In the eCommerce world, dropshipping has become increasingly common. With online retail platforms such as eBay, Amazon, AliExpress and even social media sites, companies are able to sell products without having to physically stock the product they have sold.
Essentially, dropshipping is a retail method used to sell goods without having any inventory. For example, an online fashion website sells men’s ties. When the customer purchases a red tie from the website, the online store purchases the tie from a third party, normally a wholesaler or manufacturer. Then the manufacturer ships the red tie directly to the customer meaning the online fashion store would never see or handle the tie in this transaction.
With online purchasing constantly growing and evolving there are many benefits to dropshipping. An overarching advantage of dropshipping is non-existent inventory. As well, the initial capital required to start a business with dropshipping is significantly lower give they aren’t actually investing in inventory. Instead, the inventory is only purchased when someone has purchased the product and they need to fulfill that order.
Additionally, the location of a dropshipping business can be flexible. There is no need to be located in an industrial area managing a warehouse, instead so long as there is a laptop and an internet connection it can be managed remotely. There is also large potential for selling a diverse and appealing product range given that businesses can provide customers with a vast amount of choice.
Dropshipping can be a lower risk business model. For example, if you had inventory that was difficult to sell you would often sell it at a reduced price. With no inventory on hand, this financial risk is decreased. However, there are disadvantages as well, so given that any inventory is not in an accessible stockroom or warehouse, it is important to have an inventory management system to better manage the dropshipping process.
Inventory management systems are integral with dropshipping. Effectively, these systems minimize the manual processes of managing an online site and streamline operations with third parties. The inventory management system can align orders and revenue alongside the inventory and allows for end-to-end tracking. In addition to visibility of real-time inventory, a management system can produce customizable data feeds, and can help ensure supplier data accuracy. An inventory management system is vital to streamlining operations in dropshipping and further automating this eCommerce platform.
Topics: business models, dropshipping, eCommerce, perpetual inventory, wholesale supplier