Control on Return-Refund Policy

Sellers are bound to follow the policies that the marketplace is offering. Return and Refund policies for product sold from an e-commerce platform is the next big disadvantage of Dropshipping model. Customers are allowed to return the product due to any valid reason and the full amount is refunded in return. Sellers bear a huge loss due to these policies.

  • Shipping Complications

Delay in shipping and delivery is not in our direct control. Sellers have no option other than to rely on vendors. Seller’s duties include convincing customers also for shipping and delivery issues. Many times sellers lose the order due to shipping delays and complications.

  • Quality and Standards

Sellers are dependent on suppliers for the quality of the product. Low-quality standards, wrong product, missing items, defective items are very common problems faced by suppliers. Sellers have no direct control over these issues. All they can do is to take responsibility and apologise to the customer and several times amount is refunded according to the market policy. These matters affect the status of the business significantly.  

Undoubtedly, Dropshipping is one of the low-investment businesses and a sought after model to be followed by aspiring entrepreneurs, who are willing to start with minimal expenditure. But the complications involved with it, don’t let it be a perfect business model.

Hindi lekh on drop shipping model

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